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FAQ 21 – What is an ERC-20 token ?
What is a token?
As a reminder, a coin is a cryptocurrency that has its own blockchain, while a token is a cryptocurrency based on another cryptocurrency’s blockchain.
Thus, by being hosted on an existing blockchain, tokens use the infrastructure of that blockchain more or less for free.
Why was the ERC-20 token created?
The ERC-20 token, which means “Ethereum Request for Comment”, was created as a solution to a major need: the numerous tokens created on Ethereum.
As a matter of fact, developers have wanted to create decentralized applications since the rise of Ethereum.
What are the distinctive characteristics of the ERC-20 Token?
The ERC-20 Token is a set of rules and regulations that establishes a plan for tokens created on Ethereum: it defines what can or cannot be done with these fungible tokens.
The ERC-20 token based on the Ethereum blockchain is used for smart contracts. These tokens are mainly based on a specific smart contract that handles the follow-up of the transation of this token. They can be purchased in Ethereum.
Thus, token exchanges are subject to the same gas price fees linked to the Ethereum blockchain. The transactions with the most gas will be processed faster by the Blockchain.
