Get to know the ERC-20 Token Standard

Litedex Protocol
3 min readSep 26, 2022


ERC-20 or abbreviated Ethereum Request for Comment is a technical standard of the Ethereum network to determine the rules that must be followed by each new token on the network. The number 20 itself is the identity of that standard.

Some people think of it as the ‘blueprint’ of crypto assets because anyone can make them. Most crypto assets in circulation are also created by companies or organizations that use the ERC-20 token standard. Tokens created with this standard can only run on Ethereum-based platforms and are not valid on other networks. An example is the USDT token is not valid on the Polkadot network or Hyperledger Fabric.

ERC-20 can serve as currency, lottery ticket, financial asset, and proof of ownership. ERC-20 tokens can be transferred to other addresses and used as payment transactions as long as the conditions are met. Although the code of each token is unique, all transaction history can still be tracked. Generally, ERC-20 tokens can be bought, sold, or traded on crypto exchanges. It can also be stored in Ethereum network-compatible crypto wallets such as Metamask, MyEtherWallet, Trezor, Ledger Nano S, and others.

ERC-20 Ground Rules

There are some basic rules that must be met in creating a crypto project or ERC-20 token, namely:

Total supply
This total supply shows the amount of the total token supply created.

This rule allows the user to send a certain amount of tokens from the total supply to one’s account.

Balance of
This function aims to return a number of tokens from the existing address to the account.

Transfer from
Transfer from lets the user know which user made the token transfer.

Approve is a function to check transactions from the total token supply to ensure the appropriate number of tokens sent.

Allowance functions to check the balance on the user’s account and allows users to cancel transactions if the number of tokens sent is less.

Also read: Understanding the New Trends in Blockchain Technology

Advantages of ERC-20


The ERC-20 token is considered flexible in terms of customization. These tokens can be customized to activate various features, such as gas autofill, freeze and unfreeze tokens, add a central mint to modify circulating tokens, and more.

Token standard

Users can transfer new tokens to the wallet and can be exchanged at the same time because of the universal standard. Ethereum provides a token specification that includes rules between tokens and rules for buying tokens.

High liquidity

ERC-20 is equipped with standard protocols that can be exchanged on cryptocurrency trading platforms, both centralized exchange (CEX) and decentralized exchange (DEX).

Easy to use

The emergence of ERC-20 which is then actively used as a standard makes new tokens that can be placed into exchanges or wallets automatically and quickly.

Security is maintained

With smart contracts, ERC-20 token transactions are more secure than other blockchains.

Disadvantages of ERC-20

Expensive gas fees

ERC-20 relies on the Ethereum blockchain in terms of transactions. When traffic on the blockchain is congested, the gas fee will increase. The gas fee itself is likened to fuel to make a blockchain able to process existing transactions.

Slow transaction process

When the Ethereum blockchain network crashes, all transfers on ERC-20 slow down.

Transfer bug

Transferring funds to a contracted account would cause a bug that resulted in a loss of nearly $1 million. There are two types of accounts on Ethereum, namely externally owned accounts, which are controlled by private keys, and accounts held by contract codes.


The transfer of consensus from Proof of Work (PoW) to Proof of Stake (PoS) consensus through ETH 2.0 causes system instability. This is due to the many changes that take time.

Transactions cannot be changed

If you send the ERC-20 token to the wrong address, the funds cannot be retrieved and will remain in the contract address.

Well, that’s an explanation of the ERC-20 token. Continue to follow our articles so that you understand more about crypto.

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