Technical Definition

Token Standard (ERC-20)

A token standard is a common set of technical rules that defines how a type of blockchain token should behave. ERC-20 is the most widely used standard for fungible tokens on Ethereum and Ethereum-compatible networks. Fungible means that individual units are intended to be interchangeable, similar to how one dollar can be exchanged for another dollar.

By Crypto University Editorial
TokenEthereumSmart Contract

✦ Key Insight

Token standards allow wallets, decentralised exchanges, block explorers, lending protocols, and other applications to interact with tokens in a predictable way. Without common standards, every token could require completely different software. ERC-20 helped make it easier for developers to launch stablecoins, governance tokens, utility tokens, and many other assets within the Ethereum ecosystem. However, being ERC-20 compliant does not mean a token is legitimate or safe.

✕ Common Misconceptions

Assuming ERC-20 means the token runs only on Ethereum

Treating token-standard compliance as a security audit

Confusing ERC-20 tokens with ETH

Giving unlimited token approvals without understanding them

Buying tokens by ticker rather than contract address

Confusing ERC-20 with NFT standards

Detailed Explanation

How It Works

An ERC-20 token smart contract generally implements standard functions related to:

  • Checking balances

  • Transferring tokens

  • Checking total supply

  • Approving another address or contract to spend tokens

  • Checking spending allowances

Because applications recognise these standard functions, an ERC-20 token can usually integrate with compatible wallets and DeFi protocols.

Other blockchain ecosystems use different token standards, such as SPL tokens on Solana.

FAQs

Is ETH an ERC-20 token?
No. ETH is Ethereum's native asset.

Are stablecoins ERC-20 tokens?
Many stablecoins have ERC-20 versions on Ethereum.

Does ERC-20 guarantee that a token is safe?
No. It only describes a technical interface standard.

In Practice

“A user holds USDC on Ethereum. USDC follows an ERC-20-compatible structure, allowing an Ethereum wallet to display the balance and a DEX to request approval before performing a token swap.”

Dig Deeper

Smart Contract

A smart contract is self-executing code stored on a blockchain that automatically performs actions when certain conditions are met.

Token

A token is a digital asset built on top of an existing blockchain rather than having its own independent blockchain.

Ethereum

Ethereum is a programmable blockchain network designed to support smart contracts and decentralised applications. Its native cryptocurrency is Ether, or ETH.