What is ERC20 token ?

ERC20 is a technical standard used for creating and implementing tokens on the Ethereum blockchain. ERC20 stands for Ethereum Request for Comments 20, and it defines a set of rules and guidelines that Ethereum-based tokens should follow to ensure compatibility and interoperability with other tokens and platforms.

ERC20 tokens are fungible, which means that each token is identical and interchangeable with other tokens of the same type. This standard provides a consistent interface for token contracts, allowing wallets, exchanges, and other applications to easily interact with and manage different ERC20 tokens.

Some key features and functionalities of ERC20 tokens include:

Balance Tracking: ERC20 tokens allow for tracking the balance of tokens held by Ethereum addresses. Users can send and receive tokens, and their token balances are updated accordingly.

Token Transfers: ERC20 tokens provide a transfer() function that enables users to send tokens from one Ethereum address to another.

Token Approvals: Token holders can grant permission to other Ethereum addresses to spend a certain amount of tokens on their behalf. This is useful for tokenized applications and services that require token movement under specific conditions.

Total Supply and Token Metadata: ERC20 tokens typically provide functions to retrieve the total supply of tokens in circulation and access additional metadata such as token name, symbol, and decimals.

allowance: Retrieves the amount of tokens that an approved address is allowed to spend on behalf of the token holder.

The optional functions include events, such as logging token transfers or approvals, to provide transparency and facilitate tracking of token movements.

The ERC20 standard ensures that all tokens built on the Ethereum blockchain follow a consistent set of rules. This standardization allows ERC20 tokens to be easily integrated into various wallets, exchanges, and decentralized applications, making them interoperable within the Ethereum ecosystem.

The ERC20 standard has become widely adopted, and many of the tokens issued through Initial Coin Offerings (ICOs) and token sales on the Ethereum platform follow this standard. The popularity of ERC20 tokens has made them compatible with various wallets, exchanges, and decentralized applications (DApps) within the Ethereum ecosystem.

It’s important to note that while ERC20 is the most common token standard on Ethereum, there are other token standards such as ERC721 (for non-fungible tokens) and ERC1155 (for both fungible and non-fungible tokens) that serve different purposes and have different functionalities.

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