ERC-20

Picture a digital metropolis named Ethereum, where diverse tokens function as the city's currency, circulating among residents for transactions and services. ERC-20 acts as the rulebook for issuing and using currency within this city.

In 2015, Ethereum developer Fabian Vogelsteller introduced the ERC-20 technical standard. It's not a specific software or code but a unified guideline for anyone looking to issue tokens on Ethereum – akin to "standards of measurement" ensuring cups from different manufacturers hold the same volume of water.

Why ERC-20? Put simply, it makes token interactions more predictable and seamless. Tokens earned in one game, for instance, can be effortlessly transferred to another ERC-20 compliant app to purchase services, just as leftover change from grocery shopping can buy a bus ticket. This compatibility fuels the growth of thousands of decentralized applications (DApps) and services on Ethereum, ranging from crypto wallets to decentralized exchanges and online games, all embracing ERC-20 tokens.

The ERC-20 standard outlines how tokens are transferred within the Ethereum network and accurately tracks token balances and totals for each address. Tokens representing cryptocurrencies, vouchers, gold certificates, points, or IOUs, when adhering to ERC-20, freely circulate on this platform. They even serve as voting rights in virtual polls.

ERC-20 has simplified and expedited the process of launching new tokens, explaining the surge in Ethereum-based Initial Coin Offerings (ICOs) in recent years. By mid-2017, around 5,500 ERC-20 compliant smart contracts existed on the Ethereum network; by early 2018, this number skyrocketed to over 40,000, and now exceeds 160,000, showcasing remarkable growth.

Not all Ethereum tokens follow ERC-20, however. Ethereum's native currency, Ether (ETH), predates ERC-20 and doesn't directly conform. Hence, "Wrapped Ether" (WETH), an ERC-20 token exchangeable 1:1 with Ether, was created to facilitate easy trading of Ether with other ERC-20 tokens on decentralized exchanges.

Technically, ERC-20 delineates six core functions ensuring secure and efficient token transfers and stipulates key information such as token name, symbol, and total supply, akin to how currencies have unique names and denominations for instant recognition.