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How ERC20 tokens differ from others and its Advantage and disadvantages

There are a large number of digital currencies present in today’s cryptocurrency market. But only a small part of them work in accordance with the universal standard.

By RagunathPublished 4 months ago 6 min read
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Therefore, having understood what ERC-20 is, traders may wonder what is the difference between it and other tokens?

The key difference is that all “standardized” coins are tied to the Ethereum network. In addition, this cryptocurrency uses a specific address format, and they are sent through Ethereum operations, because they all have a generalized code.

It should be noted that all ERC20 development coins cannot be considered fully independent, because they are based on one blockchain, and the tokens rely on its power in the process of their work.

Cryptocurrencies have the following features:

  • they can be mined;
  • do not become bonus offers;
  • Every miner can become an issuer.
  • ERC20 tokens:
  • become bonuses for goods;
    • do not have a separate blockchain;
    • manage smart contracts;
    • the issuers are the developers.

    TOP wallets suitable for working with ERC20

    This list is worth a closer look for those looking for a suitable ERC-20 wallet. This includes the most popular cryptocurrency wallets in this segment.

    The modern world of digital finance offers many electronic wallets for storing virtual funds. The material offers several of the most convenient digital wallets suitable for working with ERC-20 standard coins:

    • Atomic wallet;
    • Metamask;
    • MyEtherWallet;
    • Trezor;
    • Trust Wallet.

    Let’s examine each of them in more detail.

    • Atomic wallet

    It is a cross-platform decentralized wallet that can support about 300 currencies. A special advantage is the built-in instant exchanger with the possibility of receiving cashback. There are versions for both mobile and computer devices. Technical support responds quickly to requests. Interestingly, the wallet has its own coin of the same name — Atomic Wallet Token; staking it brings additional profit to the owner.

    • Metamask

    A cryptocurrency wallet that provides access to all DeFi applications (such as trading or NFT platforms). A connection to any dApps is established in a matter of seconds. Experts advise installing the browser version, because the mobile version still has too many shortcomings. The default network is Ethereum, but there are several others available to choose from, switching between them is instant. The ERC20 Metamask wallet is localized in Russian.

    • MyEtherWallet

    The browser wallet is designed specifically for coins based on the Ethereum blockchain. It is in demand due to the absence of mandatory installation and simple operation.

    This is an excellent choice for new traders who are afraid of making a mistake by getting confused in a complex interface. The wallet supports NFTs, decentralized applications and stablecoins. The private key is not sent to the ERC20 token development network but is stored on the client device. There is compatibility with hardware wallets such as Ledger and Trezor.

    • Trezor

    A hardware wallet designed for cold storage of funds. This means that there is no need to keep it constantly connected to the device. Until it is connected, attackers will not be able to get to the cryptocurrency.

    It is possible to carry out secure transactions even if the computer device is infected with a virus. Supports about 1.5 thousand coins and is also compatible with many hot wallets.

  • Trust Wallet
  • Wallet for mobile devices with official support for the Binance cryptocurrency exchange , integration with the Binance DEX platform is available. The virtual wallet supports cooperation with DeFi applications and staking of certain cryptocurrencies.

    It has its own browser for working with decentralized applications. In this case, all keys are stored on the user’s device. As in the case of Atomic wallet, the wallet can offer the client a native token of the same name.

  • Advantage of ERC-20 tokens
  • Traders who have already studied ERC-20 tokens know that these coins gained their popularity for a reason. Among their many benefits are the following:

    Demand. Today, both the ERC-20 standard itself and its cryptocurrency are in demand on many trading platforms. This is due, in large part, to the versatility of the protocol, which is able to adapt to various exchange operations.

    Flexibility of settings. Developers have the opportunity to enable functions such as automatic replenishment of ETH for upcoming transactions, freezing and unfreezing of coins, and much more.

    Low level of fraud. All cryptocurrency transactions must be approved before execution. The total number of coins simplifies the verification procedure and ensures that there are no duplicates in circulation.

    Development planning. The ERC-20 standard provides creators with a concrete plan of action that will allow them to carry out their work without major effort.

    Easy to use. ERC-20 coins are easy to work with. Smart contracts in this case are written in the digital language Solidity, which is reminiscent of JavaScript. Among other things, creators have the ability to code contracts using the Vyper language, which is similar to Python.

    Standardization of coins. Ethereum provides coin features that also include rules for interaction with other cryptocurrencies and rules for acquisition. Through ERC, users are able to transfer tokens into a wallet and begin trading immediately.

    Degree of liquidity. If projects that are based on the Ethereum blockchain are active, this attracts more clients to the network. In addition, with the advent of ERC-20, it has become much easier to exchange coins.

    ERC-20 can earn the status of the most popular standard among developers around the world, but it also has some disadvantages.

    Disadvantages of ERC20 tokens

    Despite all the advantages listed above, coins created according to the ERC20 standard cannot be called completely ideal. They also have negative sides that should not be overlooked:

    Large commissions. The coins rely entirely on the Ethereum blockchain, so every cryptocurrency transaction incurs an ERC20 fee, which becomes larger as the level of activity on the blockchain increases.

    Irreversibility of operations. If the user sent coins to the wrong place, the transaction cannot be reversed. The same can be said about cryptocurrency that was stolen by hackers; a striking example is the DAO hack.

    Instability. Not long ago, in the ETH 2.0 update, the Ethereum blockchain changed the consensus method from the PoW to PoS system. Although Ethereum aims to solve scalability issues, this will take a large amount of time, during which the system risks becoming unstable. Among other things, individual coins can be removed when used as payment for smart contracts.

    Low speed of operations. Transfers and withdrawals of funds are carried out via the blockchain; if the ERC20 development service network is under heavy load, all operations slow down. At the moment, a special solution to this problem is being developed, but the final completion of the work is still far away.

    Errors during transmission. There are two types of accounts on this blockchain. The first is external (EOA), which is controlled by private keys. The second is contractual, which belongs to the contract code. Transferring coins from one EOA account is hassle-free. But sending to the contract account still fails with errors, which lead to inevitable losses of funds.

    The entry threshold is too low. According to critics, anyone can create a cryptocurrency, even without specific goals. As a result, this “loophole” can be used to organize pre-sales of fly-by-night tokens and develop coins associated with projects of no real value.

    Most solutions are aimed at eliminating these problems, but this takes time.

    Until the downsides, especially those that may involve scammers, are addressed, investors should take them into account when evaluating a particular ERC-20 token.

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    About the Creator

    Ragunath

    Safe and Secure Blockchain Technology Service Provider

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