ERC-20 Token Standard: Complete Guide to Ethereum’s Token Protocol in 2025

2 Sep, 2025
| Salome K

What is ERC-20?

ERC-20 is a popular standard for smart contracts on the Ethereum blockchain. Represents a set of rules which need to be followed during the development of a contract, responsible for the parameters and emission of a new custom token.

This standard significantly simplified the process of creation of new cryptocurrencies. Different ERC-20 tokens can be transferred and stored on the same address in the Ethereum network.

The appearance of possibility for any developer to release their own digital asset without the necessity to launch a separate blockchain became a turning event in the history of cryptocurrencies.

The proposal about introduction of a unified standard for custom tokens was first published in November 2015. Its authors became the creator of Ethereum Vitalik Buterin and developer Fabian Vogelsteller.

Thanks to the standard ERC-20, tokens received wide distribution in the most different areas. They are used for representation of assets, such as fiat currencies, stocks, goods, as well as for creation of utility tokens for decentralized applications (DApps).

The main feature of ERC-20 consists in the definition of a basic set of functions which must be supported by each token. Among them: total quantity of issued tokens, balance of tokens of a concrete user, function of transfer of tokens from one user to another, as well as function of allowance for a third-party contract to spend tokens on behalf of the user.

Application of the standard ERC-20 provided compatibility between different tokens and decentralized applications. Tokens corresponding to the standard are easily integrated into the existing infrastructure of Ethereum, including wallets, exchanges and other services. This significantly lowers the entry threshold for new projects and promotes the development of the crypto ecosystem.

The standard ERC-20 became the foundation for the development of DeFi (decentralized finance) and other innovative directions in the sphere of blockchain. It continues to play an important role in the development of the cryptocurrency industry, providing the basis for creation of new tokenized assets and decentralized applications.

The evolution of ERC-20 does not stand still. Appear various extensions and additions to the standard, directed at elimination of its shortcomings and expansion of functionality. For example, proposals for improvement of Ethereum (Ethereum Improvement Proposals or EIP) propose new possibilities for management of tokens, increase of their security and optimization of transactions.

EIP (proposals for improvement of Ethereum). For example:

EIP-20: Clarifications and corrections of the original standard.
EIP-2612: Permission of transactions without gas (gasless transactions) for improvement of UX.
EIP-5123: Increase of confidentiality of transactions for financial applications.

These improvements are directed at elimination of shortcomings of the original standard, such as high commissions, insufficient confidentiality and complexity of management of tokens.

The influence of ERC-20 on the crypto industry is difficult to overestimate. It became the foundation for creation of a huge number of projects and services. The simplicity and accessibility of the standard allowed even beginning developers to create their own tokens and launch blockchain-projects. Thanks to ERC-20, Ethereum became the leading platform for tokenization of assets and development of decentralized applications.

The ecosystem around ERC-20 constantly develops. Appear new tools and libraries, simplifying development and integration of tokens. Various wallets and exchanges support the standard ERC-20, which provides convenience of use of tokens for users. Besides, exist various services, offering audit of smart contracts ERC-20, which helps to increase the security and reliability of tokens.

The ecosystem around the standard includes:

Libraries for developers: OpenZeppelin, Hardhat.
Audit of smart contracts: Services from CertiK, Quantstamp and Hacken ensure security of tokens.
Wallets and exchanges: Full integration with popular platforms.

These tools lower the barrier for creation and use of tokens, making the technology accessible for the masses.

The future of ERC-20 is undoubtedly connected with the development of Ethereum 2.0 and transition to the algorithm Proof-of-Stake. This should lead to increase of scalability and reduction of commissions for transactions, which will make the use of tokens ERC-20 even more attractive. The standard ERC-20, probably, will continue to play an important role in the world of blockchain, remaining the basis for tokenization of assets and development of decentralized finances.

Transition to Ethereum 2.0 and algorithm Proof-of-Stake (PoS) will cardinally change the ecosystem:

Reduction of commissions: Increase of throughput capacity of the network will reduce the cost of transactions.
Increase of scalability: Sharding and Layer 2 solutions (Polygon, Optimism) will accelerate processing of operations.
Improved security: PoS will make the network more resistant to attacks.

These changes will strengthen the positions of ERC-20 as a standard for tokenization and DeFi.

Why ERC-20 will remain a key standard

ERC-20 will continue to play vital role in the world of blockchain thanks to: