An Introduction to ERC-20 Tokens: The Standard Behind Most Crypto

ERC-20 is a short list of rules a token on Ethereum agrees to follow. It says how to report a balance, how to send tokens to someone, and how to let an app spend tokens on your behalf. That is nearly all it is - and it is why almost every token you have heard of, from Tether's USDT to Chainlink's LINK and Uniswap's UNI, is an ERC-20 token.

Why does a standard matter?

Think of a shipping container. Nobody cares what is inside; what matters is that every crane, ship and lorry in the world can handle the same box. ERC-20 is that box for tokens. Because a new token speaks the same few commands as every other one, MetaMask can display it, Uniswap can trade it and an exchange can list it without anyone writing special code first. Before the standard existed, each token was its own small engineering project.

What does an ERC-20 token have to do?

Four things, in plain words. Report the total number of tokens in existence. Report how many any address holds. Move tokens from your address to another. And let you grant an app permission to move a set amount for you - the "approve" step you see before your first swap on Uniswap or deposit into Aave. That permission is a standing allowance, which is why security guides tell you to review and revoke old approvals.

What the standard does not promise

ERC-20 says nothing about whether a token is valuable, honest or safe. Anyone can create one in an afternoon, name it after a famous project and set its supply to anything they like. The standard also cannot stop a mistake: tokens sent to an address on the wrong network, or to a contract that was never written to handle them, are usually gone for good.

When you add a token to your wallet, copy its contract address from the project's own documentation rather than from search results, and send a small test amount before anything large. Next, see how the other standards differ in ERC-20 vs ERC-721 vs ERC-1155 and what ERC-721 is.