What are ERC-20 Tokens?
ERC-20 tokens are a standard for creating fungible tokens on the Ethereum blockchain. The term 'ERC' stands for 'Ethereum Request for Comments', and '20' is the unique proposal identifier. This standard provides a uniform interface for interacting with various tokens, facilitating their use in a decentralized environment.
Key Characteristics
- Interoperability: ERC-20 tokens can interact seamlessly with various decentralized applications (dApps) and wallets within the Ethereum ecosystem.
- Fungibility: Each token is identical and can be exchanged for one another, making them suitable for use as currencies or assets.
- Smart Contracts: They are created using Ethereum's smart contract functionality, which automates transactions and increases security.
Uses of ERC-20 Tokens
These tokens have various applications, including:
- Initial Coin Offerings (ICOs): Many projects use ERC-20 tokens to raise funds.
- Decentralized Finance (DeFi): They play a vital role in the DeFi ecosystem, enabling lending, borrowing, and trading.
- Non-fungible Token (NFT) marketplaces: Some NFTs can be transacted as ERC-20 tokens.
In summary, ERC-20 tokens are fundamental to the Ethereum ecosystem, enabling various functionalities that support innovation in the cryptocurrency landscape.