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What is ERC20?

What is ERC20? Advantages and disadvantages & how to create ERC20 Token

What is ERC20? What applications does ERC20 token have? Learn about the pros and cons of ERC20 Token and how to create an ERC20 wallet here!

One of the issues that many of you are wondering is what is an ERC20 token. In this article we will learn about ERC20 & ERC20 tokens, their applications as well as their pros & cons.

What is ERC20?

ERC20 is a technical standard used to issue and deploy tokens on the Ethereum network, a form of Fungible Token.

ERC20 provides developers with a list of rules that must be followed allowing ERC20s to work seamlessly within the Ethereum platform.

ERC20 was proposed in November 2015 by Vitalik Buterin and Fabian Vogelsteller.

By following the outline, developers do not need to reinvent other structures. Instead, they can build on a foundation that is already used throughout the industry.

Application of ERC20 token

The contract structure of ERC20 includes six mandatory functions: totalSupply , balanceOf ,transfer , transferFrom , approve and allowance . In addition, there are optional functions such as name, symbol, and decimal.

By combining all the functions above, we were able to create an ERC20 token. We can query the total supply, check balances, transfer funds and authorize other DApps to manage our tokens.

A big part of the appeal of ERC20 tokens is their versatility. The set conventions don’t restrict development, so parties can implement additional features and set specific parameters to suit their needs.

Some outstanding applications of ERC20 token:

  • Management tokens of projects.
  • Utility token of DeFi projects.
  • Stablecoins.

Advantages & disadvantages of ERC20 tokens

Advantages of ERC20 tokens

Fungible tokens

Each ERC20 token is interchangeable, i.e. each unit has equivalent usability and value. If you hold 1 USDC, it doesn’t matter which particular token you hold.

You can trade it, exchange it with other people’s tokens and they are still functionally identical, just like going to the market to buy fish and meat, you pay with any $100.

This is very beneficial, if your token has the goal of becoming a currency of some kind. You wouldn’t want individual units to have distinct characteristics, as that would make them non-interchangeable.

This can make some tokens more valuable – or less valuable – than others, undermining their intended use.


ERC20 tokens are highly customizable and can be tailored to a variety of applications.

For example, ERC20 Token can be used as money and traded in AMMs, or sent to get interest in Lending platforms,…


The popularity of ERC20 in the Crypto space is a very compelling reason to use it as a common standard. There are many exchanges, wallets and smart contracts that are already compatible with the ERC20 token. Moreover, the support of the developers and the documentation is also very rich.

Disadvantages of ERC20 tokens

Ability of extension

Like many other blockchain networks, scalability is a big challenge for Ethereum.

With the current situation, Ethereum’s scaling is not going well, trying to send a transaction at peak times easily leads to high fees and delays. This affects the usability of the ERC20 token.

Risk of fraud

While this is not the fault of the technology, the ease of launching new tokens can be seen as a drawback of ERC20 in some respects.

It is now very easy to create a simple ERC20 token, which means anyone can do it, for good or bad.

Therefore, you should be careful with what you are investing. There is no shortage of scam projects using the Ponzi scheme disguised as blockchain projects. Research is essential before investing in any project.

ERC20 standard rules

To create ERC20 tokens, you need to ensure the ERC20 standard with 9 rules corresponding to the following 9 functions:

6 mandatory rules

  • TotalSupply: Total number of tokens issued.
  • BalanceOf: Check the balance of tokens in each Ethereum wallet.
  • Transfer: This function will manage the transfer of tokens to the user’s wallet address.
  • TransferFrom: Allows token holders to exchange with each other.
  • Approve: Check each transaction and compare with the total supply to make sure there is no shortage or excess of tokens.
  • Allowance: Check the balance of tokens to see if the wallet address has enough tokens to transfer.

3 custom rules

  • Token Name: Token name.
  • Symbol: Token code.
  • Decimal (up to 18): The smallest decimal number.

How to create ERC20 tokens on Coin98 Wallet

You go to coin98.com, in “Product” select “Token Issuer”.

Token Issuer is a feature in Coin98 Terminal, allowing users to easily generate Fungible tokens on many blockchains such as: Ethereum, BSC, HECO, Solana, Tron.

In the Issuer interface, you select the Ethereum blockchain and fill in the necessary information. Then click “Issue” to complete.

What is ERC20 Wallet? Instructions for creating ERC20 Wallet

ERC20 Wallet (or ERC20 wallet) is a wallet for storing ERC20 tokens.

You can create an ERC20 wallet quickly and conveniently right on Coin98 Wallet, because besides the storage function, Coin98 Wallet also supports trading, buying and selling tokens through DEXs, storing standard ERC20 tokens, etc.

First, you download and create a Coin98 Wallet account

After entering the main page interface of Coin98 Wallet, we will proceed to create an ERC20 wallet.

Step 1: Select Add Wallet.

Step 2: Select the Ethereum icon or search for Ethereum (ETH) on the search bar → Select Create Wallet.

Step 3: Give the wallet a name (name something that you can remember or convenient for later use) and click Create to create a wallet.

Step 4: Copy the passphrase or private key and paste it into the Confirmation box, check the box “I understand…”. Note: This is an extremely important step.

Wallet address: Is the address you use to receive ETH or ERC-20 from others, which can be publicly sent to anyone.

Passphrase and Private Key: You must save 12 words and a sequence of security keys in a safe place and absolutely do not disclose it to anyone. Otherwise, your account is at risk of being stolen if someone knows these strings of letters and numbers.

In particular, if you lose these two important information, it means that you cannot connect to your wallet, and lose all assets in the wallet. No one has the right to restore it except you.


So I learned what ERC20 & ERC20 tokens are, the applications as well as the pros & cons of ERC20 tokens. If you have other questions related to the above topic, please comment below so that idolmeta.net can help you right away!

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