What is ERC-20?

ERC-20 is a widely used standard that defines how a fungible token behaves on Ethereum and compatible networks. Fungible means each unit is interchangeable, like regular currency. By following the same rules for transfers, balances, and approvals, ERC-20 tokens work smoothly across wallets, exchanges, and DeFi apps without custom code for each one.

This matters because the standard is why your wallet can display and send countless different tokens the same way. Most stablecoins, governance tokens, and airdropped tokens you encounter are ERC-20 or an equivalent on another chain.

Example: a project launches its token as an ERC-20 contract, and instantly it is compatible with major wallets and DEXs because they already understand the standard.

Safety note: the token approval mechanism is part of the ERC-20 standard, which is convenient but is exactly what wallet-drainers abuse. Because creating an ERC-20 is trivial, a token following the standard is not automatically safe or valuable. Verify the contract address from official sources before trusting a token. Related terms include token approval, ERC-721, smart contract, and token vs coin.