ERC20 Token and its Features
ERC20 Token Development
Ethereum blockchain, unlike Bitcoin, was created to be an entire integrated ecosystem. Therefore, its developers have created new mechanisms to facilitate certain tasks. An example of this was improving the ability to create new currencies "on" an existing blockchain. Something possible with Bitcoin and that we see in the so-called colored coins. To achieve this, Ethereum developers created ERC-20 tokens.
Its creation was proposed by Fabian Vogelsteller and Vitalik Buterin and approved on November 19, 2015. It is part of the Ethereum EIP, under the designation EIP-20 (EIP are the initials in English for the Ethereum Improvement Proposal ).
Currently, ERC-20 tokens are one of the most used tokens in the cryptographic world. The number of ERC-20 tokens created is huge, you can check in Etherscan how many there are today.
How do ERC-20 tokens work?
ERC-20 tokens are smart contracts that run on the Ethereum blockchain. They operate within a programmatic structure established by the Ethereum team. This structure is broad enough to allow different uses without interrupting the operation of the Ethereum blockchain. For example, they can maintain a subaccount parallel to the main Ethereum ledger, having their unit of account. All of this, without mixing the Ether balances of the addresses.
It is precisely this enormous flexibility that has led ERC-20 tokens to become a standard. The main utility of these tokens is to standardize the interface to create and issue new tokens on the network. This is done by applying certain rules and parameters for acceptance. For example, to change or move an ERC-20 token, you must have Ether.
The development of ERC-20 tokens is to design a standard, create interoperability and compatibility between tokens, and promote improvements to the Ethereum ecosystem. This is because ERC-20 tokens make it much easier to create new tokens. Since the infrastructure was designed for that. It was also accompanied by tools for this purpose, such as the Solitude programming language, or the EVM virtual machine
Why were ERC-20 tokens created?
Main developers were to create something so large, mainly to create the system's ability multiple. All of this in a standard reusable interface for other applications: from wallets to decentralized exchanges. All of this under an API that guarantees developers the following advantages:
Uniformity in programming. API is standard and stable, which makes it easy to program using it. This facilitates the creative task of programmers when creating a new software based on the resources of Ethereum.
Reduces the complexity of programming. Since the API is simple, its use reduces the complexity of the software created to use it. The better reading, security, and auditability of written code can be translated.
Less complexity in understanding each type of implemented tokens. This is thanks to the fact that they will all be based on the same principles of functionality.
Increased security, especially thanks to features like a token allowance.
They have no impediments or incompatibilities so there is less risk of breaking contracts, This is because the API is stable, changes made to it improve, but never break compatibility.
Main features of ERC-20 tokens
As already mentioned, ERC-20 tokens are characterized mainly by their extensive adaptability. But to achieve this, an ERC-20 token uses a certain basic structure that allows it to take advantage of its full potential. In this sense, these characteristics are:
It can deal with the basic economic aspects of its issuance.
It operates an interface to control and review the balances of the addresses of its owners. In this way, the token can report the total funds' balance contained in a specific address.
You can manage the transfer system natively. This is because the token has functions to handle funds transfers.
In addition, the token is capable of autonomously managing partial withdrawals of funds from an address. For example, if João is allowed to withdraw 1000 ETH from Maria's account, João can withdraw 250 ETH in the first withdrawal. In subsequent withdrawals, João can finish withdrawing the rest of the funds, but he can only go up to 1000 ETH. A feature called "Approved" and depends on another called "Provision".