What Is ERC20 and What You Need to Know About Tokens on the Ethereum Blockchain

What Is ERC20 and What You Need to Know About Tokens on the Ethereum Blockchain

Let’s uncover what hides behind the acronym ERC20 and how it relates to the Ethereum blockchain. Our step-by-step guide will introduce you to the fascinating world of Ethereum and the tokens created on this network.

What Is Ethereum Blockchain?

The Ethereum blockchain is a decentralized platform that enables the creation and execution of smart contracts and decentralized applications (DApps). Launched in 2015 by Vitalik Buterin, Ethereum introduced a groundbreaking concept by extending blockchain technology beyond simple transactions to support programmable contracts. Unlike Bitcoin, which primarily serves as a digital currency, Ethereum’s blockchain serves as a global, open-source platform for developers to build and deploy decentralized applications. Its native cryptocurrency, Ether (ETH), is used to fuel transactions and smart contract executions within the network. Ethereum’s versatility and innovation have made it a cornerstone of the blockchain industry, facilitating a wide range of applications, including decentralized finance (DeFi), non-fungible tokens (NFTs), and more.

What Is ERC20?

ERC20 is a standard used for creating tokens on the Ethereum blockchain. It sets out guidelines and functions that tokens must follow to work smoothly within the Ethereum network. Tokens built with the ERC20 standard can be traded easily with other ERC20 tokens. This standard has made it easier to create digital assets like cryptocurrencies and utility tokens, which can be managed and traded on Ethereum-based platforms.

A token is a digital asset or representation of value built on a blockchain network, such as Ethereum. These tokens can represent various assets, including cryptocurrencies, digital collectibles, or even access rights to a service or platform. They are often created through smart contracts and can be transferred or traded between users on the blockchain.

Polular Tokens on ERC20

Ethereum is one of the oldest and most popular blockchains. Developers choose this blockchain for its reliability, stability, security, and well-developed infrastructure — all of which have stood the test of time. The popularity of the Ethereum blockchain has led to the emergence of a vast number of ERC20 tokens from independent developers, spanning a wide range of applications from memecoins to serious technical solutions for blockchains. Let’s take a look at some prominent members of the ERC20 family.

TOP ERC20 tokens:

Top ERC20 Tokens Top ERC20 Tokens. Source: Coingecko.com

Obtaining a ERC20 Address for Your Tokens

After we’ve clarified what Ethereum and the ERC20 token standard are, let’s obtain an ERC20 address to start using the Ethereum blockchain. Getting an ERC20 address is quite simple, and there are numerous platforms and software solutions available to do so - the choice is always yours. However, here are a few important things to consider when choosing a wallet: security, reliability, privacy, and functionality. Gem Wallet is a self-custodied mobile wallet with open-source code that meets modern user demands and offers a wide range of features. Obtaining ERC20 is as easy as 3 clicks - simply install Gem Wallet on your device, create a new wallet, and select the desired asset, be it Ethereum or an ERC20 token. Now you’re ready to take the next step and receive your first tokens at your new ERC20 address.

Please note that your ERC20 address is the same for all ERC20 tokens and matches your Ethereum address. So don’t be surprised if you want to receive, for example, tokens from completely different projects, such as the USDC ERC20 stablecoin and the PEPE ERC20 memecoin, and yet the address for receiving them will remain the same.

Acquire ERC20 Tokens

After obtaining your ERC20 address, the next step will be acquiring tokens into your balance. There are plenty of options for acquiring tokens - you can withdraw them from an exchange, receive them from friends, or even win them in various contests and giveaways. Additionally, you can purchase ERC20 tokens using Gem Wallet with a credit card. This is a simple, fast, and secure way to acquire ERC20 tokens or Ethereum into your balance, which will allow you to avoid additional registrations and protect you from asset losses associated with errors in the recipient’s address - a common mistake that can be very costly. The entire process is automated, simple, and convenient.

What You Need to Know about Storing ERC20 Tokens

When it comes to safeguarding your ERC20 tokens, it’s essential to plan ahead - starting with the choice of wallet or platform, as the security of your crypto assets depends on your initial choice. As we mentioned earlier, there are numerous solutions available that offer ERC20 token storage functionality with varying levels of security and privacy. In Gem Wallet, three important aspects contribute to the security of your ERC20 assets:

  • Self-custody: This means that the access key is solely in the hands of the user, and only the user decides how to manage this access.
  • Open source: Transparency and openness to users. On one hand, it provides assurance that everything works within the declared functionality; on the other hand, it ensures timely fixing of any possible errors and vulnerabilities with the involvement of independent researchers.
  • Privacy: Ensuring high privacy for our users is a priority for us.

How to Send ERC20 Tokens to Another Address

To send your ERC20 tokens, you will need the recipient’s address and a small amount of Ethereum in your balance to cover the network fee. The required amount of ETH will be indicated on the confirmation page under the ‘Network Fee’ line. For convenience, we recommend always having a small amount of ETH in your balance if you plan to use ERC20 tokens frequently. Excess ETH can be sent to staking to earn passive income - and when needed for fee payment, simply withdraw the reward or all the ETH from staking.

What Else Can You Do with ERC20 Tokens?

Besides the basic functionalities, ERC20 assets also possess the capability of exchange - swap.

Swap ERC20 Tokens

Assets within the Ethereum blockchain can be exchanged for each other using smart contracts. This is convenient in cases where, for example, you have a stablecoin like USDC ERC20 and you want to get a meme token like PEPE ERC20 - simply perform a swap of one asset for another. The entire exchange takes place using a smart contract, so the risk of fraud is lower compared to exchanging assets through a third party. There are many decentralized exchange (DEX) platforms on Ethereum accessible via a web interface or directly in your Gem Wallet - just select the desired asset and click the ‘Swap’ button.

ERC20 Tokens Swap Volumes on Uniswap ERC20 Tokens Swap Volumes on Uniswap. Source: uniswap.org

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