ERC20 -- Ethereum’s Secret Weapon for Creating New Crypto Tokens

2017 was a hell of a year for crypto enthusiasts. Bitcoin hit new highs, only to plummet severely, and it’s taken months for this digital currency to recover . Yet beyond the hype surrounding Bitcoin there are dozens of other cryptocurrencies out there, all of which are fighting for market share.

Though your news feed might say otherwise, the technology behind cryptocurrency is useful for more than just creating virtual money with speculative value. In fact, a long-standing rival to the Bitcoin blockchain has some serious aces up its sleeve in the form of a robust, agile programming standard that has the potential to be even more disruptive and revolutionary.

Pulling Back the Curtain on the Secrets of Ethereum

Ethereum’s been living in Bitcoin’s shadow for a long time. While Bitcoin has been around a lot longer, Ethereum is certainly no slouch, even though the difference in value between these two coins is massive. Despite this difference, Ethereum’s blockchain infrastructure is much more flexible than Bitcoin’s, something that gives it a distinct advantage in the long run.

Exactly how versatile is Ethereum? The core of this blockchain isn’t designed to only handle transactions of virtual cash. No, there’s much more under the hood than just that, and the most revolutionary aspect of Ethereum’s flexibility as a blockchain is that developers have been able to harness Ethereum to build new crypto tokens that run on Ethereum. These tokens can and do act as completely new cryptocurrencies unto themselves, despite the fact that they don’t need a blockchain of their own. Ethereum does this by implementing something called the ERC20 programming standard.

It’s All Thanks to ERC20

Known as the Ethereum Requests for Comment standard, ERC20 was specifically designed to make it easy for developers to craft new crypto tokens by adhering to a set of commonalities on the cryptocurrency’s blockchain. The smart contracts that make up the standard are interrelated, referencing one another that knits them together to create innovative ways to manipulate the Ethereum blockchain.

The crypto tokens created by ERC20 are, functionally, independent cryptocurrencies. However, they rely completely on the Ethereum blockchain to function and can’t exist outside that environment.

The ERC20 Revolution

ERC20 isn’t a complex programming standard. Yet despite this -- or perhaps because of this -- there have been some major innovations in the cryptosphere. No longer do developers have to spend time, money, and effort on designing a blockchain from scratch if they want to create their own crypto coin or create a platform based on it. Developers can now use the Ethereum blockchain’s infrastructure as it exists, cutting the amount of resources needed to a fraction of what they would be otherwise.

The relative ease of crypto token creation through ERC20 has spearheaded a digital currency revolution. Specific token creation makes it easier for content creators to hold initial coin offerings as a form of crowdfunding, offering their token in exchange for development capital and to provide the promise of a future ROI to their investors.

The Digital Application Avalanche

ICO crowdfunding with ERC20 crypto tokens has opened the floodgates when it comes to providing options to developers working on blockchain-based projects. The cryptosphere has benefited from this, as it’s acted as a stimulating factor for decentralized application (dapp) development. Dapps provide new and interesting avenues to interact with blockchains above and beyond simple digital asset transactions, making it possible for users to participate in many other different types of tasks using blockchain-based programming tech.

The number of dapps, built both on Ethereum or on other blockchains, is blossoming daily. There are dapps that are used for relatively frivolous pursuits such as the CryptoKitties collectible pet  craze (which has spawned many imitators) to those that are more serious-minded such as more useful ones like media content management systems, web browser plugins, peer-to-peer lending platforms, and many others. ICO crowdfunding from ERC20 token sales have been the primary driver of many of these projects in the past, and are likely to continue to be in the future.

ERC20’s Many Benefits

There are any number of benefits to tokens created using ERC20. While the primary advantages are their ability to be used to crowdfund dapps and the ability to make it easier and cheaper to create cryptocurrencies without creating fully-fledged blockchains, there are even more benefits to using the programming standard to create new crypto assets.

The core of this advantage again relies on these tokens being built on the Ethereum blockchain. Wallets designed to store Ether, the blockchain’s core cryptocurrency, are by default ERC20 wallets as well. This means you won’t need an individual wallet for each ERC20 token you wish to own -- you can send and receive as many different of these tokens to just a single wallet address. The only issue you might face is finding an Ether wallet that supports the tokens you want to hold, but your wallet of choice will allow you to receive as many disparate tokens that it supports at just a single receive address.

The ERC20 Competitive Edge

ERC20 is a powerful tool, one that showcases just how versatile Ethereum is in comparison to its older, bigger brother. Bitcoin is indisputably more valuable that Ether, and that will likely never change, but the utility of Ethereum is likely going to have a larger impact that Bitcoin on the cryptosphere as a whole.

This sentiment is shared by industry bigwigs. Coinbase co-founder Fred Ehrsam, co-founder has gone on record stating that there’s a definite debt that Ethereum owes Bitcoin, but Ethereum is pushing the boundaries of what blockchain can accomplish. Stating that “Ethereum would never have existed without Bitcoin as a forerunner,” Ehrsam added that “Ethereum is ahead of Bitcoin in many ways” and that it is representative of “the bleeding edge” of cryptocurrencies.

The cryptosphere is likely to be volatile for a very long time. New blockchains will rise one moment only to disappear overnight, but when you get down to brass tacks, Ethereum’s contributions to the world of cryptocurrency will be incredibly far-reaching for years, if not decades, to come.


Written by: Shariq Toor

Shariq Toor is Content Strategist writing on the behalf of NoStop, a boutique writing agency focusing on helping small business clients take their websites to the next level. From social media topics to articles on niche industry issues, NoStop’s articles are written with style, attention to detail, and with the client’s audience in mind.

Shariq Toor