Tokens that are built on top of the Ethereum blockchain need to follow a specific token standard in order to function efficiently and be utilized across the decentralized finance (DeFi) space.
One of the most popular token standards within the crypto sphere, especially by the thousands of developers that aim to build on top of Ethereum, is the ERC 20 token standard.Today, we are going to go over just about everything you need to know when it comes to what it is and how it can be utilized as a payment option.
- ERC 20 is short for “Ethereum Request for Comments 20” and is a token standard proposed by Fabian Vogelsteller in November 2015.
- ERC 20 is essentially a token standard that implements an API for tokens that reside within Smart Contracts/
- ERC 20 provides numerous functions, such as the ability to transfer tokens from one account to another or get the token balance of an account.
- You can easily implement ERC 20 tokens as a payment option on just about any website by leveraging the power of NOWPayments, and we will go on a step-by-step guide on how you can do so.
What is ERC token?
Ethereum is an entire blockchain platform, which means that tokens can be developed to run on top of it, and decentralized applications (dApps) can be built on top of it through the utilization of smart contracts. If you are asking yourself, what is ERC 20, here is everything you need to know.
An ERC token, or in other words, when we look at the Ethereum blockchain network, an ERC 20 token is a specific token standard. Any token that is developed on top of a blockchain network needs to follow a specific set of standards so that it can be shared, exchanged for other tokens, or even transferred to a cryptocurrency wallet.
Smart contracts, which are programmable, self-executing programs that are engaged when predetermined conditions are met, are used to create ERC 20-based tokens.
They are used to facilitate the process of transactions on top of the network and can record the balances of tokens within an account. Smart contracts are written in the programming language known as Solidity.
Once a smart contract creates a token, it can be traded, spent, or given to someone else, where the ERC 20 token standard fills the role of being a language that all tokens on the network use and allows all of this functionality.
As such, ERC 20 tokens are the most commonly used tokens across the Ethereum network and are specifically designed to be used for the payment of functions and are known as utility tokens; however, they can also be used to pay for goods or services.
These tokens can be fungible, where the code of each token is the same as any other. However, the transaction histories here are utilized as a means of identifying and separating out the tokens involved.
They can also be transferable, which means that they can be sent from one wallet address to another wallet address, and they can have a fixed supply, which is a number of tokens that have to be created so that developers cannot issue any more tokens and raise the supply. Now you know what is ERC 20 token.
Each ERC 20 token contains numerous functions that they implement, including:
- TotalSupply – provides information surrounding the token supply.
- BalanceOf – provides the account balance of an owner’s account.
- Transfer – executes transfers of a specified number of tokens to a specific address which has been pre-specified.
- TransferFrom – executes transfers of a specified number of tokens to a specified wallet address.
- Approve – allows a spender to essentially withdraw a specified number of tokens from a specified account.
- Allowance – returns a specified number of tokens from a sender to the owner.
Pros and cons of ERC 20 payments
- Fungible ERC 20 tokens are interchangeable and work in a similar way as cash does. Although the coins are distinct, they function in exactly the same way, which means that you can trade one for another at any point in time, and they will always be equivalent.
- The popularity surrounding ERC 20 tokens is immense, and they can be seen across the entire crypto industry, as there is a large number of wallets, exchanges, and smart contracts that are supported widely on a global level.
- ERC 20 tokens are also highly flexible and can be utilized in a variety of different circumstances as well as applications due to the fact that they follow the same token standard and set of rules.
- There are way too many projects that utilize the same standard, which means that it can be difficult for specific projects to stand out from one another due to the fact that they are rarely differentiating the token in some way since they are all the same on a technical level.
- It takes minimal time as well as minimal effort to create a simple ERC 20 token, which can allow anyone to create one, and this could result in potential frauds or scams, or even pyramid schemes that are pretending to be legitimate projects.
- The Ethereum blockchain has issues when it comes to scalability, and at points in time when there is a high level of network congestion, there can arise struggles in terms of completing token transactions, which results in high network fees, and there is a large minimum payment amount required in order to push the transactions through at times of high network congestion. You can discover the minimum payment amount on NOWPayment’s status page.
Since the launch of the ERC 20 token standard, due to the high level of popularity surrounding the Ethereum blockchain, we have seen numerous use-cases.
- Non-fungible tokens (NFTs) have been utilized in the gaming and artwork industries.
- Security Tokens, which have been utilized in the crowdfunding space.
- Digital identity has allowed users to own access to their digital identity.
Some of the leading ERC 20 platforms that have utilized the token standard include decentralized exchanges such as Uniswap (UNI), which enables users to swap tokens through a peer-to-peer (P2P) method without relying on a centralized authority, as well as Aave (AAVE) which is a lending platform.
However, it also includes numerous Non-fungible token (NFT) related use-cases, such as Decentraland (MANA), which is a token that can get burned as a means of getting LAND tokens that represent virtual land. Furthermore, projects such as ApeCoin (APE) have their utility and governance tokens created through the ERC 20 token standard.
This means that there is a plethora of use-cases surrounding the ERC 20 token standard, such as for payments on eCommerce websites, burning, the creation of non-fungible tokens (NFTs), and the list goes on.
How to accept ERC 20 tokens as payment
It is now simpler than ever before for you to start accepting ERC 20 tokens on just about any platform, and all you have to do is follow these steps:
- Create an account on the official NOWPayments website here.
- Provide your ERC 20 Crypto address to begin the overall process.
- Generate your Application programming interface (API) key through the platform
- Once all of the aforementioned steps have been completed successfully, you will be able to pick the tool you deem to be suitable for accepting ERC 20-based payments on your specific website or platform. You can easily check all of the available options by clicking here.
NOWPayments is the cryptocurrency payment gateway that allows businesses to accept ERC 20-based tokens, as well as many other types of cryptocurrencies, stablecoins, and token standards on your website. This fairly straightforward process will take you only a few minutes to complete.
We have gone over just about everything you need to know surrounding what is ERC-20 token standard actually is and what you need to do in order to begin accepting it on top of your specific website.
ERC 20 is one of the most widely-accepted and adopted standards, which means that all of the tokens built on top of it can be accepted just about anywhere, which serves as an incentive for a lot of cryptocurrency traders, investors, and enthusiasts to buy and hold these tokens in their wallets.
By opening your website or app with the ability to accept this token standard as a payment option, you are opening the gateway toward a much larger consumer base, which could potentially lead to much higher sales counts and a much wider appeal for your specific service or products within the crypto space.