ERC-20 Token: What It Is, How It Works, and Why It Matters in Crypto

When you hold a crypto token like UNI, LINK, or even SHIB, you’re likely holding an ERC-20 token, a standardized type of digital asset built on the Ethereum blockchain that follows a set of rules for how it’s created, transferred, and tracked. Also known as Ethereum token standard, it’s the reason your wallet can display hundreds of different tokens without needing a separate app for each one. Think of it like a universal plug — no matter which device you have, if it uses the same outlet, it works. ERC-20 is that outlet for Ethereum-based tokens.

This standard doesn’t just make tokens compatible — it makes them usable. DeFi platforms like Uniswap, Aave, and Compound all rely on ERC-20 tokens to let you lend, borrow, and trade without intermediaries. Airdrops? Most of them — like the ones for SNE, BNC, or MOWA — distribute ERC-20 tokens because they’re easy to send and track on Ethereum. Even scams use ERC-20 tokens because they’re simple to fake, which is why you’ll see so many posts here warning about fake airdrops and worthless tokens. The same standard that powers real projects also makes it easy for fraudsters to copy them.

Behind every ERC-20 token is a smart contract, a self-executing code on the Ethereum blockchain that automatically handles token transfers, balances, and rules. It’s not magic — it’s code. And if that code has a flaw, your tokens can vanish. That’s why projects like THORChain and Wagmi are built on different chains — they’re trying to solve Ethereum’s slow fees and congestion. But even then, most new tokens still start as ERC-20 because it’s the easiest way to get noticed. You don’t need to be a coder to understand this: if a token isn’t ERC-20, it’s probably not on the main exchanges you use.

And then there’s Ethereum, the blockchain that made ERC-20 possible — the foundation for nearly all decentralized apps, tokens, and DeFi protocols today. It’s not just a network; it’s the ecosystem where tokens come to life. Whether you’re staking crypto, joining an airdrop, or just holding a token, you’re interacting with something built on Ethereum’s rules. Even when you hear about new chains like zkSync Era or BSC, they often mirror ERC-20 because users already know how it works.

What you’ll find below isn’t just a list of articles — it’s a map of how ERC-20 tokens shape real crypto behavior. You’ll see how they’re used in airdrops, why some fail, how scams exploit them, and how they connect to wallets, exchanges, and regulations. No fluff. Just what you need to know to tell the real tokens from the noise — and why the standard behind them matters more than the name on the screen.