ERC-20

ERC-20 is a technical standard used for smart contracts on the Ethereum blockchain that defines a common set of rules for creating and managing fungible tokens. Because all ERC-20 tokens follow the same interface, they are fully interchangeable with one another within the same token type and are compatible with any Ethereum wallet, exchange, or decentralized application that supports the standard. This interoperability has made ERC-20 the dominant token standard in the cryptocurrency industry, underpinning thousands of projects from stablecoins to governance tokens to utility tokens.

Developers can use the ERC-20 standard to create their own tokens and launch them on the Ethereum network without building a new blockchain from scratch. A token contract defines properties like the token's name, symbol, total supply, and the functions that govern how tokens are transferred and approved for spending. This dramatically lowers the barrier to issuing a digital asset, which is why the ICO (initial coin offering) boom of 2017 saw an explosion of ERC-20 token projects.

For traders, ERC-20 tokens represent a vast and liquid segment of the crypto market. Most decentralized exchanges on Ethereum — including Uniswap — primarily trade ERC-20 tokens, and many of the most prominent DeFi protocols issue ERC-20 governance or utility tokens. When building trading strategies that interact with Ethereum-based assets, understanding ERC-20 mechanics — including approval workflows, gas costs for token transfers, and how token contracts can vary in their implementation — is an important part of operating safely and efficiently.