eth erc20

What Is the ERC-20 Standard?

The ERC-20 standard is a set of token interaction interfaces on Ethereum that define how fungible tokens can be consistently recognized and operated by wallets, exchanges, and applications.

This “interface standard” can be understood as a set of common button names, such as “transfer”, “approve”, and “balance check”. As long as a token contract follows these standard button names, wallets can display balances, exchanges can process deposits and withdrawals, and applications can execute payments or governance actions. ERC-20 specifically addresses fungible assets, such as stablecoins, governance tokens, and payment tokens.

How Does the ERC-20 Standard Work?

The ERC-20 standard abstracts common token operations into fixed functions and events, allowing any compliant contract to be invoked and monitored in a uniform way.

Key functions include:

• totalSupply: Returns the total supply of tokens, like the inventory in a warehouse.
• balanceOf: Checks the balance of a specific address, similar to checking a bank account.
• transfer: Sends tokens directly to another address.
• approve: Authorizes a third party to spend a specified amount on your behalf, like setting a spending limit for a delegated card.
• allowance: Checks the remaining authorized amount for a spender.
• transferFrom: Enables an authorized party to transfer tokens from your address.

Key events include:

• Transfer event: Emitted with every transfer, enabling wallets and block explorers to record and display transaction history.
• Approval event: Emitted with every approval, allowing users to track who has been authorized to spend tokens and how much.

These fixed function and event names originate from the EIP-20 proposal, which became the official standard in 2017, ensuring cross-compatibility between different implementations.

How Does the ERC-20 Standard Operate on Ethereum?

The ERC-20 standard is implemented through smart contracts—self-executing programs deployed on the blockchain that handle transfers, approvals, and balance updates according to predefined rules, emitting event logs for every operation.

When you initiate a transfer, the token contract checks your balance, updates its internal ledger, and emits a Transfer event. When you approve an allowance and an application later calls transferFrom, the contract checks the allowance to ensure it does not exceed your set limit. Wallets and exchanges read these events and function return values to display balances, transaction records, and holdings.

The “decimals” parameter determines the smallest unit of the token (for example, 18 decimals means 1 token equals 10^18 minimal units). Applications must convert these smallest units into human-readable amounts according to decimals to avoid display errors.

How Do You Use ERC-20 Tokens on Gate?

When using ERC-20 tokens on Gate, the main operations are deposits, withdrawals, and trading. Always confirm the network and contract address before any action to prevent loss of funds.

Step 1: For deposits, select the Ethereum network and copy the deposit address provided by Gate. Popular assets like USDT on Ethereum conform to the ERC-20 standard.

Step 2: Send a transfer transaction from your wallet to this address and wait for blockchain confirmation. Gate credits your account after detecting the corresponding Transfer event and confirming receipt.

Step 3: For withdrawals, make sure the destination address supports the ERC-20 network. Check gas fees and minimum withdrawal limits. Always select the correct network for your asset to avoid sending ERC-20 tokens to an incompatible chain with the same address format.

Additionally: When interacting with decentralized applications that require third-party payments (such as DEXs or lending protocols), your wallet will prompt for an approve authorization. Only approve the necessary amount—avoid granting “unlimited approvals” to reduce potential risks.

Note: Deposits and withdrawals involve fund security. Always double-check the token contract address, network type, and memo if required; blockchain transactions are irreversible, so any mistake may result in loss of funds.

How Can Developers Create an ERC-20 Token?

The process of creating an ERC-20 token involves writing and deploying a compliant smart contract, then verifying and publishing its details.

Step 1: Choose your tools and libraries. Common development stacks include Hardhat or Foundry. For security and best practices, start with OpenZeppelin’s ERC-20 implementation.

Step 2: Write your contract. Set parameters such as name, symbol, decimals, and initial supply; implement core functions like transfer, approve, transferFrom; ensure Transfer and Approval events are emitted.

Step 3: Test and audit. Create unit tests covering authorizations, transfers, and edge cases (like insufficient balances or allowances). Audit key logic or at least perform static analysis and fuzz testing.

Step 4: Deploy to Ethereum mainnet or testnet. Record the contract address and distribute tokens to initial holders.

Step 5: Verify and publish information. Verify source code on block explorers, upload token logo and description, and publish contract address plus decimals so wallets and exchanges can recognize your token correctly.

What Are the Differences Between ERC-20, ERC-721, and ERC-1155?

The main differences between ERC-20, ERC-721, and ERC-1155 are whether assets are fungible or non-fungible, and how batch transfers or multi-asset management are supported.

ERC-20: Fungible—any two units are fully interchangeable. Suitable for currency-like or governance tokens.

ERC-721: Non-fungible (each ID is unique and indivisible), similar to collectibles or event tickets. Commonly used for NFTs.

ERC-1155: Supports both fungible and non-fungible assets plus batch transfers. Allows efficient management of multiple asset types in a single contract—popular for in-game items.

If you need tokens that are “divisible and interchangeable” (like stablecoins or governance weights), ERC-20 is ideal; for unique assets or batch management needs, consider ERC-721 or ERC-1155.

What Are the Risks of Using ERC-20 Tokens?

There are two main risk categories with ERC-20 usage: operational risks and authorization risks. Always verify details before and after every transaction.

Authorization risks: Many applications request “unlimited approvals” to minimize repeated authorization steps. If such an app or its contract is compromised, attackers could drain your tokens. Best practice is to approve only what’s needed and regularly reset sensitive token allowances back to zero.

Fake token risks: Scammers may deploy counterfeit contracts. Always verify the token contract address against official project announcements before transferring funds—prefer addresses obtained from official channels.

Network and fee risks: During periods of high Ethereum congestion, gas fees can spike, impacting transaction costs and confirmation times. Always allocate enough ETH for fees and choose optimal timing for major transactions based on network conditions.

Deposit/withdrawal risks: Using the wrong network or address on Gate can result in unrecoverable assets. Always confirm you’re using the ERC-20 network, ensure destination address compatibility, and check minimum withdrawal limits.

How Has the ERC-20 Standard Evolved? What Are the Trends?

Since being finalized as a stable interface in 2017, ERC-20 has seen several community-driven extensions focused on improving user experience and security.

By 2025, common extensions include:

• EIP-2612 (Permit): Enables gasless approvals via signatures—users can approve spending with an off-chain signature before a deduction occurs on-chain—improving UX by saving one blockchain transaction.
• Meta-transactions & fee delegation: With relayer services, third parties pay gas fees for users, lowering participation barriers.
• Gas optimization & safer modes: Libraries continue optimizing storage/computation costs while promoting safer transfer patterns and stricter event validation for better compatibility.

Looking ahead, ERC-20 remains foundational for fungible assets. It is increasingly being integrated with cross-chain protocols, account abstraction solutions, and advanced permission models to improve usability and risk control.

Why Is the ERC-20 Standard Important?

The ERC-20 standard is a foundational layer for assets on Ethereum—it enables simple, unified interactions that allow wallets, exchanges, and applications to support fungible tokens with minimal friction. Understanding its functions (“buttons”) and events lets you grasp how tokens actually behave on-chain; carefully checking authorizations and contract addresses reduces fund risks in daily use. For developers, adhering to the standard—plus integrating audits or extensions (such as Permit)—strikes a balance between compatibility and security. For users or builders alike, think of ERC-20 as a universal language of value exchange—on top of which richer applications and scenarios can be developed.

FAQ

Why do I need to approve (Authorize) an ERC-20 token transfer?

Approval is a core security mechanism within the ERC-20 standard designed to protect your assets. When using tokens on an exchange or DeFi app, you must first authorize that app to access your tokens—similar to granting permission in payment apps like Alipay. Only after approval can an app transfer tokens on your behalf; you can revoke these approvals at any time for enhanced safety.

Why do ERC-20 token addresses differ across chains for the same asset?

ERC-20 is an Ethereum-specific standard—token contracts must be deployed separately on each chain such as Ethereum, Polygon, BSC, etc., resulting in different addresses per network. For cross-chain transfers, bridging tools are required; on platforms like Gate you can directly select which chain to deposit or withdraw from.

Does the decimal setting of an ERC-20 token affect its actual value?

No—the decimals setting only affects display precision, not real value. For example, USDT typically uses 18 decimals so “1 USDT” shows as 1.0 but is represented internally as 1 × 10^18 minimal units. This is similar to expressing $1 as 100 cents; changing decimals alters only the counting unit—not actual value.

How can I verify if an ERC-20 token is from an official project?

You can verify this by: checking the contract address on block explorers like Etherscan for transparent code; confirming the official website lists the correct contract address; reviewing token holder distribution (a highly concentrated distribution may signal rug pull risks). Tokens listed on regulated platforms like Gate have undergone review processes for added safety.

How are gas fees calculated when transacting with ERC-20 tokens?

Gas fee = Gas used × Gas price. A basic ERC-20 transfer typically consumes about 21,000 gas units—but interactions with smart contracts may require more. During times of network congestion on Ethereum, gas prices rise resulting in higher fees. It’s advisable to transact during off-peak periods to save costs; platforms like Gate provide real-time gas price information for reference.