How New Tokens are Created Using the ERC20 Token Development Protocol

ERC20 Token Development Protocol

What is the ERC20 Protocol

ERC20 is the token standard of the Ethereum network. The abbreviation stands for Ethereum Request for Comments – a request for comments on Ethereum. This is the company’s official protocol for making proposals to improve the blockchain on the network. Number 20 is the offer identifier.

To create ERC20 token protocol is referred to as a token, or what is the basis of most modern tokens. The term token has several meanings:

  • private banknote issued due to lack of funds;
  • a device that provides information security, and a hardware key for identification.

Reasons for Creating ERC20

The protocol was created in 2015 by the founder of the Ethereum platform, Vitaly Buterin. The initial purpose of creation:

  • replace securities in the digital world;
  • make electronic money universal;
  • conduct an ICO – raising funds for the development of the company.

Before the advent of the standard, platforms operated according to their own rules; each token had an individual type of smart contract.

Using ERC20, new tokens can be added to the exchange and the necessary manipulations can be performed – quickly adding and removing tokens, moving between wallets, etc.

The protocol contains a set of rules by which all coins created based on this platform operate. Let’s list the problems that the new standard solved:

  • to create a new token it was necessary to write new code;
  • it was impossible to quickly place tokens on services, wallets, and exchanges. Due to the lack of compatibility, placement required a lengthy approval process with support.

ERC20 Standard Functions

The ERC20 standard includes 6 mandatory functions and 3 additional ones. The developers do not oblige but recommend using additional functions when creating a token. The list of required features includes:

  • TotalSupply
  • BalanceOf
  • Transfer


  • Approve
  • Allowance

3 additional features recommended for use:

  • name — token name;
  • decimal — number of decimal places;
  • symbol — symbol for exchanges.

These features created a single code base that allowed wallet developers and exchanges to collaborate with all ERC20 protocol contracts. The unification of functions simplified the development of tokens. 

How to create your token using the ERC20 standard

The most popular and easiest way is to open the ERC20 token development source code written in the Solidity programming language and change a few lines. Then upload the contract to the network using official clients, for example, MetaMask.

Smart contracts

These are programs that run automatically and allow you to create decentralized worlds, cryptocurrency exchanges, and tokens.

Before the advent of the standard, platforms operated according to their own rules; each token had an individual type of smart contract.

Smart contracts are stored on the blockchain. They allow you to exchange shares, money, and other types of property directly, eliminating intermediaries and optimizing the process. Contain a contract that specifies the terms of the transaction.

Requirements fulfilled by smart contracts:

  • wallet balance control;
  • verification of transferred funds;
  • sending tokens.

Smart contracts are described mathematically and eliminate double interpretation. If one of the parties has not fulfilled the terms of the contract, this will lead to fines without transferring the problem to the legal field.

In which programming languages ​​can you create your tokens?

For this purpose, 4 programming languages ​​can be used:

  • Mutan – Go-like language;
  • LLL – Lisp-like;
  • Serpent – Python-like;
  • Solidity is similar to JavaScript and aims to develop smart contracts.

The Solidity language was based on an idea by Gavin Wood. This idea was implemented in 2014 by developers led by Christian Reitwiesner. The Solidity language is cross-platform, but in practice, it is written primarily for Ethereum. 

How tokens differ from cryptocurrencies

Cryptocurrency, as opposed to a token:

  • used as a monetary unit to measure the value of a product and is characterized by purchasing power;
  • can be earned by mining;
  • is issued not by just one person, but by all miners;
  • does not provide bonuses or discounts.
  • is based on blockchain and has a wallet based on this technology.

Token, as opposed to cryptocurrency:

  • issued by the ICO initiator and can be either a discount or a bonus for the product;
  • is a status marker showing the availability of funds, reflecting merit, and giving the right to use a service or product;
  • tied to the Ethereum network, works within the framework of the format adopted within it, and allows you to track transactions.

Practical application of ERC20

Initially, tokens were used during the initial fundraising for the development of the company. They were a digital asset with fixed obligations. Tokens were purchased directly from the developers and could not be sold or bought anywhere else. In 2014, the Ethereum initial coin offering (ICO) raised over $16 million. Ethereum has attracted the attention of representatives of many industries, as it can be used to optimize and digitize inefficient business processes in the future. 

Tokens are classified as cryptocurrencies if they have their blockchain and can be traded on exchanges. Tron and EOS are two instances of ERC20 token development companies that have developed their blockchain. Tron created its blockchain because of its promise: blockchain games are becoming more popular every day. Ethereum’s rival, EOS, is primarily utilized for decentralized exchanges and gaming.

Tokens are now assets in the form of money and value that provide membership in a program or proof of ownership. They are traded on exchanges along with cryptocurrencies, used as points in loyalty programs, as well as certificates for asset ownership.

The cryptocurrency market operates with reliable stablecoins of the ERC20 standard, which are traded on major crypto exchanges.

Which tokens use the ERC20 standard

  • USDT Tether
  • WETH
  • LCS

Which wallets support ERC20 tokens

  • Ledger
  • MyEtherWallet

Disadvantages of ERC20 tokens

The ERC-20 standard was created first. Since 2017, there have been reports that it is imperfect and cryptocurrency is lost during transactions.

Automatic contract execution

In 2018, developer Dexaran described a bug that had previously caused millions of dollars to be lost. The transaction is completed if the transfer is successful, and if there is an error, the transfer of funds must be revoked. If ERC20 token development works with smart contracts that do not support this standard, the transaction will get stuck, resulting in tokens being frozen and lost.

BatchOverFlow vulnerability

In 2018, a system that analyzes the transfer of tokens raised an alarm in connection with an unusual transaction: a gigantic number of means of payment were transferred. The test result showed that this transfer was caused by an “in-the-wild” attack that exploited a vulnerability in the contract. Scanning and analysis confirmed that more than a dozen contracts are vulnerable to the overflow problem.

The problem with integer overflow is in the batchTransfer function.

In line 257 amount, the amount variable is cnt multiplied by _value. Here _value is an arbitrary 256-bit integer. If the parameter is infinitely large, the sum overflows and is reset to zero. In this case, the hacker can successfully pass the check on lines 258–259 and reverse the subtraction on line 261.

This bug allowed attackers to create large numbers of tokens, send them to a common address, and manipulate the market. After completing the security review of ERC20 smart contracts, the project team announced that they have installed token protection against overflow errors.

Easy to Deploy

Deploying a token becomes technically simple. The simple creation of digital assets makes ICOs a common procedure, allowing carrying them out to teams unable to fulfill their obligations to investors. As a result, tokens began to appear that are used to make money from investors, rather than from developing the project. Let’s give specific examples.

In 2017, the US Securities and Exchange Commission (SEC) brought fraud charges against the founders of PlexCoin, who attracted investors with the promise of a fantastic return of 1,354% in 29 days. PlexCoin deceived investors by quoting fictitious market experts. The investigation found that the founders spent $200 thousand of the funds raised for their own needs.

At the beginning of 2018, the founder of the Fantasy Market project, Jonathan Lucas, fled. He managed to raise more than $4 million, promising to invest it in the development of a platform on which tokens would be used to pay for watching porn.

Another striking example of fraud is the Confido project, which issued tokens, collected about 375 thousand dollars and then deleted all data about itself.


ERC20 is the token standard of the Ethereum network. This is the company’s official protocol for making proposals to improve the blockchain on the network. The ERC20 protocol is referred to as the token or the basis of most tokens. It was created in 2015 to solve the problem of compatibility and support. ERC20 token generator standard contains 6 mandatory functions and 3 additional ones, ensuring the creation of a single code base.

The ERC20 standard’s introduction led to a sharp rise in the ICO market. Standards of compatibility between tokens and wallets, exchangers, blockchains, and DApps (decentralized applications with open source) are no longer necessary.

To create your tokens based on the ERC20 standard, you need to open the ERC20 source and make your changes to the code written in the Solidity programming language. To upload a contract to the network, you can use official clients – for example, MetaMask. Tokens differ from cryptocurrencies in that a cryptocurrency is based on a blockchain, and a token is based on a cryptocurrency.


Ragunath.T is a Digital Marketing Executive at the ERC20 Token development company. He designs marketing strategies to use high-quality content to educate and engage audiences. His specialties include social media marketing specialist and SEO, and he works closely with B2B and B2C businesses, providing digital marketing strategies that gain social media attention and increase your search engine.