Beginner

FAQ for Crypto Beginners

What is an ERC-20 token ?

Before we define "ERC-20 token", let's go through a few fundamentals.

What is a Blockchain?

A blockchain is a public ledger of transactions that is maintained and verified by a decentralized, peer-to-peer network of computers that adhere to a consensus mechanism to confirm data.

Each computer in a blockchain network, called a node, maintains its own copy of the shared record, making it nearly impossible for a single computer to alter any past transactions or for malicious actors to overwhelm the network.

Sufficiently decentralized blockchains do not rely on centralized authorities or intermediaries to transact globally, securely, verifiably, and quickly, making technology like cryptocurrency possible.

A blockchain also typically has a native asset/currency, known popularly as cryptocurrency, which is used to

• pay transaction fees (gas) on the network

• incentivize users to keep the cryptocurrency’s network secure

What is a Cryptocurrency?

A cryptocurrency is the native asset/currency of a blockchain network that can be

• traded,

• utilized as a medium of exchange,

• used as a store of value.

A cryptocurrency is issued directly by the blockchain protocol on which it runs.

Cryptocurrencies are also used to

• pay transaction fees (gas) on the network

• incentivize users to keep the cryptocurrency’s network secure

Bitcoin and Ether are the two most popular cryptocurrencies.

Cryptocurrencies typically exhibit the following characteristics:

• Decentralized, as they rely on code to manage issuance and transactions.

• Built on a blockchain or other Distributed Ledger Technology (DLT), which allows participants to enforce the rules of the system in an automated, trustless fashion.

• Uses cryptography to secure the cryptocurrency’s underlying structure and network system. This is where the "crypto" part of it comes from.

What is a token or rather, what is a crypto token ?

A crypto token is a blockchain-based digital asset with similar functionality to cryptocurrencies like Bitcoin, Ether, and Bitcoin cash: in that it can

• hold value

• be sent and received and

• traded.

They are created by software platforms that are build on top of blockchains.

For instance, the Ethereum blockchain’s native token is ether (ETH). Ethereum offers a software platform upon which new tokens can be built and it defines a few standards/rules for developers to follow while building these tokens which is the executed on the Ethereum Virtual Machine, or EVM.

This code is self-executing and is referred to as a smart contract.

ERC-20 is the most popular token standard, with ERC being the abbreviation for Ethereum Request for Comments.

The set of functions defined by the ERC-20 standard which a developer of a token should implement are:

totalSupply  -   get the total token supply
balanceOf    -   get the account balance of account address
transfer     -   send amount of tokens 
transferFrom -   define where the tokens are transfering from
approve      -   allow tokens to be withdrawn from sending address
allowance    -   returns the remaining tokens of the address

ERC-721, which was designed to enable non-fungible tokens (NFT) that are individually unique and cannot be interchanged with other similar tokens, is another popular token standard.

ERC-20 token

The crypto tokens built on top of Ethereum blockchain, implementing the ERC-20 token standard are called ERC-20 tokens.

$SHIB, $LEASH, and $BONE are ERC-20 tokens.

Sourced from Ethereum Developers GuideBlockchain.com Ethereum FAQGemini.com Blockchain 101