What is ERC-20 and how does it work?

There are many technical jargons in the crypto world and one such term would be ERC-20. In this article, we will discuss more on the ERC-20 token and its related concepts.

What is an ERC-20 Token?

Here are some relevant terms that will aid your understanding.

Ethereum is both a blockchain system and a cryptocurrency. It supports decentralized applications (DApps) by allowing developers to use its underlying technology and developers pay in Ether (ETH). ERC-20 tokens are the cryptocurrencies built on the Ethereum platform by DApps, where it can be bought, sold, or traded with others. The tokens might be created for other purposes such as rewards or proof of ownership. Specifically, ERC-20 is a technical standard used for smart contracts on the Ethereum blockchain.

Smart contracts are used to create ERC-20 tokens. These digital contracts that allows two parties to exchange deals without a third party. The paperwork and rules for contraction, such as fixed price, must be submitted when a party intends to sell an asset. The receiving party will have to make payment within a stipulated period. Once the payment is settled and the contract is executed, the deal is exchanged. After the token is created, it can be traded with another.

For instance, JSEcoin is a consumer-focused web platform built on top of a browser mined blockchain using Ethereum that is now listing on ecxx.com. The platform includes a suite of tools enabling website owners to monetize their content. Publisher mining uses opted-in visitor resources (less than a video advertisement) to contribute to a site cost of content. Advertisers will be able to use the JSE token to purchase ad space on the publisher network. JSE tokens are also mined using excess CPU power that would otherwise be wasted.

What about other tokens?

Some cryptocurrencies such as Bitcoin, Litecoin, Stellar, EOS and NEO rely on their own blockchain architecture. Others might build a custom blockchain or fork a current one as every blockchain has technical differences and constraints such as traffic, transaction and costs required. Nevertheless, the Ethereum blockchain offers a global network with high level of decentralisation, a good platform to build almost any application and a native cryptocurrency with high liquidity.

If you are interested in developing your own DApp, always carry out proper research first and, check the technological and protocol differences. There are considerations of decentralisation, scalability and security. In terms of scalability, confirmation time, transaction volume and costs also differ for the various blockchains. When a network becomes congested, transaction costs can soar. For example, sending Bitcoin is slower than executing a smart contract transaction on the Ethereum network due to greater security.

Please feel free to share the article if you enjoyed it! You can trade* Bitcoin, JSEcoin and other digital assets on ecxx.com too. Sign up for an account here and enjoy 0% trading fee for a limited time only.

*Risk Warning

Digital asset trading comes with high risk. ecxx.com only provide users with an online exchange platform and do not provide investment, tax or legal advice. ecxx.com is not responsible for any review of the assets and your trading strategies. There is also no guarantee against losses. Should you choose to trade, you need to be aware of and accept three important considerations: 1. Liquidity 2. Diversification 3. Loss of Capital. Please consult with your financial advisor before trading.

Please follow and like us:
Essential SSL