Guide to everything ERC20

In the blockchain industry, there is a recurring term thrown around called ‘ERC20.’ This article will serve as a guide to explaining what it is and why it is something of a commodity in the industry.

What exactly is it?

To start off, ERC20 tokens are referred to as ‘Ethereum Assets’ in Exodus due to the fact that they live on the Ethereum blockchain.

ERC20 is an official protocol that is used for proposing improvements to the Ethereum (ETH) network and can typically be acknowledged as being a standard for tokens that are conceived on the Ethereum chain. For instance, a large quantity of ICO tokens are ERC20 tokens. ICOs (Initial Coin Offerings) are defined as being events centered on fundraising wherein companies raise money for certain projects by selling digital tokens.

Participation in an ICO goes like this:

  1. You register with a cryptocurrency exchange. “You cannot participate in an ICO with fiat currency. If you don’t own cryptocurrencies, you will first need to buy some. The best way to buy large amounts of Bitcoin is through online exchanges and send your transfer money from your bank account to your newly created account with a cryptocurrency exchange.”
  2. You exchange fiat for either Bitcoin or Ether. “Once you registered on an exchange and the money from your bank account has arrived in your cryptocurrency exchange account, you now have to exchange your EUR, USD, etc for the cryptocurrency you want to buy.”
  3. You transfer your coins from the exchange to a blockchain wallet that is under your control. “Another reason for you to move your coins to a wallet which is under your control is the token sale participation. Unless your exchange offers the explicit possibility to participate in a specific ICO with your online wallet, the general rule is not to send funds from an exchange wallet since you won’t have access to the new token with most online wallets.”
  4. You set up your wallet. “Most token sales today happen on the Ethereum network. Therefore you will need an Ethereum wallet to participate in the token sale. Not every wallet is suitable for ICOs. The most user-friendly and widely accepted Ethereum wallets are MetaMask and MyEhterWallet.”
  5. You purchase ICO tokens. “Before you proceed make sure to read the general terms of the ICO and the token purchase agreement. Most start-ups provide step-by-step guides for the token sale participation including screenshots for each step.”
  6. You secure your tokens. “After you receive your tokens in your MetaMask – or MyEtherWallet, or Parity – address make sure to transfer these to a more secure wallet.”

If you want a more traditional type of finance, take IPOs (Initial Public Offerings) into account. These are when companies get placed on the list of public stock exchanges and sell stocks (i.e. shares) of their respective company to the public so that they can raise the funds. The conventional ERC20 token principle makes it that much easier to trade a single ERC20 token for another, incorporate a variety of ERC20 tokens into platforms similar to blockchain wallets and exchanges, and so much more.

A more detailed explanation

All that has been said has been a comparatively rudimentary explanation of what ERC20 tokens are. From here, we can delve into a more technical summary of this particular type of tokens.

ERC is an acronym for ‘Ethereum Request for Comments’ and – as previously stated – it is regarded as being the official system for coming up with and suggesting improvements that can be made to the Ethereum network. The “20” in the title is the unique proposal ID number.

The proposal ERC20 outlines a set of rules which are required to be met in order for a token to be officially called an ‘ERC20 token.’ These rules apply to all of the ERC20 tokens on account of the fact that these guidelines need to be followed so that ERC20 tokens will be able to interact with one another.

These rules associated with ERC20 are as follows:

  • The optional rules
    • The name of the token
    • The symbol (ex. REP, which is the symbol for Augur)
    • The decimal (how many decimal places a token can be divided into, which can go up to 18)
  • The mandatory rules
    • totalSupply – The total supply of tokens created
    • balanceOf – A specific function that, when utilized, shows the total number of tokens that are held in a given wallet
    • transfer – The number of tokens that can be transferred from the total token supply straight to a user wallet
    • transferFrom – A function that permits users to transfer tokens to other users
    • approve – Checks transactions against the total token supply and actively prevents counterfeiting and fraudulent activities by authenticating that the transactions do not increase or decrease the total token supply
    • allowance – The function that checks individual wallets and also cancels transactions if the wallet funds have been revealed to be insufficient

Exchanging assets

Much like with other blockchain assets, ERC20 tokens are assets to a blockchain that can possess value and be both sent and received like Bitcoin, Ethereum, Litecoin, or any other kind of blockchain asset.

The primary difference that sets ERC20 tokens apart from cryptocurrencies such as Litecoin is that ERC20 tokens do not have their own blockchain, but instead use the Ethereum blockchain. ERC20 tokens are commonly stored on Ethereum addresses, sent with the use of Ethereum transactions, and they use Gas (tiny fractions of Ether and are basically the equivalent of a fee) to pay for transaction fees.

To send and/or exchange ERC20 assets, your wallet will need a small amount of ETH in order to pay for the transaction. If you do not have this amount stored, then you will be met with a message reminding you of the fact. If you are not in possession of Ethereum and have an Ethereum-powered asset that you want to send or trade, there are a few options for you to consider in order to control and exchange these particular assets:

  1. Exchange any regular asset (BTC, DASH, LTC, BTG, VTC, etc.) for Ethereum. This is arguably the easiest way to obtain Ethereum for your Exodus wallet. As soon as the exchange is complete and your Ethereum is successfully deposited, you can then begin to manage and/or exchange assets that are powered by Ethereum.
  2. Deposit Ethereum into your Exodus wallet. This will require you to have Ethereum sent straight to your Exodus Ethereum address from an outside source, usually in the form of an external wallet and exchange.

It should also be noted that to send or trade an ERC20 asset, Exodus requires you to have a minimum of 0.005 ETH inside your Exodus wallet. It has been recommended by Exodus that you keep at least 0.1 ETH in your wallet in order to cover fees for a long-term. This amount will provide just enough padding to send and/or exchange all of those assets that are powered by Ethereum over a hundred times without ever having to worry about the possibility of running out of Gas.

Moreover, for those who are advanced users, fees that are applied to ERC20 assets will increase if you send them to a ‘smart contract’ address. For those who don’t know, smart contracts are self-executing types of contracts that have the terms of an agreement between the buyer and the seller written directly into the lines of code. They permit trusted transactions and agreements to be carried out among anonymous parties without involvement of central authority, a legal system, or an external enforcement mechanism.

With that being established, these fees are higher because smart contracts need to be given enough Gas to process transactions and carry out the contract program correctly.

Unsupported tokens

The final section about this subject stems from the inquiry some may have about what happens when an unsupported ERC20 token is sent to an ETH address on Exodus. To answer this, your Exodus ETH address is fully capable of receiving just about any ERC20 token regardless of whether or not Exodus supports it. Tokens that are unsupported will merely not be visible in Exodus.


With its strong presence in the Ethereum network and blockchain technology, it’s no wonder that ERC20 is such a popular term in the industry.

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