What is an ERC20 Token and does Exodus support it?
You’ve probably heard the term “ERC20 token” used in the blockchain industry. In Exodus, ERC20 tokens are called Ethereum Assets since they live on the Ethereum blockchain. But what exactly are they?
In this article:
What is an ERC20 token?
ERC20 is an official protocol for proposing improvements to the Ethereum (ETH) network and can be understood as a standard for tokens that are created on the Ethereum blockchain. For example, many ICO tokens are ERC20 tokens. ICOs, or initial coin offerings, are fundraising events where companies raise funds for projects by selling digital tokens.
A traditional finance analogy would be IPOs, or initial public offerings. IPOs are when companies get listed on public stock exchanges and sell stocks (shares) of their company to the public in order to raise funds.
A More Technical Explanation of ERC20 Tokens
ERC stands for Ethereum Request for Comments. This is an official protocol for proposing improvements to the Ethereum (ETH) network. “20” in this case is the unique proposal ID number.
The proposal ERC20 defines a set of rules which need to be met for a token to be called an “ERC20 token”. These rules apply to all ERC20 tokens because the rules need to be followed in order for ERC20 tokens to be able to interact with each other.
ERC20 rules are as follows.
- Token Name
- Symbol (e.g. REP)
- Decimal (how many decimal places a token can be divided into - up to 18)
- totalSupply (total supply of tokens created)
- balanceOf (a function, that when used, shows the number of tokens held in a given wallet)
- transfer (how many tokens can be transferred from the total token supply to a user wallet)
- transferFrom (a function that allows users to transfer tokens to other users)
- approve (checks transactions against the total token supply - prevents counterfeiting and fraud by verifying that transactions don’t increase or decrease total token supply)
- allowance (function that checks individual wallets and cancels transactions if wallet funds are insufficient)
ERC20 Tokens Use Ethereum’s Blockchain
Like other blockchain assets, ERC20 tokens are blockchain assets that can have value and be sent and received like Bitcoin, Ethereum, Litecoin, or any other blockchain asset.
The difference between ERC20 tokens and cryptocurrencies like Litecoin is that ERC20 tokens don’t have their own blockchain but use Ethereum’s. ERC20 tokens are stored on Ethereum addresses, sent using Ethereum transactions, and use GAS (tiny fractions of Ether*) to pay for transaction fees.
*Ether is the formal name for the Ethereum blockchain’s cryptocurrency (commonly called “Ethereum”).
For more information on how ERC20 transaction fees work, see this article.
Take this transaction for example:
At first glance, this transaction may look like an empty Ether transaction - Note the ‘Value’ of Ether transacted is zero - but look at the text in the red box:
For more details on how ERC20 token fees work, see this article http://support.exodus.io/article/67-how-do-i-send-or-exchange-an-ethereum-powered-asset
You also may have noticed that within your Exodus wallet, your ERC20 Tokens like REP, BAT, TUSD, and other ERC20 tokens supported by Exodus share the same receiving address as your Ethereum (ETH). This is because, as mentioned, ERC20 tokens use the Ethereum blockchain. In your Exodus wallet, your ETH wallet not only handles your ETH but any other ERC20 or Ethereum-powered assets you may have. Keep in mind that this only applies to Ethereum (ETH), and not to Ethereum Classic (ETC); Ethereum Classic has its own independent platform and protocols for smart contracts.
You can find an up-to-date list of our supported assets (Including ERC20 Tokens) here.
What happens if I send an unsupported ERC20 token to my ETH address on Exodus?
Your Exodus ETH Address is capable of receiving any ERC20 token whether or not Exodus supports it. Unsupported Tokens just won’t be visible in Exodus. However, you can easily manage your Exodus-unsupported ERC20 tokens using your Private Key.