Understanding the ERC-20 Token Standard

ERC-20 stands for "Ethereum Request for Comment 20" — a technical standard proposed in November 2015 by Fabian Vogelsteller. It defines a common set of rules that all fungible tokens on Ethereum must follow.

"Fungible" means each token is identical and interchangeable — 1 USDT is always worth the same as any other 1 USDT, just like a $10 bill is interchangeable with any other $10 bill.

Before ERC-20, each token contract had different function names and behaviors, making integration a nightmare. The standard created a universal interface that enabled the entire DeFi ecosystem.

Every ERC-20 token must implement these six functions:

`totalSupply()` — Returns the total number of tokens in existence.

`balanceOf(address)` — Returns how many tokens a specific address holds.

`transfer(to, amount)` — Moves tokens from the caller's account to another address.

`approve(spender, amount)` — Authorizes another address (like a DeFi protocol) to spend up to a certain amount of your tokens.

`allowance(owner, spender)` — Returns how many tokens the spender is still allowed to withdraw from the owner.

`transferFrom(from, to, amount)` — Used by approved spenders to transfer tokens on behalf of the owner. Essential for DeFi composability.

And two events: - `Transfer(from, to, value)` — Emitted on every transfer. - `Approval(owner, spender, value)` — Emitted when an approval is set.

Beyond the core standard, several extensions add functionality:

• ERC-20 Metadata — name(), symbol(), and decimals() (most tokens use 18 decimals).
• ERC-20 Burnable — Adds a burn() function to permanently remove tokens from circulation.
• ERC-20 Pausable — Allows the owner to pause all transfers in emergencies.
• ERC-20 Permit (EIP-2612) — Enables gasless approvals via off-chain signatures.
• ERC-20 Capped — Enforces a maximum total supply.
• ERC-20 Votes — Adds governance delegation and voting snapshots.