eth erc20

What Is ERC-20?

ERC-20 is the universal standard for fungible tokens on Ethereum, establishing a shared set of “transfer and balance query rules” that ensure seamless interoperability across wallets, exchanges, and decentralized applications (DApps). This specification allows diverse tokens to function and interact smoothly within the Ethereum ecosystem.

On Ethereum, tokens are not standalone currency systems but are managed by “smart contracts”—self-executing programs that handle balances, transfers, and approvals according to predefined interfaces. “Fungible” means that each unit of the token is identical in value and attributes, similar to coins or loyalty points where individual units are indistinguishable.

How Does ERC-20 Work on Ethereum?

ERC-20 smart contracts track the balance of each address and manage the transfer of tokens between addresses. All operations are ultimately recorded on the blockchain ledger, making transactions transparent and verifiable by anyone.

An ERC-20 transfer involves initiating a transaction that calls the contract’s transfer function, paying a network fee (Gas) in ETH to Ethereum validators, updating both sender and recipient balances, and generating a record that can be referenced. Gas fees represent the cost of network processing, paid in ETH—the native asset accepted by miners and validators for transaction fees.

If an application needs to transfer tokens on your behalf, you must first set an allowance via the approve function. The application can then use transferFrom to spend tokens within the authorized limit, similar to setting a spending cap on a debit card.

What Are the Main Functions of the ERC-20 Interface?

The core ERC-20 interface centers on three functionalities: querying, transferring, and approving. Queries include retrieving total token supply (totalSupply) and an address’s balance (balanceOf); transferring (transfer) enables sending tokens to another address; authorization and delegated spending involve setting allowances (approve) and spending within those limits (transferFrom).

Supplementary functions provide metadata such as the token’s name (name), symbol (symbol), and decimal precision (decimals). Decimals determine the smallest unit, typically set at 18, allowing a single token to be split into 10^18 subunits for flexible pricing and calculations.

ERC-20 contracts also emit events like Transfer (for token movements) and Approval (for changes in authorization), which wallets and block explorers subscribe to for displaying transaction history and approval updates.

What Are Common Use Cases for ERC-20?

ERC-20 tokens are widely used for stablecoins, governance tokens, platform points, asset-backed certificates, and fundraising tokens. Popular stablecoins such as USDT, USDC, and DAI utilize ERC-20 for payments and DeFi services due to broad wallet and application support.

In decentralized exchanges (DEXs), ERC-20 serves as the foundational format for trading and liquidity provision. Similarly, lending protocols, yield aggregators, and cross-chain bridges leverage ERC-20’s unified interface for programmatic asset management and seamless liquidity movement.

How to Safely Use ERC-20 Transfers and Authorizations?

Key safety practices include verifying contract addresses, managing approval limits, understanding fees, and promptly revoking unnecessary authorizations.

Step 1: Verify the token’s contract address using official channels or reputable block explorers to avoid sending assets to fraudulent contracts.

Step 2: Conduct a small test transfer to confirm correct addresses and network selection before proceeding with larger transactions.

Step 3: Set appropriate allowance limits when authorizing applications—avoid granting unlimited approval. Regularly review and revoke unused approvals using wallet or block explorer tools to reduce risk if an application is compromised.

Step 4: Ensure you have sufficient ETH to pay Gas fees. Without ETH, you cannot complete ERC-20 transfers or authorizations on Ethereum.

What Should You Know When Using ERC-20 on Gate?

When depositing or withdrawing ERC-20 tokens on Gate, it’s crucial to select the correct network and contract version while verifying addresses.

Step 1: Choose the correct network. For example, when depositing USDT, select the Ethereum network (ERC-20 version), ensuring your assets enter Ethereum’s ERC-20 contract ecosystem.

Step 2: Copy and verify your deposit address carefully. Use only addresses provided by Gate, double-check key digits against official or wallet addresses before proceeding. Consider a small test deposit first.

Step 3: Prepare for transaction fees. Withdrawals to external addresses or on-chain transfers require paying Ethereum network fees in ETH; when depositing to Gate, the sender bears the Gas costs.

Step 4: Monitor deposit confirmations. Ethereum transactions require several block confirmations before assets are credited; Gate displays confirmation progress and status on its interface.

Funds are at risk—always verify network, contract version, and address accuracy before making significant transfers.

How Does ERC-20 Differ from Other Token Standards?

Compared to ETH (Ethereum’s native coin), ERC-20 tokens are “contract-based” assets with balances tracked inside smart contracts. ETH is the blockchain’s native currency used for Gas payments—it is not governed by any token contract.

Relative to ERC-721 (NFTs) and ERC-1155 standards, ERC-20 focuses on fungibility: every unit is identical and interchangeable. NFTs are non-fungible—each token has a unique identifier; ERC-1155 supports both fungible and non-fungible assets within a single contract.

Advanced standards like ERC-777 offer expanded transfer hooks and interaction models, but ERC-20 remains the most widely adopted due to its ecosystem compatibility—making it highly supported across wallets and exchanges.

What Are the Risks and Limitations of ERC-20?

Contract-level risks include vulnerabilities in smart contracts or excessive permissions (such as minting, freezing, or blacklist features) that may affect token properties. Always review contract code and official documentation to understand possible admin controls.

Authorization risks often affect newcomers. Granting unlimited approval to untrusted applications exposes assets to potential unauthorized withdrawals. Always use minimum necessary allowances and periodically revoke unused authorizations.

Transaction-related limitations include high fees during periods of Ethereum congestion, mandatory use of ETH for Gas, and potential asset loss from incorrect networks or contract addresses. Beware of scams like “fake tokens” or “trap contracts” that cannot be sold—always rely on verified information sources and community audits.

Practical Steps for Learning ERC-20

Step 1: Read the EIP-20 documentation to understand each interface function and event.

Step 2: Deploy a simple ERC-20 contract template on a testnet; set its name, symbol, and decimals; practice transfers and approvals.

Step 3: Use mainstream wallets to observe approvals and event logs; track Transfer and Approval events on a block explorer.

Step 4: Experiment with small amounts in a DeFi app; set limited authorization for a transaction; then practice revoking authorizations and risk assessment.

Key Takeaways of ERC-20

ERC-20 serves as Ethereum’s “universal language” for fungible tokens, providing standardized interfaces that make assets recognizable and manageable across wallets, exchanges, and DeFi platforms. Its operation depends on smart contracts and Gas fees paid in ETH. Mastering transfers, approvals, and events is essential for transaction safety. In practice, always verify contracts/networks, control allowance limits, keep ETH for fees, and exercise caution when depositing or withdrawing via platforms like Gate. Used responsibly within best practices, ERC-20 offers stable compatibility for a wide range of assets and applications.

FAQ

Why Do Most Cryptocurrencies Use the ERC-20 Standard?

The ERC-20 standard provides a unified token specification that allows all Ethereum-based tokens to be seamlessly recognized and interacted with by wallets, exchanges, and DApps. Much like standardized barcodes in retail, this common protocol streamlines ecosystem efficiency—making ERC-20 the most widely adopted token standard in the Ethereum community.

Are ERC-20 Tokens in My Wallet Real?

ERC-20 tokens are digital assets created by smart contract code; their legitimacy depends on the issuer. Tokens from reputable projects (such as USDT or USDC) are issued by official organizations and can be verified on platforms like Gate. Always confirm the token’s contract address via official websites or block explorers before trading to avoid counterfeit tokens.

Why Does My ERC-20 Transfer Sometimes Require Prior Authorization?

Authorization (Approve) is a security feature of the ERC-20 standard that prevents contracts from moving your tokens without explicit consent. When transacting on Gate or similar platforms, you’ll be asked to grant an allowance before transfers occur—much like setting a spending limit on a bank card—to protect your assets from unauthorized access.

Can Frozen or Burned ERC-20 Tokens Be Restored?

No. Freeze (locking) and Burn (destruction) operations performed via ERC-20 smart contracts are irreversible blockchain transactions. Once a contract issuer executes these functions, affected tokens are permanently reduced or locked—making project credibility especially important when choosing tokens.

What Are Common Mistakes for Beginners Using ERC-20?

Frequent errors include transferring tokens to incorrect contract addresses (such as counterfeit tokens) or failing to account for Gas fees leading to failed transactions. Beginners should start on secure exchanges like Gate, copy official contract addresses precisely, and practice operations on testnets (e.g., Goerli) before transacting on mainnet—helping minimize risks effectively.