ERC-20 is a technical standard for fungible-token contracts on Ethereum. It defines a shared set of methods and events so wallets, exchanges, and smart contracts can interact with compatible tokens through a familiar interface. The standard specifies how a token contract exposes functions such as balances and transfers; it does not certify a token’s legitimacy, security, value, or issuer.
What the Standard Defines
EIP-20 specifies six core methods: totalSupply reports supply, balanceOf reads an account’s balance, transfer sends tokens, approve sets a spending allowance, allowance reads the remaining allowance, and transferFrom lets an authorized spender move tokens. The standard also specifies Transfer and Approval events. The metadata methods name, symbol, and decimals are optional, so software should not assume every contract provides them.
Implementations may add other functions or rules. A token can also implement the interface imperfectly, so “ERC-20” describes a standard and intended compatibility, not a guarantee that every application will behave identically with every contract.
How Allowances Work
A common decentralized-application flow is to ask a user to approve an amount for a particular contract. That allowance gives the approved spender permission to call transferFrom up to the allowed amount. Approval is separate from transferring tokens: it grants permission, while a later contract call may use it.
Some interfaces request an unlimited allowance for convenience. A large allowance can leave more tokens exposed if the approved contract or account is compromised or behaves unexpectedly. Review the spender and amount shown in a wallet before approving; the standard itself does not determine whether an application or token is trustworthy.
What ERC-20 Does Not Mean
ERC-20 is not ETH: ETH is Ethereum’s native asset, while an ERC-20 token is tracked by a smart contract. The standard does not promise that a token has a particular supply policy, purpose, governance process, or market value. If an interface shows a token on another network, check the network and contract address; a familiar symbol alone does not identify a unique asset.
Social Media Sentiment
A September 2015 r/ethereum discussion about a proposed coin standard debated the value of a common interface for wallets and exchanges alongside concerns about standardizing too early. The thread predates the finalized ERC-20 specification, so it is useful as historical context rather than a snapshot of current opinion.
Last updated: 2026-10
Related Terms
See Also
- What Is Tokenomics? A Guide to Crypto Token Economics
- Why Smart Contract Audits Fail
- Why Calling It a Wallet May Have Been Crypto’s Biggest Mistake
- Exchange crypto with ChangeNOW
Sources
- Ethereum Improvement Proposal 20: ERC-20 Token Standard — defines the required token methods and events and marks name, symbol, and decimals as optional.
- ethereum.org: ERC-20 Token Standard — explains fungible tokens, interoperability, and typical ERC-20 functions.
- r/ethereum: “Let’s talk about the coin standard,” September 2015 — records early community discussion about common token interfaces and the trade-offs of standardization.