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ERC-20 Tokens

ERC-20 tokens are a subset of Distributed Ledger Technology (DLT) Layer 2 (L2) Digital Assets, built on top of an existing blockchain system, usually through smart contract technology. “Ethereum Request for Comments 20,” more commonly known as ERC-20 tokens, are a type of Token. ERC-20 tokens represent a technical standard used to implement smart contracts that create the API for tokens on the Ethereum blockchain. Adhering to this standard allows tokens on Ethereum to be re-used by other applications (e.g., wallets or decentralized exchanges.) Tokens designed and used solely on the Ethereum platform follow the ERC- 20 token standard. Smart contracts are responsible for creating the tokens, handling transactions, and keeping track of the balances. There are six mandatory functions that an ERC-20 token smart contract must implement, including:

  • Creating a method that defines the total supply of tokens, which will allow the smart contract to refuse new tokens once the cap is met.
  • Creating a method to show the balance of tokens in each respective address.
  • Creating a transfer method to take tokens from the total supply and giving them to a user.
  • Creating a transfer method to allow users to transfer tokens between themselves.
  • Creating a method to approve transactions from user to user, ensuring that the total supply has a greater balance than or equal to the amount being sent (if sending tokens from a non-personal balance).
  • Creating a method to approve transactions from user to user, ensuring that the user has a balance greater than or equal to the amount being sent.

Optionally, the ERC-20 standard also allow developers to give their tokens a name, symbol, and determine how dividable their token is by specifying the number of decimals that the token can support.

Common ERC-20 tokens include Tether (USDT), BNB, LEO, DAI, and more.

Note: These are non-technical definitions meant for a general audience and should not be used as legal definition
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