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What is ERC20? The differences between ERC20 and other tokens

  1. 1. What is ERC20?
  2. 2. When was ERC20 established?
  3. 3. ERC20 standard rules
  4. 3.1 Optional Rules
  5. 3.2 Mandatory rule
  6. 4. Other types of ERC standards
  7. 5. What is the ERC20 token?
  8. 6. How do we distinguish ERC20 Token from other Tokens?
  9. 7. Benefits and drawbacks of the ERC20 Token
  10. 7.1 Advantages of ERC20 Token
  11. 7.2 Disadvantages of ERC20 Token
  12. 8. Types of ERC20 Tokens
  13. 9. How to own ERC20 Token?
  14. 10. ERC20 Token Wallet
  15. 10.1 My Ether Wallet (MEW)
  16. 10.2 ImToken
  17. 10.3 MetaMask
  18. 10.4 Trust and Cipher
  19. 10.5 Mist and Parity
  20. 10.6 Ledger and Trezor Wallets
  21. 10.7 Wallets of exchanges
  22. 11. How to mine ERC20 Token?
  23. 12. What features does the ERC20 have?
  24. 13. What's the problem that ERC20 facing?

*****What is ERC20***? When participating in the Crypto market, the term ERC20 constantly appears in the Ethereum Blockchain. So how is ERC20 related to the Ethereum token and what is the difference between the ERC20 Token compared to other Tokens? Let's go through this term with BHO Network in the article below!

1. What is ERC20?

ERC20 (Ethereum Request for Comment) is a technical standard used for smart contracts to issue and deploy tokens on the Blockchain platform of the Ethereum network. The digit 20 is used to differentiate from other standards.

ERC20 provides developers with a list of rules, allowing them to predict the future of chain interactions to help the Ethereum ecosystem grow stronger. These rules cover how tokens are transferred between addresses and how the data within each token is accessed.

2. When was ERC20 established?

Developer Fabian Vogelsteller first proposed the ERC20 standard on November 19, 2015. By outlining it clearly from the start, the developers didn't have to reinvent any other structure and only followed the general rules of an Ethereum token.

Then, ERC20 became more widespread in 2017, when Startup companies raised capital through ICO projects (Initial Token Offering) and started to boom until now. ERC20 standard has become more and more popular.

3. ERC20 standard rules

Every platform has its own standards to help investors grow stronger and users benefit more. ERC20 is not an exception.

3.1 Optional Rules

  • Token Name: the name of the token.
  • Symbol: symbol of token or token code.
  • Decimals (up to 18): specifying the number of decimal places in the token's unit.


  • Token Name: Maker
  • Symbol: MKR Decimals: 18. At this time, the smallest unit of MKR is 0.000000000000000001 MKR.

3.2 Mandatory rule

  • Total supply: is the number of Tokens in the market, with the amount locked minus the burned amount. Example: Total supply of MKR is 1,005,557 MKR.

  • Balance: The balance of the token in an existing account or wallet.

  • Transfer: transfer Tokens from your wallet to another user's wallet by providing the recipient's address and the number of tokens.

  • TransferFrom: Transfer Tokens from one account to another. This rule is similar to Transfer but more convenient with the feature that allows you to authorize someone to transfer tokens on your behalf.

  • Approve: transaction reconciliation, limit the number of tokens withdrawn from your wallet. This can help participants avoid the risk of contract failure or having all Tokens in the wallet stolen.

  • Allowance: allows checking the user's balance. In case you permit a particular wallet address to manage your tokens when using the allowance function, you can check the cash out balance and the remaining balance will be returned to your wallet.

Read more: What are NFT games? Top 20 Earning NFT Games in 2022

4. Other types of ERC standards

Although ERC20 tokens have outstanding advantages, there are still many limitations. Therefore, cryptocurrency developers have created new standards to overcome those limitations, replacing the ERC20 standard.


This platform is powered by smart contracts and allows users to securely transfer Tokens to digital wallets. In addition, ERC223 also helps to reduce transaction costs compared to ERC20. Some ERC223 tokens such as Lendo (ELT), ProntaPay (PRO)…


Created with the idea of ​​going completely against the nature of tokens with the aim of being fungible. This property means that each token has the same value and is treated equally. For example, all BTC coins are the same, no matter which user's wallet, or 10 USD bills will be exchanged for the same value as 1 10 USD bill.


ERC1155 standard wanted a smart contract interface representing and controlling any type of token, including Fungible and Non-fungible Tokens.

In this way, the ERC1155 can perform the same functions as the ERC20 and ERC721, or even all the features of both standards simultaneously. ERC1155 is still improving and maximising the efficiency of functions and fixing the vulnerabilities on standards and ERC721.


One of the Ethereum Request for Comment variants, the ERC standard, comes with a distinct set of features. This function is like an extension to ERC20 focused on making the circulation provide fees and be trusted by more users.

Works with defined boundaries and helps developers overcome the most common issues, building the potential to secure assets that keep from over-checking. The project also allows for more modification and provides perks that can be easily implemented with minimal errors.


This is a version with added security improvements and many other advanced features. ERC777 provides many options when it comes to dealing with token transactions. Tokens ERC777 will be compatible with ERC20 and backward.

In addition, there are other ERC standards such as ERC827, ERC948, ERC884…

5. What is the ERC20 token?

ERC20 tokens are tokens created on the Ethereum Blockchain platform and comply with ERC20 standards.

Thousands of ERC20 Tokens are listed on Coinmarketcap, some of which are DAI, Maker, OKB, Aave, USDT...

6. How do we distinguish ERC20 Token from other Tokens?

Here are some features of ERC20 Tokens that can be distinguished from other Tokens:

Wallet address

The wallet address of ERC20 Tokens always has a "0x" part in front. Next is 40 Hexa characters (including digits from 0 to 9 and letters from a to f, regardless of lowercase or uppercase).

In addition, the wallet address of ERC20 Tokens is ETH's wallet address. Assuming you have a wallet of ETH, the ERC20 Tokens that you own or are about to buy will also have the same wallet address as ETH.

Transaction fee

Not only ERC20 Token but with all other Token types, when you make transactions to transfer Tokens to another wallet. There will be is a transaction fee. This fee will depend on each platform.

Processing time

The processing speed of transactions related to ERC20 Token will be much faster than other types of Tokens.

High security

The ERC20 standard is implemented on smart contracts, so it will ensure the safety of your transactions. In case you enter the wrong wallet address, the system will immediately report an error, and your token is completely saved.

7. Benefits and drawbacks of the ERC20 Token

Until now, no token is perfect and without defects, including ERC20.

7.1 Advantages of ERC20 Token


Each ERC20 token can be exchanged for the same value. If you own 1 USDC (it doesn't matter what kind of token), you can still trade them freely with other people's tokens without changing the token's value. Their functionality is similar to cash and gold.

This becomes a plus if your Token aims to become a currency of some kind. With ERC20's Fungible feature, individual Tokens are interchangeable without detracting from their intended monetary use.


ERC20 tokens are highly customizable and can be adapted to a variety of applications.

For example, ERC20 Tokens can be used as money and traded in AMMs, deposited for interest in Lending platforms or even represented artwork and ownership.


ERC20's popularity in the Crypto space is a very compelling reason to use it as a common standard. There is developer support, and the documentation should be rich.

Besides, ERC20 makes it easy to create new Tokens which is why Ethereum has become the most popular platform for ICO campaigns. ERC20 tokens are available on most cryptocurrency exchanges with high liquidity. Users can buy, sell, or exchange at any time.

7.2 Disadvantages of ERC20 Token

Poor Scalability

For many other Blockchain networks, scalability is a big challenge for Ethereum. Currently, Ethereum's scaling is not going well. Trying to send a transaction at peak times can lead to high fees and delays.

This affects the usability of the ERC20 Token. It has resulted in many investors losing significant fees and delays in trading. In addition, if you launch an ERC20 token and experience network congestion, the token's availability may be affected.

High risk of fraud, easy to impersonate

ERC20 tokens are created very simply, which means anyone can do it, with good or bad intentions, so this is easy for many crooks to take advantage of creating tokens with no value, impersonating many other investors. Therefore, you should carefully check the smart contract address of the token to avoid buying the wrong one.

Besides, some ERC20 tokens are easily destroyed while trading for a smart contract instead of using ETH. It is estimated that 3 million USD was lost because of this situation.

8. Types of ERC20 Tokens

ERC20 Token will be chosen through the cooperation of valuable products. Doing so will help users maximize the Token balance in their accounts by transferring money and connecting applications on the dApp.

With the attraction of the flexibility of the ERC20 Token, it has helped creators freely develop their ideas. Currently, there are three basic types of Tokens.


  • Stablecoin is a cryptocurrency designed with the aim of minimizing the impact of price fluctuations by fixing it to a more stable asset such as fiat money, commodities ( gold, silver) or maybe another cryptocurrency.

  • The amount of stablecoins issued is usually based on the actual market supply. For example, if there are 10,000 USD locked in the reserve, the issuer will generate 10,000 Tokens to ensure that 1 Token can be exchanged for 1 USD.

  • Technically, the Ethereum network can fully meet the issuance needs of Stablecoins. The issuer only needs to provide 10,000 Tokens per contract. They will then start distributing Tokens to users and collect a corresponding amount of fiat money.

  • When owning a certain amount of Stablecoins, the ownership is yours. You can use them to buy and sell products or services at a place that accepts Stablecoins or some dApp exchanges to earn interest.

  • Compared to those that have announced ERC20, the process of issuing Stablecoins is usually quite complicated. The developer ensures compliance with the regulations of financial institutions to ensure their value follows the value of fiat money.

Token Utility

  • In ERC20 token, Utility token is the most popular. The issuance of token is relatively easily. Utility tokens are like the incentive program that the developer gives customers.

  • Utility tokens are often used to pay transaction fees, assist users in voting for changes in the system they are participating in, etc.

  • Since the token supply is small, the token value is expected to scale up with the growing demand. If the token is linked to the DApp, the token's value can increase as the network grows.

Stock Tokens

  • Stock tokens are similar to Stablecoins. Stock tokens are valued for their performance and the underlying security. If the price of the underlying security asset increases, the cost of the security token will also increase. If the underlying security asset's price falls, the security token's price is expected to fall accordingly.

  • Security tokens will represent bonds, coupons, and physical assets. This type of token is similar to a share in a business or for a specific type of asset.

9. How to own ERC20 Token?

Do you want to own ERC20 Token but don't know how? There are two ways:

  • Buy ERC20 in ICO project to own ERC Token: this form is quite popular and accounts for up to 90% of the ICO project. Buyers only need to start buying ERC20 at a cheap initial ICO stage and then own their own ERC.
  • Through the official exchanges to own ERC Token: in addition to buying and selling from the ICO project, you can directly go to the exchanges and buy. However, the price of Erc Token when on the exchange is often more or less different from the ICO.

10. ERC20 Token Wallet

When owning any Token, you will also be interested in what types of wallet to send Tokens. Some wallets that integrate with ERC20 are

10.1 My Ether Wallet (MEW)

My Ether Wallet is a built-in Ethereum-listed electronic wallet compatible with ERC20. Currently, the wallet owns the largest number of users worldwide because of its friendly interface and low token withdrawal costs. The registration is quite simple and the wallet can be used right on your phone.

My Ether Wallet has a weak point in that the security is not high, and it is easy to be attacked by hackers and viruses.

10.2 ImToken

ImToken Wallet is a versatile product that supports storing cryptocurrencies according to ERC20 standards based on technology. Ethereum's Blockchain Platform. Up to now, BTC has supported with version 2.0 through the app on Android and iOS smartphones with absolute security, so it has credibility and is supported by users.

Users can store a variety of Tokens on the crypto market and stake some tokens on ImToken to earn profits. One highlight is being able to play games and Tokenlon through trade right on ImToken.

10.3 MetaMask

MetaMask is a popular browser extension that is established, and functions as a crypto wallet connected to the Ethereum Blockchain. Integrated as an extension (Extensions) works on many popular web browsers such as Chrome, FireFox, Brave, and Edge.

In addition to storing Ethereum's cryptocurrency, ETH, MetaMask also supports cryptocurrencies that build on the standards and ERC721.

10.4 Trust and Cipher

Trust and Cipher Wallet is highly appreciated by users for its security feature, allowing you to be completely secure. These two wallets were born exclusively for smartphones and are available on both Android and iOS.

10.5 Mist and Parity

Wallets Currently, Mist and Parity wallets are being explored and used more widely by many users. These two wallets are compatible with Lexus, MAC, and Windows operating systems. This is an open-source code, so the exchange and transaction between Token types will be faster and easier.

10.6 Ledger and Trezor Wallets

Unlike online wallets, Ledger and Trezor are hardware wallets, cold wallets used to store cryptocurrencies. The devices of these two wallets are like a USB for private storage safely and securely. The project is completely isolated from the outside world, so you don't have to worry about the possibility of hacker attacks.

Besides, users are completely in control of their wallets without having to go through any other 3rd party like online wallets.

10.7 Wallets of exchanges

If you have a need to buy and sell (trade), it is more convenient to put it on the exchanges. Exchanges that support trading exchanges like Binance, Huobi or Poloniex will store that Token if they have listed it on the exchange.

Read more: What is DAO? How does DAO work?

11. How to mine ERC20 Token?

Mining Tokens is based on many factors. In the integrated Ethereum network, it is possible to participate in mining ETH Tokens. Still, with other types of Tokens, they are not supported, but they usually will be released according to the developer roadmap.

Token ERC20 was usually released to the market yesterday, the first ICO or IEO. The home side will send ETH into the contract to change the date of the ERC20 Token they need.

In this process, a certain amount of money will be collected and used for the development of the project. As the project grows and goes up, the token users' own also becomes more valuable.

12. What features does the ERC20 have?

A big advantage of ERC20 is that it makes everything simpler. Before the ERC20 code was born, developers had their own terms in the code, and many codes had similar names, which led to confusion.

ERC20 sets a universal standard, allowing newly created Tokens to be exchanged or transferred to an automated wallet. ERC20 also makes the creation of new Tokens extremely easy, one reason why Ethereum became the most popular platform for Initial Coin Offerings (ICOs) in 2017.

13. What's the problem that ERC20 facing?

In addition to the unique points of ERC20, there are still some dilemmas that have not been resolved. There have been cases where tokens were accidentally destroyed before being used to pay for a smart contract instead of using Ether, resulting in losses of up to 3 million USD.

To overcome this situation, investors have developed and researched a new standard called ERC223. However, this new standard is not yet compatible with ERC20, so developers encourage users to continue using ERC20 until ERC223 can be compatible with ERC20.

In April 2018, some transactions of deposits and withdrawals of Ethereum-based Tokens were suspended due to a BatchOverflow. Therefore, this has led to attackers taking advantage of the loophole to own some tokens. There is currently no traditional security approach that can fix this vulnerability.

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The above article has answered the question "What is ERC20?" and provides the most detailed information on the pros and cons of ERC20 and the problems that it's encountering. Hopefully, this has given you some helpful thought. If you have any questions, don't hesitate to contact BHO Network.

Published on July 25, 2022

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