Blockchain 1.0 or also known as the launch of Bitcoin powered by the decentralized ledger technology could only act as a store of value. Meaning, if you wish to send money from one person to another, without involving a third party like a bank or payment gateways, Bitcoin-blockchain makes a lot of sense. But think of a situation where you need to regulate the operations and integrate better interoperability in the scheme of things. At such times, you need something that can self-execute directed by some codes or “If This, Then That” logic. That’s why we need the ERC-20 Token standard that can standardize blockchain and make it applicable to numerous sectors on a massive scale. ERC-20 Standards of EVM’s (Ethereum Virtual Machine) are also called Blockchain 2.0 where blockchain transcended from being an environment streamlining payment to an environment that envisaged blockchainization of almost everything by facilitating automation, process management, and contract execution.
The sole purpose of the ERC-20 standard was to change a sentence that most of the individuals asked when blockchain came in 2008, “ Is It On Blockchain” to “Why it is not on Blockchain.” Without any further ado, let’s deep dive to understand the ERC-20 Token Standards.
What is the Purpose of Creating ERC-20 Token Standards?
A technology can penetrate only when it diversifies and expands its area of application. That’s what happened when the Internet came, it wasn’t initially meant to connect everyone but later on evolved to power everything that you can think of. The purpose of the ERC-20 Standard Token was to create a virtual machine or super computer powered by the EVM or Ethereum Virtual Machine Network that can blockchainize almost everything where you need a store of value and exchange of value. So, you can right now see that people trading, getting into contracts, performing operations, trusting logical flows from getting paid for the job done to trade to simply registering their art in the blockchain for piracy protection, everything is getting governed by ERC Standards categorized under diverse heads. The ERC-20 Standards have specific smart-contracts that govern its operations. So, you can simply take smart-contracts as the cash that you insert in the vending machine and different candies come out. Likewise, you use the ERC-20 empowered smart-contracts to mint different ERC-20 Tokens that can empower various operations/functions of blockchain use-cases like trading, remittance, compensation, and exchange.
What Is The Main Role of The ERC-20 Tokens In the Blockchain Ecosystem?
- Ensuring interchangeability of assets
- Establish a uniform environment to power operations
- Streamlining operations with decentralized applications
- Simplification of transaction with the leverage to easily send and receive ERC 20 standard tokens.
- Ability to interact with other cryptocurrencies via smart-contracts
How ERC -20 Standards Have Changed the Landscape of Blockchain?
Setting Up Interoperability
ERC-20 standards set-up a uniform environment for every token minted so that they can interact with each other. With that said, it becomes easy to conduct interoperability with different blockchain networks using the smart-contracts. Such an advantage allows for better information flow within the same interface created by the ERC 20 token standards empowering trading and exchange to be streamlined using one single wallet for multiple tokens. Since the ERC 20 standards use one single API or Application Process Interface, different third party Ethereum blockchain projects can communicate with each other and perform diverse operations without even getting to know about the token’s native environment.
Broadening the Scope of Finance
The main reason for the success of the ERC-20 Standards is attributable to its ability to tokenize diverse assets. Therefore, you can make the blockchain scalable and efficient by using it to peg properties against tokens, safeguard an artwork, authorize the right of use by copyright protection, and many other things. Earlier, it was just a vision or a dream to ensure that financing can be moved to blockchain. But with the introduction of the ERC 20 Standards Tokens, the DeFi boom has already taken financing to the next level. As a result of this, there is greater scope for the financial inclusion of those who were left out of the system because of compliances and parameters.
ERC 20 Standards Tokens have lately been picking up pace since DApps empowered DeFi projects have completely revolutionized the blockchain space. For the first time, people can easily lend and collateralized assets without documentation and other formalities to acquire quick flash loans. The pressing challenge of finances and very high-interest rates have haunted individuals to sustain their finances. ERC-20 Standards DeFi projects have heralded a new concept that can completely change the ace of finance.