Posts tagged "ERC20 tokens"

ERC20: A Brief Overview

ERC20 is one of Ethereum’s most prominent tokens. In addition to being a token form, it also represents digital token standards. Usually, this token is used to implement smart contracts and covers a set of rules that all Ethereum-based platforms must abide by.

It’s a bit like other cryptocurrencies such as Bitcoin and Ether, for example. In the end, you need to understand that Ether is not the same as ERC20. ERC20 is a standard for a specific type of token, but Ether is the native currency of the Ethereum platform. Others can create more ERC20 tokens based on this standard, and each of them will have a different name.

Additionally, this standard will only apply to fungible tokens; it will not apply to non-fungible tokens. Because of this, ERC20 tokens can only be exchanged for other ERC20 tokens.

ERC20 is not software or code. It is just like HTTP, a standard protocol. Essentially, it governs the tokenization process and ensures the technical specifications are followed. For it to function as intended, it includes basic functions. The standardization test will not be passed if the essential features are not implemented. 

There is no requirement for all tokens to have their own blockchain, and the Ethereum blockchain is a home to them, which makes ERC20 so interesting and valuable.

The ERC20 standard offers many benefits and it allows developers to create DApps on the Ethereum blockchain, and it also streamlines the whole standardization process. 

ERC20 Wallets
For users of ERC20 tokens, ERC20 wallets are also necessary. It is a wallet that keeps all of your tokens. You don’t want anyone to get access to the tokens, so storing them in a wallet is always a good idea. Furthermore, ERC20 wallets can also be used to connect to other platforms and buy and sell items with blockchain support.

Here is a list of some of the most popular ERC20 wallets: 

-MyEtherWallet;

-MistWallet;

-MetaMask;

-Coinbase Wallet; 

Most people are confused about ERC20’s wallet address while using it. It is usually an Ethereum address. Furthermore, all Ethereum addresses can be used to store ERC20. The Ethereum blockchain runs through all Ethereum wallets.

Consequently, the ERC20 address refers to an address on the Ethereum platform. Please keep in mind that to access or even check the balance of your wallet, the wallet provider will have to ask for permission. Occasionally, however, the ERC20 address will only accept this type of token.

If possible, avoid limiting yourself to a particular type of token. If you want to keep all of your tokens safe you should choose a wallet that supports other types of tokens as well. This way you get the option of converting your tokens into others.

The Cons of ERC20

Although these tokens have some positive attributes, they also have some critical flaws that you should be aware of. Accounts in Ethereum typically fall into two categories: contract accounts and externally owned accounts. In this case, you simply need to use the transfer function when attempting to interact with another account that is externally owned. However, when the transfer function of its contract account does not work as it should, you may lose money.

This blockchain protocol does not notify the recipient of the funds sent to a contract when using it. Therefore, they cannot recognize it, and so the token gets trapped within the contract, where no one can use it. Due to this, it’s best to use the approval +transferForm functions. But this will come with additional costs.

Another negative side of ERC20 is that anyone with internet access can create tokens by using these standards. As a result, there are plenty of worthless tokens flooding the market for no reason, and the threat of scams is rising.

Final words

ERC20 is, without a doubt, one of the most prominent blockchain protocols available. It’s user-friendly, so anyone can use it to create ERC20 tokens and release them on a blockchain. However, it does have some drawbacks, and users should be very careful while investing in it. Before doing any kind of activity in the ERC20 world, conducting proper research is always a good idea.