What is ERC-20?
ERC-20 is the most widely used standard for fungible tokens on Ethereum-compatible blockchains, defining a common interface for balances and transfers so wallets, exchanges and contracts can support any ERC-20 token uniformly.
Also known as: ERC20 · fungible token standard · Ethereum token standard
In plain terms
ERC-20 is a recipe that says what every interchangeable token must be able to do: report its name, symbol and supply, show balances, and allow transfers and approvals.
Because thousands of tokens follow it, one wallet can handle all of them the same way — that uniformity is why the standard matters more than any single token.
How it works
A contract implementing ERC-20 exposes standard functions: total supply, balance queries, transfer, approve and transfer-from for delegated spending.
Wallets, exchanges and DeFi protocols are built to that interface, so any compliant token works with them without custom integration.
Extensions add features: burnable supply, caps, permit signatures for gasless approvals — but the base interface stays the same.
Example
Hypothetical: a startup issues its utility token as an ERC-20 with 1,000,000,000 supply. Within hours it is visible in every major wallet, tradeable on decentralized exchanges and integrable into payment flows — all without the exchange or wallet writing custom code for that one token.
Why it matters for founders and investors
ERC-20 compatibility is table stakes for any Ethereum-based token: without it, wallets, exchanges and liquidity simply cannot handle the asset.
Its openness is also its limitation: ERC-20 has no built-in compliance, which is why regulated instruments move to permissioned standards like ERC-3643.
Common misconceptions
ERC-20 is a technical standard, not a legal or quality stamp. A compliant ERC-20 contract can still represent a scam or an unregistered security.
It is not the only standard: other chains have equivalents (BEP-20, SPL), and non-fungible assets use entirely different standards such as ERC-721.
Frequently asked questions
Does every crypto token use ERC-20?
No. ERC-20 applies to Ethereum-compatible chains. Bitcoin's native unit is not a token at all, Solana uses the SPL standard, and non-fungible tokens use standards like ERC-721.
What is an approve function?
It lets a token holder authorize another contract — such as an exchange — to spend up to a set amount of their tokens. Unlimited approvals are convenient but expand the damage if that contract is compromised.