ERC20 tokens are built on the Ethereum blockchain and adhere to a set of standards that define their key features and functionality. These standards include the ability to transfer tokens, approve transfers, and track the total supply of tokens in circulation. The ERC20 standard also defines the way in which tokens can be stored and accessed in a wallet, as well as how they can be traded on cryptocurrency exchanges. The adherence to these standards provides consistency and compatibility between different ERC20 tokens, making them easier to use and manage. The security of ERC20 tokens is also impacted by these standards, as they ensure that the tokens are stored and transferred in a secure and transparent manner. Additionally, the decentralized nature of the Ethereum blockchain provides an added layer of security for ERC20 tokens.

An ERC20 token is a standard for creating fungible tokens on the Ethereum blockchain. Key features include six mandatory functions: totalSupply, balanceOf, transfer, transferFrom, approve, and allowance. These ensure interoperability across wallets, exchanges, and smart contracts. ERC20 tokens are programmable, enabling automated transactions and complex logic. Their standardised structure enhances functionality by simplifying integration and improving liquidity. From a security perspective, smart contract code must be well-audited, as bugs can lead to exploits or loss of funds. While ERC20 provides consistency, vulnerabilities like the “approve front-running” issue exist. Developers often implement enhancements like safe math libraries or adopt newer standards (e.g., ERC777) for added protection. Overall, ERC20’s structure balances ease of use with flexibility and caution.