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Understanding ERC-20: The Standard for Ethereum Tokens

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5 May 2023

While you may have heard of Ethereum, the revolutionary blockchain that allows for smart contracts, you may not be familiar with ERC-20. It is the fundamental bedrock of Ethereum and is primarily how you will come into contact with the blockchain. In this blog post, we’ll explore what ERC-20 is.

Did you know? ERC-20 stands for “Ethereum Request for Comment” with the number 20 referring to the recommendation identifier or proposal number attached to it. You can see the original proposal here!

Introduction

Are you familiar with popular cryptocurrencies like $USDC, $USDT, $DAI, $UNI, $MATIC, and $SHIB? Did you know that they are all ERC-20 tokens? ERC-20 refers to the standard that developers must follow when creating and deploying tokens on the Ethereum blockchain. It’s a common language that ensures all code can communicate properly with each other.

The ERC-20 Standard

This standard was proposed in 2015 by Vitalik Buterin and Fabian Vogelsteller. It allows for a standardized interface that makes it easy for tokens to be re-used across all applications on the blockchain. It also enables basic functionalities like the transfer of tokens, token approvals, and allowances, the basic ingredients of a cryptocurrency.

 

Why it is important

By dictating the structure of a token, ERC-20 enables the blockchain to achieve something that is hard to achieve in traditional finance – out of the box composability. When a developer launches a new ERC-20 token, they can be assured that their token will work with the myriad of dAPPs, exchanges and wallets out there, as they all support the ERC-20 standard.

In fact, all you need is a few dollars worth of ETH to deploy a ERC-20 token onto the Ethereum main net. There are even a few tools out there that can help you do so (eg. CreateMyToken for Ethereum and BakeMyToken for Polygon).

So what is the difference between ERC-20 and ETH?

ETH is the native cryptocurrency of the Ethereum network, and is used as gas for facilitation of transactions on the Ethereum blockchain. ETH does not conform to the ERC-20 standard as it is not a smart contract and was not designed to be.

If a user wants to conduct any activity involving the blockchain (ie. transfer tokens, swap or interact with any of the dAPPs out there), they will have to pay gas in the form of ETH to compensate validators (POS) or miners (POW) for using their computing resources to verify your transactions.

In a sense, ETH is the grease that enables the Ethereum machine to run, enabling this machine to move around ERC-20 tokens across different addresses and facilitating all the use cases that have been invented thus far!

Wait, does that mean I need both ETH and the ERC-20 token to transact?

The short answer is yes. And you can imagine that this leads to really bad user experience. Imagine you want to pay someone in USDC (a ERC-20 token) from your EOA wallet (that is your MetaMask wallet). In that wallet, you will need to have the appropriate amount of ETH tokens for gas and the USDC amount that you want to transfer for payment. It can be a pain in the ass to make sure all of your wallets are appropriately funded for transactions to go through.

How Suberra solves this

At Suberra, we’ve put in a great deal of effort to streamline the above mentioned process, ensuring that our users can pay without the extra gas fees (for USDC payments) on alt chains like Avalanche, Arbitrum, and Polygon. We achieve this by partnering with reliable services like Biconomy and OpenZeppelin, where we subsidize the gas fee portion for you.

Simplify the payment experience and eliminate hassle for gas fees. Ready to get started? Sign up now to create your account for free and start collecting crypto payments today at https://merchant.suberra.com.

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