What is ERC-20 and How were Tokens Created in this Standard?

ERC-20 or Ethereum Request for Comment 20 is a standard that sets the rules for creating fungible tokens on Ethereum. Fungible tokens are interchangeable with other tokens, so any unit carries the same value as another. For example, an ERC-20 Token acts just like an ETH token, meaning that 1 Token is and will always be equal to all the other Tokens. By contrast, ERC-721 covers non-fungible tokens that represent unique items.

Developers who follow the ERC-20 specification write smart contracts that issue tokens compatible with most wallets, exchanges, and dApps. These tokens can represent rights, ownership, assets, access, cryptocurrency, or anything that is not unique but is transferable.

Key takeaways:

• ERC-20 tokens follow a common standard on the Ethereum blockchain and remain fully interchangeable.
• ERC-20 tokens remain fully interchangeable and swap readily for other tokens of equal value.
• Every ERC-20 token contains the same essential properties; thus, they are easily transferred across projects and within different applications on the Ethereum network.

Overview of Ethereum

Ethereum operates as a public blockchain where thousands of independent nodes maintain a shared, continuously updated ledger. The system records every balance, smart contract call, and ownership transfer in chronologically linked blocks, forming a chain that resists tampering. Under proof-of-stake, more than a million validators each lock 32 ETH and earn annual yields of roughly three to five percent for submitting valid blocks. Replacing energy-intensive mining with this model reduced power consumption by approximately 99.9 percent, allowing Ethereum to remain the second-largest cryptocurrency by market value while leading in real-world applications, including DeFi, NFTs, and enterprise solutions.

What is the ERC-20 Technical Standard?

ERC-20, or Ethereum Request for Comment 20, sets the rules for fungible tokens in Ethereum smart contracts. Fabian Vogelsteller introduced the proposal in November 2015, and the community ratified it in 2017. The specification requires six functions (totalSupply, balanceOf, transfer, transferFrom, approve, and allowance) and two events, Transfer and Approval. Contracts that follow these rules issue tokens that integrate automatically across the Ethereum ecosystem: wallets display balances, exchanges list the asset, and DeFi applications move it safely without custom code.

A Short History of ERC-20

Before 2015, each Ethereum project defined its token interface, so wallet developer teams needed custom adapters for every release. Fabian Vogelsteller addressed the issue with GitHub pull request number 20, introducing a shared set of functions that became the ERC-20 standard. 

• Six core functions
  • totalSupply( ) → returns the number of tokens ever minted.
  • balanceOf(address) → fetches a wallet’s token balance.
  • transfer(recipient, amount) → moves tokens directly.
  • approve(spender, amount) → grants another address an allowance.
  • transferFrom(owner, recipient, amount) → lets that spender move up to the allowed amount.
  • allowance(owner, spender) → checks the remaining allowance.
• Two required events fire every time tokens move (Transfer) or an allowance changes (Approval), enabling wallets and block explorers to index activity in real time.

Optional extras, such as token name, symbol, or decimals, became so universally adopted that many developers treat them as de facto mandatory.

The draft reached test networks in 2016, remained under community review for several months, and gained broad mainnet adoption by early 2017. This timing aligned with the initial-coin-offering wave, which produced thousands of ERC-20 tokens and channeled billions of dollars in ether into new ventures. Today, ERC-20 supports stablecoins, governance tokens, and staking derivatives across the Ethereum ecosystem.

What is an ERC-20 Token?

An ERC-20 token is any fungible asset, in which one unit is interchangeable with any other, that follows the standard’s interface. The simplicity hides a powerful idea: because all ERC-20 contracts speak the same “language,” they become Lego bricks that slot seamlessly into wallets, exchanges, and dApps.

Popular ERC-20 Token Categories

There are various categories of ERC-20 tokens, each of which complies with industry standards. These ERC-20 tokens represent a wide variety of assets, such as the ones listed below:

List of Top ERC-20 Tokens by Market Cap 

ERC-20 reshaped Ethereum by streamlining digital-asset creation, which fueled a wave of ICO crowdfunding and broader interest in blockchain projects. The network now hosts more than 350,000 ERC-20 tokens. 

Listed below are the top ERC-20 compliant tokens as of June 16, 2025, on Coinmarketcap.com