Step two in the crypto-world: ERC 20

4 min readNov 17, 2020

What Is ERC-20?

One of the most significant Ethereum concepts is known as ERC-20. ERC-20 is just an interface/rules that a contract may implement. ERC-20 tokens behave similarly to any other cryptocurrencies (Bitcoin, Etherum…); All of them are blockchain-based assets that have value and can be sent and received. The primary difference is that instead of running on their own blockchain, ERC-20 tokens are issued on the Ethereum blockchain.

so what does the interface actually contain?

The main functions in the ERC20 interface are:
function balanceOf(address) public view returns (uint256 balance)

and

function transfer(address _to, uint256 _value) public returns (bool)

The first function, balanceOf, returns how many tokens an owner (identified by an ETH wallet address) has, and the second function, transfer, simply moves some amount of tokens from the sender to another ETH wallet address.

This basically means that any contract that keeps track of how many “tokens” each ETH address has, and has a means of moving this balance from one address to another (and a little bit more functionality, such as allowing someone else to send your tokens on your behalf), can be considered an ERC20 token, or an ERC20 contract.

This simple interface is the basis of how DApps such as Uniswap and Metamask work — They automatically support every ERC20 token, because all they do is to simply call the “transfer” function of the contract — they don’t need to know anything else about how the contract works.

ERC-20 Use cases

ICO Investment

With ERC-20 anyone can raise and invest in any project at any stage!

Assume that you are the owner of an early-stage startup company, and you want to raise funds for development and expansion. Raising funds from VCs is a complex and lengthy process, filled with bureaucracy. In comparison, ICO, or initial coin offering, is a great alternative for startups who wish to raise money in a much more quick and modern way. The company simply generates a new ERC-2o token which can be bought by investors using ETH/BTC, and in return, investors may get shares of the company or its profits or other rewards that the company sees fit.

ICOs have indeed made many investors into millionaires. For example, in 2017, there were 435 successful ICOs, each raising an average of $12.7 million. So, the total amount raised for 2017 was $5.6 billion, with the 10 largest projects raising 25% of this total. Furthermore, tokens purchased in ICOs returned an average of 12.8 times on the initial investment in dollar terms.4

Decentralized Finance Projects(DeFi)

Imagine a global, free, regulation-free alternative to every financial service you use today — savings, loans, trading, insurance and more — operated by people all around the world, without mediation!
DeFi projectts are projects that supply services to users, while possibly requiring payment using a token they created.

Notable examples are — Etherscan, DEXTools, Uniswap, Infura, and more.

High-Adrenaline Pump N’ Dumps

one of the most common use-cases for ERC20 tokens is creating a simple token whose only function is to be sent and received, listing it on Uniswap and hoping the price will sky-rocket. As the name suggests, Pump N’ Dump (PnD) have no actual purpose but to make quick money by hoping someone else will buy the token from you at a higher price.

This is a usual graph of a PnD token:

If you’ve been in the Uniswap-sphere for more than a week, you probably recognize those types of graphs.

PnD’s can be an easy way to make a quick profit, but it helps to take note of things like

The code quality
The Developers’ reputation
The community’s hype

Investing in those projects should be done with great care and preparation for loss.

Managing ERC20 Tokens

NOTE: This section assumes you are already familiar with Metamask, if not follow our Metamask tutorial before proceeding.

MetaMask can show you any known standart ERC 20 tokens you own, visible by clicking the menu icon on the top-left of the extension. However, sometimes your tokens won’t be displayed automatically, For those tokens, we offer an easy step by step guide on how to add below.

How to add ERC20 Token to Metamask

Step 1: Open Metamaks

Step 2: Press add asset etherscan

Step 3: Press Custom token, then insert the token’s address. Token address can be found easily on tokens page on etherscan, or token address is provided usually by the token’s owner.