ERC (Ethereum Request for Comments) is the official protocol for making suggestions to improve the Ethereum network; 20 is a unique proposal ID number.
Technical specifications for tokens issued on the Ethereum blockchain were published in 2015. Before the ERC-20 standard, there were many compatibility issues between different forms of Ethereum tokens, each with a completely unique smart contract.
ERC-20 defines a shared list of rules for Ethereum tokens which they should follow in the larger Ethereum ecosystem, which allows developers to accurately predict interactions between tokens. These rules include methods of transferring tokens between addresses and how to access the data in each token.
What is ERC-20 tokens?
ERC-20 are tokens developed and used exclusively on the Ethereum platform and in fact are smart contracts on the Ethereum blockchain. The tokens themselves represent blockchain assets that can have value and can be sent and received like any other cryptocurrency.
Scenarios for the usage of ERC-20 tokens are very different. For example, they can be used as project shares, certificates confirming ownership of assets, points in loyalty programs or as cryptocurrency. It is also possible that ERC-20 tokens perform several such roles simultaneously.
How do ERC-20 tokens differ from traditional cryptocurrencies?
The difference of ERC-20 tokens from other known cryptocurrencies is that they are tied to the Ethereum network, use the address format accepted within this network and are sending via Ethereum transactions.