ERC20 tokens for blockchain developers are generated on the Ethereum blockchain and have emerged as a common method for companies to raise funds for their projects. In this blog post, we are going to look at what ERC20 tokens are and how they function as well as why they have become so ubiquitous.

What is ERC20 ?

ERC20 Tokens: These are the tokens that have been generated and transferred over service of the Ethereum network. The fact that they are standard means, in other words - a set of rules which was pushed out by the Ethereum community to have an inter-changeable behavior between tokens and wallets for everything digital dealing with ETH. ERC20 is short for "Ethereum Request For Comment 20", which offers care of rules that the token must follow within an Ethereum network.
They are fungible in a sense that they all have one token, just with different balances. Available in all of the same - If you have an ERC20 token from a project it is like any other standard from that program.

How do ERC20 Tokens work?

ERC20 tokens are formed over the Ethereum blockchain. A company or organization can create its own ERC20 token by generating a smart contract which outlines the rules of that specific token. This smart contract is then deployed on the Ethereum network and this becomes a basis for our token wallet.

After deploying the smart contract, it will enable the organization to issue tokens for investors. On top of that, these tokens can be traded on stock exchanges (just like any cryptocurrencies) or will have other utilities within the platform.

The beauty of ERC20 tokens rests in the fact that they will be supported by a plethora already established wallets and exchanges. This helps investors take a smooth way to trade and manage their tokens.

Why are ERC20 Tokens Popular?

ERC20 tokens have taken off for a few reasons. For one, they offer organizations and companies the means to fund their projects without using traditional fundraising mechanisms. Tokens allow companies to issue securities, directly raising funds from the global audience without having to comply with national requirements associated with traditional fundraising mechanisms.

Also, they make you portion of an entire process simple - creation and management. Tokens can be easily created on the Ethereum network which provides both a platform for issuing tokens and many sources available to entities wishing to create their own.
Finally, the tokenomics are also easy to handle and trade for investors with wallets or exchanges due to their compatibility. This led to a rich community of ERC20 tokens where several projects and investors have joined the network.

Advantages of ERC20 Tokens

Interoperability: ERC20 tokens transfer is created with standard so it can be compatible from any Ethereum wallet or exchange, enabling users to manage and trade their assets easily.

Standardization:These tokens mainly follow the rules on how they will be transferred. 1 transferable = transfer me to flat, transparent and predictable standards. And that helps in reducing the complexity and improves adoption.

Flexibility: ERC20 Tokens can be used to represent any digital or physical asset, and for that matter, the possibilities are infinite - from simple voting and governance systems (such as Civic) through supply chain management solutions down to applications managing Digital Identities.

Security: ERC20 is a technical standard that can be followed while creating new tokens on Ethereum to benefit from the plethora of services already built utilizing this technology. This makes it easier for such projects in terms of developing your own ERC 20-compatible token, since they are usually created by executing a smart contract with specific functionality after being deployed onto an immutable blockchain network (Ethereum). It offers maximum security and accountability as all dealings are stored in the blockchain - what is written there stays out!

Global Reach: The issuer can then release and trade the ERC20 tokens worldwide, allowing companies and organizations to access a global investor base without needing prior rounds of fundraising.

Liquidity:ERC20 tokens can be traded very easily on exchanges, providing liquidity to token holders and allowing people who own these tokens a quick way to buy or sell them -something the vast majority of NOOBY ICO token buyers expect once their trade becomes available.

Lower Costs: As opposed to traditional fundraising practices like IPOs, ERC20 tokens can be issued cheaper and result in a lower user transaction fee being lower.

Conclusion

ERC20 tokens for blockchain developers are a kind of token that is designed via the Ethereum network as it works on standards set by ERC. Startups and companies that have a project, can raise funds in this way on the one side of these things - for other investors it has become quite popular to make investments into such kinds of projects. Given the still-evolving nature of the ecosystem, and with Ethereum development likely to continue into at least 2019 at a bare minimum (Casper Proof-of-Stake is scheduled for rollout next year), it stands to reason that ERC20 tokens will remain an important part of cryptocurrency infrastructure well into the future.