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What Is an ERC-20 Token? The Standard Behind Most Ethereum Tokens
An ERC-20 token is a fungible token on Ethereum that follows the EIP-20 standard interface, which defines functions such as transfer, approve and balanceOf so wallets and apps can handle any such token the same way.
Key takeaways
- ERC-20 defines a common set of functions every compliant token implements.
- Tokens are balances recorded by a smart contract, not coins held in your wallet.
- The same wallet can hold any ERC-20, because the interface is identical.
- Anyone can create one, so a token existing is not a sign that it is trustworthy.
What the standard says
The ERC-20 standard, written down in EIP-20, specifies a set of functions and events that a token contract must provide. The key ones are balanceOf, which returns an address's balance, transfer, which sends tokens, and approve, allowance and transferFrom, which let a spender move tokens on someone's behalf. Optional fields give the token a name, a symbol and a number of decimals.
How it works
An ERC-20 token is not a coin stored in your wallet. It is an entry in the token contract's table of balances. Your wallet shows the sum for your address by calling the contract. A transfer is a transaction that calls the contract's transfer function and updates two entries in the table. This is why you need ETH to pay gas even when you only move a token.
Why standards matter
Because every ERC-20 exposes the same interface, a wallet written once can display and send any token, and an exchange can list any token without custom work. ethereum.org describes ERC-20 as the standard for fungible tokens, meaning each unit is interchangeable with another.
What to keep in mind
The standard defines how a token behaves, not whether it is honest. Anyone can deploy a contract that follows ERC-20 and name it anything, including copying a well-known name. Check the contract address against a trusted source before you add or trade a token, and look at who controls the supply. Decimals vary between tokens, commonly 18 but sometimes 6, so raw on-chain amounts must be converted before they are shown.
Example
A token contract records that address A holds 1,000 units. A calls transfer to send 100 to address B. The contract reduces A's balance to 900 and raises B's to 100 and emits a Transfer event.
Put it into practice
Verify a token before you trade it
Scrypt Wallet supports ERC-20 tokens on Ethereum. Check the contract address of any token against a trusted source before you swap into it.
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Last reviewed 2026-10-02 by the Scrypt Wallet team. The factual claims on this page, and where each comes from:
- EIP-20 specifies functions such as balanceOf, transfer, approve, allowance and transferFrom for tokens. [1]
- ethereum.org describes ERC-20 as the standard for fungible tokens. [2]
Sources
- EIP-20: Token standard · Ethereum EIPs · primary source
- ERC-20 token standard · ethereum.org · secondary source
Primary sources are protocol papers, specifications, source code or a project's own documentation; secondary sources are wikis and explainers. We checked each claim against the source text on the review date. Found an error? Tell us and we will correct it.
Frequently asked questions
Is ERC-20 a coin?
It is a token standard. The token lives inside a smart contract rather than being a native coin like ETH.
Why do tokens have different decimals?
The token's creator chooses the precision. Many use 18, and some use 6.
Can anyone create an ERC-20?
Yes. That is why you must verify the contract address and the project before trusting a token.
Written by the Scrypt Wallet team · Updated 2026-10-02. General education, not financial, tax or legal advice.