ERC-20

ERC-20 is a technical standard that defines how a certain type of token should behave on the Ethereum blockchain. Think of it as a rulebook — when a new token is created and follows ERC-20 rules, every wallet, exchange, and application that already understands those rules will be able to work with the new token automatically, without needing any special customization. The acronym stands for “Ethereum Request for Comment, number 20,” which was simply the tracking number of the proposal when it was first submitted.

What makes ERC-20 so important is interoperability. Before standards like this existed, every token was written in its own unique way, meaning software had to be specially adapted to recognize each one. ERC-20 solved this by saying: if your token can do these six specific things — like report its total supply, check a wallet’s balance, and allow transfers — then it qualifies. Thousands of tokens used in DeFi, gaming, and fundraising follow this standard today.

ERC-20 tokens are “fungible,” meaning every single unit is identical and interchangeable. One token is exactly equal in value and function to any other token of the same type — just like how one dollar bill is the same as any other dollar bill.

Example: Imagine a concert venue selling paper tickets where every ticket looks identical and grants the same access. It does not matter which specific ticket you hold — they are all worth the same and work the same way. ERC-20 tokens work just like that: any unit of a given ERC-20 token is perfectly interchangeable with any other unit of the same token.