Understanding ERC-20 Tokens: What are They and How are They Created?

What are ERC-20 Tokens?

ERC-20 tokens are fungible assets that are created on the Ethereum blockchain, following a standardized protocol for compatibility across different platforms. This standardization enables these tokens to interact seamlessly with each other, providing a consistent environment for developers. ERC-20 tokens are a significant component of the Ethereum ecosystem and its many applications.

The primary purpose of ERC-20 tokens is to represent various digital assets, which can be used in numerous applications such as Decentralized Finance (DeFi), decentralized applications (dApps), and tokenized projects. These tokens can represent anything from a digital currency to a voting right, or even a proof of ownership. Some popular examples of ERC-20 tokens include Tether (USDT), Binance USD (BUSD), Polygon (MATIC), and Shiba Inu Coin (SHIB).

How are ERC-20 Tokens Created?

The process of creating ERC-20 tokens involves programming a smart contract using Solidity, the primary programming language for Ethereum contracts. This involves writing code that defines the rules and functions of your token, which is then deployed to the Ethereum blockchain.

However, creating an ERC-20 token does not necessarily require extensive coding knowledge. Platforms like Bitbonds Token Tool allow users to create their own ERC-20 tokens easily, offering a simple interface to define the parameters of the token. This makes the creation of ERC-20 tokens accessible to a wide range of users, not just those with programming skills.

Regardless of the method used to create them, all ERC-20 tokens must include specific functions to ensure their interoperability with other tokens and platforms. These functions include balanceOf which shows the number of tokens held by a given address, transfer which allows a certain number of tokens to be transferred from the total supply to a user, and approve which provides a way for others to withdraw a set number of tokens from a user. By including these functions, ERC-20 tokens can operate consistently within the wider Ethereum ecosystem.