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Glossary

ERC-20

Plain-language definition

ERC-20 is the technical standard that most fungible (interchangeable) tokens on Ethereum follow. It defines a common set of functions every compliant token implements.

How it works

The standard specifies a shared interface — how to check a balance, transfer tokens, and approve another contract to spend on your behalf. Because every ERC-20 token exposes the same functions, any wallet, exchange or DApp can support a new token automatically without custom code. The token itself is just a smart contract that tracks balances. The “approve” function is worth understanding: granting a contract an allowance lets it move your tokens, so revoking unused approvals is a common security habit.

Why it matters

This shared standard is a big part of why Ethereum became the hub for tokens: interoperability is built in. Most stablecoins, governance tokens and utility tokens on Ethereum and compatible chains are ERC-20 tokens.

Example

When a new project launches a token on Ethereum, it is almost always issued as an ERC-20 contract.

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