A standard like ERC-20 specifies a common interface that a token's smart contract must implement, including functions for checking a balance, transferring tokens between addresses, and approving another address to spend tokens on the holder's behalf. Most implementations also expose basic details like the token's name, symbol, and how many decimal places it supports. Because so many different tokens implement this same interface, wallets, exchanges, and other smart contracts can all interact with any ERC-20 token in a predictable way, without needing custom integration work built specifically for each individual token.
This shared interface is also what allows ERC-20 tokens to plug into decentralised finance applications so easily: a lending protocol or decentralised exchange can support a new ERC-20 token with comparatively little extra work, because it already knows how to call the standard functions every compliant token provides. Interacting with any ERC-20 token still requires paying network gas fees in Ethereum's native currency, since the token contract itself runs on the Ethereum blockchain rather than existing independently of it.
In practice, most tokens issued on Ethereum, including many stablecoins and governance tokens, follow the ERC-20 standard. That's why a single wallet application can hold and send hundreds of unrelated tokens using the same basic underlying mechanics, rather than requiring separate software for each one. It's worth being clear about what the standard does and doesn't cover: ERC-20 governs the technical shape of the token contract itself, not the project, company, or team behind it. A token meeting the ERC-20 standard says nothing about whether the project is legitimate, well-run, or has any real utility, so that still requires separate independent research before relying on it.
Key takeaways
- ERC-20 is a shared technical interface for tokens issued on the Ethereum blockchain, not a specific coin or project.
- It lets wallets, exchanges, and smart contracts interact with any compliant token in the same standard way.
- Meeting the ERC-20 standard only describes a token's technical format — it says nothing about the project's legitimacy or value.
ERC-20 — frequently asked questions
Is every token on Ethereum an ERC-20 token?
Most fungible tokens on Ethereum use the ERC-20 standard, but Ethereum also supports other standards for different purposes, such as ERC-721 for non-fungible tokens, so not every asset on the network follows ERC-20.
Does ERC-20 mean a token is safe to use?
No. ERC-20 only describes the technical interface a token's contract follows. It doesn't verify the project's team, purpose, or security, so separate research is still needed.
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