ERC20 tokens are smart contracts that run on the Ethereum blockchain. ERC is an abbreviation for Ethereum Request for Comments. ERC20 has 6 functions and 2 events. This standard was created to enable interoperability (the ability of computer systems or software to exchange and make use of information). The functions describe how tokens can be transferred. ERC20 has achieved much in the blockchain world. Some of the advantages of the existence of ERC20 tokens include the provision of a common set of features and interfaces for contract tokens in Ethereum. It also allows wallets to provide token balances for hundreds of different tokens. Creating a means for exchanges to list more tokens by providing nothing more than the address of the token’s contract. The ERC20 standard protocol also allowed all the developers and enterprises to tokenize their projects and conduct crowdfunding, in the form of ICOs.
Let’s break down ERC20’s first 3/6 functions;
Allowance
Allows for 2 addresses to create a repeated unidirectional transfer. A wallet address tokenOwner and wallet spender are defined as the two wallets that will engage in repeated transactions. The wallet spender will withdraw some amount from the wallet tokenOwner at some point.
Approve
The approve function is a simple standard function that calls for the wallet owner to “approve” a transaction that is about to make on his/her behalf in the contest of an Allowance (first stage). This function requires 2 inputs; the address of the spender and the amount of tokens being sent.
BalanceOf
This function accepts a single address input parameter (tokenOwner) and returns a single public constant (unit balance).
