Glossary

ERC-20

Plain-language definition Crypto glossary

Key takeaways

ERC-20 is the technical standard that most fungible, or interchangeable, tokens on Ethereum follow, defining a common set of functions every compliant token implements.
The standard specifies a shared interface for checking balances, transferring tokens, and approving another contract to spend on your behalf, so any wallet, exchange, or DApp can support a new token without custom code.
This built-in interoperability is a big part of why Ethereum became the hub for tokens, and most stablecoins, governance tokens, and utility tokens on Ethereum and compatible chains are ERC-20 tokens.

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.

FAQ

Frequently asked questions

Why does the ERC-20 standard matter?

Because every ERC-20 token exposes the same functions, wallets, exchanges, and DApps can support a new token automatically without writing custom code. This interoperability is a major reason Ethereum became the main hub for tokens.

What does the approve function do?

The approve function lets you grant another contract an allowance to move your tokens on your behalf, which many DApps need in order to function. Because that allowance can be reused, revoking unused approvals is a common security habit.

Is an ERC-20 token its own blockchain?

No. An ERC-20 token is just a smart contract that tracks balances and runs on a host blockchain such as Ethereum or a compatible chain. It relies on that underlying network rather than being a separate blockchain of its own.