ERC-20: Why It Is the Foundation of the Ethereum Ecosystem

You have probably heard about ERC-20 while scrolling through crypto forums, but what is it really?

The Simple Definition

ERC-20 = a kind of standardized “recipe” for creating tokens on Ethereum. Proposed in 2015 by Fabian Vogelsteller (co-founder of Ethereum), this standard allows any developer to launch their own token in just a few clicks.

How Does It Work?

An ERC-20 token can:

• Transfer from one wallet to another
• Have a controlled supply limit
• Allow third-party apps to use it
• Display your balance in real time

The Advantages (Why everyone uses it)

✓ Super easy: ready-made template, zero complication ✓ Compatible everywhere: works with all exchanges and wallets ✓ Secure: self-executing smart contracts

The Traps (Don't forget)

✗ Too easy = too many dubious projects issuing their tokens ✗ Network congestion when there is too much ERC-20 trading ✗ Cannot transfer additional information beyond the transfer

The Two Main Types

Stablecoins (USDT, USDC, DAI) → Stable price, pegged to the dollar or crypto collaterals

Application Tokens (UNI, LINK, APE) → Used for governance, staking, rewards

In short, ERC-20 has become THE standard for creating assets on Ethereum. Almost all the tokens you know use it as a foundation.