ERC-20 Token Standard

Last edit: @corwintines(opens in a new tab), June 11, 2024

Introduction

What is a Token?

Tokens can represent virtually anything in Ethereum:

reputation points in an online platform
skills of a character in a game
financial assets like a share in a company
a fiat currency like USD
an ounce of gold
and more...

Such a powerful feature of Ethereum must be handled by a robust standard, right? That's exactly where the ERC-20 plays its role! This standard allows developers to build token applications that are interoperable with other products and services. The ERC-20 standard is also used to provide additional functionality to ether.

What is ERC-20?

The ERC-20 introduces a standard for Fungible Tokens, in other words, they have a property that makes each Token be exactly the same (in type and value) as another Token. For example, an ERC-20 Token acts just like the ETH, meaning that 1 Token is and will always be equal to all the other Tokens.

Prerequisites

Body

The ERC-20 (Ethereum Request for Comments 20), proposed by Fabian Vogelsteller in November 2015, is a Token Standard that implements an API for tokens within Smart Contracts.

Example functionalities ERC-20 provides:

transfer tokens from one account to another
get the current token balance of an account
get the total supply of the token available on the network
approve whether an amount of token from an account can be spent by a third-party account

If a Smart Contract implements the following methods and events it can be called an ERC-20 Token Contract and, once deployed, it will be responsible to keep track of the created tokens on Ethereum.

From EIP-20(opens in a new tab):

Methods

1function name() public view returns (string)
2function symbol() public view returns (string)
3function decimals() public view returns (uint8)
4function totalSupply() public view returns (uint256)
5function balanceOf(address _owner) public view returns (uint256 balance)
6function transfer(address _to, uint256 _value) public returns (bool success)
7function transferFrom(address _from, address _to, uint256 _value) public returns (bool success)
8function approve(address _spender, uint256 _value) public returns (bool success)
9function allowance(address _owner, address _spender) public view returns (uint256 remaining)
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Events

1event Transfer(address indexed _from, address indexed _to, uint256 _value)
2event Approval(address indexed _owner, address indexed _spender, uint256 _value)
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Examples

Let's see how a Standard is so important to make things simple for us to inspect any ERC-20 Token Contract on Ethereum. We just need the Contract Application Binary Interface (ABI) to create an interface to any ERC-20 Token. As you can see below we will use a simplified ABI, to make it a low friction example.

Web3.py Example

First, make sure you have installed Web3.py(opens in a new tab) Python library:

1pip install web3

1from web3 import Web3
2
3
4w3 = Web3(Web3.HTTPProvider("https://cloudflare-eth.com"))
5
6dai_token_addr = "0x6B175474E89094C44Da98b954EedeAC495271d0F"     # DAI
7weth_token_addr = "0xC02aaA39b223FE8D0A0e5C4F27eAD9083C756Cc2"    # Wrapped ether (WETH)
8
9acc_address = "0xA478c2975Ab1Ea89e8196811F51A7B7Ade33eB11"        # Uniswap V2: DAI 2
10
11# This is a simplified Contract Application Binary Interface (ABI) of an ERC-20 Token Contract.
12# It will expose only the methods: balanceOf(address), decimals(), symbol() and totalSupply()
13simplified_abi = [
14    {
15        'inputs': [{'internalType': 'address', 'name': 'account', 'type': 'address'}],
16        'name': 'balanceOf',
17        'outputs': [{'internalType': 'uint256', 'name': '', 'type': 'uint256'}],
18        'stateMutability': 'view', 'type': 'function', 'constant': True
19    },
20    {
21        'inputs': [],
22        'name': 'decimals',
23        'outputs': [{'internalType': 'uint8', 'name': '', 'type': 'uint8'}],
24        'stateMutability': 'view', 'type': 'function', 'constant': True
25    },
26    {
27        'inputs': [],
28        'name': 'symbol',
29        'outputs': [{'internalType': 'string', 'name': '', 'type': 'string'}],
30        'stateMutability': 'view', 'type': 'function', 'constant': True
31    },
32    {
33        'inputs': [],
34        'name': 'totalSupply',
35        'outputs': [{'internalType': 'uint256', 'name': '', 'type': 'uint256'}],
36        'stateMutability': 'view', 'type': 'function', 'constant': True
37    }
38]
39
40dai_contract = w3.eth.contract(address=w3.to_checksum_address(dai_token_addr), abi=simplified_abi)
41symbol = dai_contract.functions.symbol().call()
42decimals = dai_contract.functions.decimals().call()
43totalSupply = dai_contract.functions.totalSupply().call() / 10**decimals
44addr_balance = dai_contract.functions.balanceOf(acc_address).call() / 10**decimals
45
46#  DAI
47print("===== %s =====" % symbol)
48print("Total Supply:", totalSupply)
49print("Addr Balance:", addr_balance)
50
51weth_contract = w3.eth.contract(address=w3.to_checksum_address(weth_token_addr), abi=simplified_abi)
52symbol = weth_contract.functions.symbol().call()
53decimals = weth_contract.functions.decimals().call()
54totalSupply = weth_contract.functions.totalSupply().call() / 10**decimals
55addr_balance = weth_contract.functions.balanceOf(acc_address).call() / 10**decimals
56
57#  WETH
58print("===== %s =====" % symbol)
59print("Total Supply:", totalSupply)
60print("Addr Balance:", addr_balance)
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Known issues

ERC-20 token reception issue

When ERC-20 tokens are sent to a smart contract that is not designed to handle ERC-20 tokens, those tokens can be permanently lost. This happens because the receiving contract does not have the functionality to recognize or respond to the incoming tokens, and there’s no mechanism in the ERC-20 standard to notify the receiving contract about the incoming tokens. The main ways this issue takes form is through:

Token transfer mechanism

ERC-20 tokens are transferred using the transfer or transferFrom functions
- When a user sends tokens to a contract address using these functions, the tokens are transferred regardless of whether the receiving contract is designed to handle them

Lack of notification
- The receiving contract does not receive a notification or callback that tokens have been sent to it
- If the receiving contract lacks a mechanism to handle tokens (e.g., a fallback function or a dedicated function to manage token reception), the tokens are effectively stuck in the contract’s address
No built-in handling
- The ERC-20 standard does not include a mandatory function for receiving contracts to implement, leading to a situation where many contracts are unable to manage incoming tokens properly

Some alternative standards have come out of this issue such as ERC-223

Other fungible token standards

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