Most Ethereum and cryptocurrency enthusiasts have become familiar with ERC20 tokens. This token standard is used to create new forms of currency on the Ethereum blockchain. Now that Ethereum Improvement Proposal 20 has been formally adopted, the ERC20 token standard is officially instituted. This is a major development for the ecosystem as a whole, as the proposal also formally establishes API standards for Ethereum-based tokens.
ERC20 is now an Instituted Standard
Although many people have gotten used to the concept of ERC20 tokens, the “standard” itself was never an actual standard to begin with. Rather, it was a way for enthusiasts to create new tokens on top of the Ethereum blockchain. However, the recent surge in the popularity of such tokens put pressure on Ethereum’s developers to officially institute ERC20. This is exactly what occurred thanks to the EIP20 adoption, which took place on Monday.
Ethereum Improvement Proposal 20 was originally created back in November of 2015. Ever since that time, ERC20-based tokens have gone from a niche market to a new way of fundraising for startups, projects, and coders alike. It is unfortunate that the concept of cryptocurrency ICOs faces a lot of criticism in different parts of the world, but this nascent industry was bound to attract some attention sooner or later.
The goal of EIP20 has always been twofold. On the one hand, it is designed in such a way that the ERC20 token standard is officially instituted as part of the Ethereum blockchain technology. That may sound trivial, but it is good to see the community using this token creation “tool” to build creative ways of raising money. One could almost no longer envision a world in which ERC20 tokens are not common, as they have become intertwined with Ethereum.
Additionally, EIP20 introduces a standard API for tokens within smart contracts. This means that tokens can be transferred accordingly and they may even be used in other projects as their own currency. Creating API capabilities for these ERC20 tokens is significant, as it allows any Ethereum-based token to be reused by other applications. We are not talking here about wallets and traditional exchanges, but rather decentralized exchange solutions of the present and future.
Over the past two years, there have been minor changes made to EIP20, which explains why it took so long for it to be “approved” in the first place. Considering how there are now dozens of different tokens adhering to ERC20 token specifications right now, it is only normal that the concept would be officially instituted moving forward. This move lends a bit more credibility to the concept of ERC20 tokens as a whole, which is pretty significant as well. It opens the door for further integration of ERC20 tokens in more applications and services moving forward.
There are now a total of five EIPs which have been formalized by the Ethereum developers to date. ERC20 joins a pretty selective club, which is a milestone on its own. ERC20 becoming an official token standard means there is no more uncertainty over how it will be implemented. This may lead to more ERC20 tokens being created in the future, although it remains to be seen how things will evolve in this regard.