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Understanding ERC-20 Tokens on the Ethereum Network

Updated: Apr 3

What is ERC-20?

ERC-20 serves as the technical standard for creating fungible tokens utilizing the Ethereum blockchain. Unlike non-fungible tokens (NFTs) such as ERC-721 tokens, fungible tokens are interchangeable with one another.

ERC-20 empowers developers to craft tokens enabled with smart contracts, facilitating their utilization across various products and services. These tokens represent various entities, including assets, rights, ownership, access, cryptocurrencies, or other transferrable items that lack inherent uniqueness.


Key Points:

  • Ethereum Request for Comment 20 (ERC-20) is the established standard for developing fungible tokens on the Ethereum blockchain.

  • ERC-20 streamlines the creation of new tokens on Ethereum, ensuring their interoperability with other smart contract tokens.

  • Since its inception, the ERC-20 standard has been predominantly utilized for creating Ethereum-based tokens.

History of ERC-20

The surge in popularity of smart contracts in 2015 highlighted several challenges. With the ability for anyone to create tokens, the absence of a standardized token framework led to an influx of tokens without clear guidelines for their creation, usage, or exchange. This lack of standardization meant that each application necessitated its own token, complicating user interaction across multiple platforms.

Origin of the Standard

ERC-20 emerged from a proposal by developer Fabian Vogelsteller in 2015, aiming to address the need for standardization within smart contracts on the Ethereum blockchain. Submitted as an Ethereum Request for Comment (ERC) on the project's Github page, the proposal received the designation ERC-20 due to its sequential order as the twentieth comment.

Following the customary procedure within the Ethereum developer community, the proposal underwent approval and was implemented in 2017 as Ethereum Improvement Proposal 20 (EIP-20). Despite its formal adoption, it retained the designation ERC-20 due to its initial recognition throughout the proposal phase.

By establishing ERC-20 as the standard for token creation on Ethereum, developers gained a unified framework for generating interoperable tokens, thereby enhancing efficiency and accessibility within the Ethereum ecosystem.

In 2023, Ethereum underwent significant changes in how modifications were suggested and processed within its ecosystem. The methodology was bifurcated into two separate repositories: Ethereum Request for Comments (ERCs) for standardization and documentation concerning Ethereum's application layer, and Ethereum Improvement Proposals for suggesting, processing, and documenting changes for Ethereum itself. Following approval and implementation, smart contract tokens on the Ethereum blockchain must adhere to the ERC-20 standard to ensure interchangeability.

Contents of ERC-20

ERC-20 delineates a set of functions and events necessary for a token to achieve ERC-20 compliance. These functions, referred to as methods within the ERC, outline the requirements for a smart-contract-enabled token, while events signify actions. The mandatory functions encompass:

TotalSupply: Representing the total number of tokens to be issued.

BalanceOf: Indicating the balance of a token owner's account.

Transfer: Enabling the automated transfer of a designated quantity of tokens to a specified address for transactions utilizing the token.

TransferFrom: Executing automatic transfers of a specified number of tokens from a designated address using the token.

Approve: Allowing a spender to withdraw a predetermined number of tokens from a designated account, up to a specified amount.

 Allowance: Returning a predetermined number of tokens from a spender to the owner.


The required events include:

Transfer: Triggered when a transfer is successfully executed.

Approval: Logging an approved event.

Optional functions that enhance a token's usability encompass its name, symbol, and the decimal points to be utilized.


Interpreting ERC-20

The terms "Token" and "Cryptocurrency" are often interchangeable; however, while all cryptocurrencies are tokens, not all tokens are cryptocurrencies. Tokens frequently represent external assets and rights, with "Token," in the context of ERC-20 compliance, denoting a blockchain representation meeting the Ethereum community's standards for smart contract standard-compliant tokens.

The functions and events described adhere to programming languages and offer a standardized structure for tokens, facilitating accessibility, recognition, review, and utilization. This standardization mitigates user and application developer confusion, ensuring uniformity across tokens and assisting in essential functionalities such as circulation tracking, balance storage, transfer requests, approval granting, and automated transfers.

Popular Examples of ERC-20 Tokens

Many prominent digital currencies adhere to the ERC-20 standard, including Tether USD (USDT), USD Coin (USDC), Shiba Inu (SHIB), Binance USD (BUSD), BNB (BNB), DAI Stablecoin (DAI), HEX (HEX), Bitfinex LEO (LEO), and Maker (MKR).

Goals of ERC-20

The ERC-20 standard plays a critical role in blockchain by establishing a standardized set of rules governing Ethereum tokens utilizing smart contracts. These rules encompass token transfer mechanisms, transaction approval processes, data accessibility, and total token supply. By adhering to ERC-20, developers can anticipate how new tokens will function within the Ethereum ecosystem, streamlining development processes and ensuring compatibility between new and existing projects. Fortunately, the majority of token developers have embraced ERC-20 rules, resulting in widespread ERC-20 compliance across tokens released on Ethereum

BEP-2 vs. ERC-20

ERC-20 serves as the standard for tokens within the Ethereum ecosystem, but various tokens, blockchains, and ecosystems have branched out from Ethereum. One such ecosystem is Binance, the cryptocurrency exchange, which developed its own blockchain known as the Binance Chain, derived from an Ethereum fork. Subsequently, Binance developers established a token standard for their blockchain called BEP-2, similar to ERC-20, guiding token creation for use on the Binance Chain. Additionally, Binance introduced the Binance Smart Chain, a side chain compatible with ERC-20 tokens and the Ethereum Virtual Machine, employing a newer standard called BEP-20 to achieve cross-chain compatibility.

Understanding USDT TRC20 and ERC20

USDT, or Tether, operates on both the Tron and Ethereum networks, albeit with slight differences:

Blockchain: USDT TRC20 operates on the Tron blockchain, while USDT ERC20 operates on the Ethereum network, distinguishing the two tokens within separate ecosystems.

Transaction Speed: TRC20 tokens typically boast faster transaction speeds compared to ERC20 tokens. TRC20 transactions usually complete within approximately 3 minutes, whereas ERC20 transactions may take up to 15 minutes. The Tron network can process up to 2000 transactions per second, significantly surpassing Ethereum's capacity of 15 transactions per second.

Transaction Costs: TRC20 transactions generally incur lower gas fees than ERC20 transactions due to the comparatively lower transaction fees on the Tron network.

Security: While ERC20 tokens, including USDT, benefit from their longer existence, potentially instilling a sense of higher security, opinions among crypto enthusiasts vary, with some asserting that both TRC20 and ERC20 tokens offer comparable levels of security.


FAQs about TRC20 and ERC20 USDT

Are ERC20 and TRC20 USDT the same?

No, ERC20 and TRC20 USDT differ due to being issued on different blockchains with distinct coding standards, despite both being stablecoins issued by Tether.

What's the Difference Between ETH and ERC-20?

Ether (ETH) is the native token of the Ethereum blockchain, while ERC-20 is a standard for creating fungible tokens within the Ethereum ecosystem.

Which USDT is better?

The preferable USDT variation varies among traders; while ERC20 USDT offers more versatility in development and sharing, TRC20 USDT typically incurs lower gas fees and is favored by novice traders.

Can I transfer USDT between ERC20 and TRC20?

Yes, users can transfer USDT between Ethereum and TRON networks bidirectionally, facilitating liquidity across chains and enabling transactions based on individual preferences.

How do I know if My USDT is TRC20 or ERC20?

Users can discern the type of USDT by examining the token contract address, with ERC20 USDT addresses commencing with "0x" and TRC20 USDT addresses commencing with "T."

How many networks does USDT have?

USDT is available on six distinct networks, which comprise Ethereum, TRON, Bitcoin, Algorand, EOS, and OMG.

Are there wallets that support TRC20 and ERC20 USDT?

Yes, numerous wallets support both USDT variations, including the XREX APP (EXCHANGE CRYPTO TO INR), alongside various alternatives catering to diverse user preferences. About us

A2ZCrypto (FIU-IND) is a secure OTC trading platform in India that facilitates non-custodial swaps through XREX, a regulated centralized exchange holding multiple licenses. Our platform serves as a gateway for converting INR to crypto and vice versa. Despite being centralized, we operate on a non-custodial basis, ensuring that your crypto assets are never held by us (Custodian: XREX).

Disclaimer: Cryptocurrency trading carries significant risks and may not be suitable for all investors. Prior to engaging in cryptocurrency trading, it is crucial to carefully assess your investment objectives and ensure that cryptocurrencies are safeguarded by blockchain technology with robust cybersecurity measures and secure keys. Cryptocurrencies are stored in wallets secured by private and public keys, which should only be accessible to the owner. Therefore, it is important to remain vigilant against potential scams and unethical online activities. The information provided on A2ZCrypto investment platforms is for general knowledge purposes and provides introductory insights only



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