ERC-20
ERC-20 is the Ethereum standard for fungible tokens, meaning tokens where every unit is identical and interchangeable. It defines a common set of functions so any wallet or app can hold, send and trade them.
What the standard defines
ERC-20 was proposed in November 2015 by Fabian Vogelsteller and Vitalik Buterin and became the template for most Ethereum tokens. A compliant contract must offer functions such as totalSupply (how many units exist), balanceOf (how many an address holds), transfer (send tokens), approve (let another address spend some of yours) and transferFrom (that address actually moving them), plus allowance to check the approved amount.
It also emits standard events whenever tokens move, which is how block explorers and wallets keep track of balances.
Where you meet ERC-20 tokens
Stablecoins such as USDC and USDT on Ethereum, governance tokens of DeFi protocols, and wrapped assets like WETH and WBTC are all ERC-20 tokens. The standard powered the 2017 wave of initial coin offerings, when launching a token became as simple as deploying a short contract. Many other EVM-compatible chains and layer 2s use the same standard, so the same token logic works there too.
How approvals work, and why they matter
Decentralized apps cannot pull tokens from your wallet on their own. You first sign an approve transaction that gives a specific contract an allowance. Many apps ask for an unlimited allowance for convenience, so you do not need to approve again next time.
That convenience is a risk. If the approved contract is malicious or later hacked, it can move every unit of that token you hold, without asking again. Wallet drainers often trick people into signing such approvals. Reviewing and revoking old approvals with an allowance checker is a good habit.
Other pitfalls
Sending ERC-20 tokens directly to a token contract address, or to an exchange on the wrong network, can lose them permanently. And because anyone can deploy an ERC-20 contract, a token named like a famous project may be a copy; the contract address is what identifies the real one.
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Frequently asked questions
Is ETH an ERC-20 token?
No. ETH is Ethereum's native coin. Wrapped ether (WETH) is its ERC-20 version, used by apps that only handle ERC-20 tokens.
Why do I pay ETH to send an ERC-20 token?
Every Ethereum transaction pays gas in ETH, including token transfers handled by a smart contract.
What is an unlimited approval?
Permission for a contract to spend any amount of a token from your wallet. It saves future approvals but exposes your whole balance if that contract is compromised.
Related terms
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