What is an ERC20 token?

If you are getting into cryptocurrency, you will regularly come across the term ERC20 token, but what does it actually mean? It all has to do with the Ethereum blockchain and its network. ERC20 is a protocol standard used for the Ethereum network. The protocol contains certain rules and standards that must be followed in order to issue tokens on the network. A large number of tokens run on the Ethereum network. Well-known examples include:

• Chainlink (LINK)
• Uniswap (UNI)
• Shiba Inu (SHIB)
• Pepe (PEPE)
• Aave (AAVE)

All these tokens use the Ethereum network and comply with the ERC20 standard and its conditions. Stablecoins like USDT (Tether) and USDC also largely run as ERC20 tokens on the Ethereum network. ERC20 tokens are easy to trade on exchanges such as Bitvavo (440+ cryptocurrencies), Bybit EU and OKX. Because all these tokens run on the same Ethereum network, you can also store them in a single Ethereum wallet.

What is the ERC20 standard?

ERC stands for Ethereum Request For Comments and the 20 stands for the unique ID number to distinguish this standard from others. It can be compared to the HTTPS protocol for the internet, to which websites must adhere. In the same way, tokens must also comply with all the requirements set in the ERC20 standard. These requirements are incorporated in so-called smart contracts. If you do not comply with these requirements, you are not ERC20 compliant and the token is not considered to be ERC20.

Cryptocurrency with other blockchains are therefore not ERC20 compliant. Think of coins like Bitcoin and XRP, which use their own blockchain. Besides ERC20, there are now also other token standards on Ethereum, such as ERC721 for NFTs and ERC1155 for both fungible and non-fungible tokens. ERC20 remains by far the most widely used standard for crypto tokens.