ERC-20 fungible token standard in Blockchain / Solidity

Introduction

The ERC-20 standard defines a common way for tokens on the Ethereum blockchain to work. It makes sure all tokens behave the same, so wallets and apps can use them easily.

When creating a new digital currency that can be traded or used in apps.

When you want your token to work with popular wallets and exchanges without extra work.

When building a game or app that needs tokens to represent points, assets, or rewards.

When you want to make sure your token can be sent, received, and tracked like others on Ethereum.

Syntax

Blockchain / Solidity

interface IERC20 {
    function totalSupply() external view returns (uint256);
    function balanceOf(address account) external view returns (uint256);
    function transfer(address to, uint256 amount) external returns (bool);
    function allowance(address owner, address spender) external view returns (uint256);
    function approve(address spender, uint256 amount) external returns (bool);
    function transferFrom(address from, address to, uint256 amount) external returns (bool);

    event Transfer(address indexed from, address indexed to, uint256 value);
    event Approval(address indexed owner, address indexed spender, uint256 value);
}

This is an interface, meaning it only defines functions without code.

All ERC-20 tokens must implement these functions and events exactly.

Examples

Returns the total number of tokens that exist.

Blockchain / Solidity

function totalSupply() external view returns (uint256);

Returns how many tokens a specific address owns.

Blockchain / Solidity

function balanceOf(address account) external view returns (uint256);

Sends tokens from the caller to another address.

Blockchain / Solidity

function transfer(address to, uint256 amount) external returns (bool);

Event emitted when tokens move from one address to another.

Blockchain / Solidity

event Transfer(address indexed from, address indexed to, uint256 value);

Sample Program

This is a simple ERC-20 token contract. It creates tokens, lets users send tokens, approve others to spend tokens, and transfer tokens on behalf of others.

Blockchain / Solidity

pragma solidity ^0.8.0;

contract SimpleToken {
    string public name = "SimpleToken";
    string public symbol = "SIM";
    uint8 public decimals = 18;
    uint256 public totalSupply;

    mapping(address => uint256) public balanceOf;
    mapping(address => mapping(address => uint256)) public allowance;

    event Transfer(address indexed from, address indexed to, uint256 value);
    event Approval(address indexed owner, address indexed spender, uint256 value);

    constructor(uint256 initialSupply) {
        totalSupply = initialSupply * 10 ** decimals;
        balanceOf[msg.sender] = totalSupply;
        emit Transfer(address(0), msg.sender, totalSupply);
    }

    function transfer(address to, uint256 amount) public returns (bool) {
        require(balanceOf[msg.sender] >= amount, "Not enough tokens");
        balanceOf[msg.sender] -= amount;
        balanceOf[to] += amount;
        emit Transfer(msg.sender, to, amount);
        return true;
    }

    function approve(address spender, uint256 amount) public returns (bool) {
        allowance[msg.sender][spender] = amount;
        emit Approval(msg.sender, spender, amount);
        return true;
    }

    function transferFrom(address from, address to, uint256 amount) public returns (bool) {
        require(balanceOf[from] >= amount, "Not enough tokens");
        require(allowance[from][msg.sender] >= amount, "Allowance too low");
        balanceOf[from] -= amount;
        balanceOf[to] += amount;
        allowance[from][msg.sender] -= amount;
        emit Transfer(from, to, amount);
        return true;
    }
}

Important Notes

ERC-20 tokens must emit Transfer events on token moves so wallets can track balances.

Decimals define how divisible the token is; 18 decimals means tokens can be split into very small parts.

Always check for enough balance and allowance before transferring tokens.

Summary

ERC-20 is a standard that makes tokens work the same way on Ethereum.

It defines functions to check balances, send tokens, and approve spending.

Following ERC-20 helps your token work with wallets, exchanges, and apps easily.

Practice

1. What is the main purpose of the ERC-20 standard in Ethereum?

easy

A. To ensure tokens have a common set of functions for compatibility

B. To create unique non-fungible tokens

C. To define the Ethereum network consensus rules

D. To manage smart contract deployment costs

Solution

1. Step 1: Understand ERC-20 purpose

   ERC-20 defines a common interface for fungible tokens to work uniformly.

2. Step 2: Identify the correct purpose

   This standard allows wallets and apps to interact with tokens easily by using the same functions.

3. Final Answer:

   To ensure tokens have a common set of functions for compatibility -> Option A

4. Quick Check:

   ERC-20 = Common token interface [OK]

Hint: ERC-20 standardizes token functions for easy use [OK]

Common Mistakes:

• Confusing ERC-20 with NFT standards
• Thinking ERC-20 controls Ethereum network rules
• Assuming ERC-20 manages deployment costs

2. Which of the following is the correct function signature to check a token balance in ERC-20?

easy

A. function balanceOf(address owner) external view returns (uint256);

B. function getBalance(address owner) public returns (uint256);

C. function balance(address owner) external returns (bool);

D. function checkBalance(address owner) public view returns (bool);

Solution

1. Step 1: Recall ERC-20 balance function

   The standard defines balanceOf as a view function returning a uint256 balance.

2. Step 2: Match function signature

   function balanceOf(address owner) external view returns (uint256); matches the exact signature: external view returns (uint256).

3. Final Answer:

   function balanceOf(address owner) external view returns (uint256); -> Option A

4. Quick Check:

   balanceOf = correct signature [OK]

Hint: balanceOf returns uint256 and is a view function [OK]

Common Mistakes:

• Using wrong function name like getBalance
• Missing view keyword for read-only function
• Returning bool instead of uint256

3. Given this Solidity snippet from an ERC-20 token contract:

function transfer(address to, uint256 amount) public returns (bool) {
    if (balances[msg.sender] < amount) {
        return false;
    }
    balances[msg.sender] -= amount;
    balances[to] += amount;
    emit Transfer(msg.sender, to, amount);
    return true;
}

What will transfer return if the sender has 50 tokens and tries to send 60 tokens?

medium

A. true

B. false

C. It will throw an error

D. It will return zero

Solution

1. Step 1: Check sender balance condition

   The function checks if sender's balance is less than amount; if yes, returns false.

2. Step 2: Apply given values

   Sender has 50 tokens but tries to send 60, so condition is true and function returns false.

3. Final Answer:

   false -> Option B

4. Quick Check:

   Insufficient balance returns false [OK]

Hint: Transfer returns false if balance is insufficient [OK]

Common Mistakes:

• Assuming it throws error instead of returning false
• Thinking it returns true regardless
• Confusing return value with event emission

4. Identify the error in this ERC-20 approve function snippet:

function approve(address spender, uint256 amount) public returns (bool) {
    allowances[msg.sender][spender] = amount;
    emit Approval(msg.sender, spender, amount);
    return true;
}

What is the common security issue with this implementation?

medium

A. It does not emit the Approval event

B. It does not check if spender is zero address

C. It allows race condition by directly setting allowance

D. It returns false instead of true

Solution

1. Step 1: Understand approve race condition

   Directly setting allowance can cause race conditions if spender uses old and new allowance simultaneously.

2. Step 2: Identify missing mitigation

   Safe implementations require resetting allowance to zero before changing it to new value to avoid this issue.

3. Final Answer:

   It allows race condition by directly setting allowance -> Option C

4. Quick Check:

   approve race condition = direct allowance set [OK]

Hint: Always reset allowance to zero before changing it [OK]

Common Mistakes:

• Thinking missing zero address check is main issue
• Assuming Approval event is missing
• Believing return value is incorrect

5. You want to create an ERC-20 token that charges a 1% fee on every transfer and sends it to a fee collector address. Which modification to the transfer function correctly implements this?

hard

A. Send full amount to recipient, then send 1% from sender to collector

B. Add 1% to amount, send full amount to recipient, send fee separately

C. Send full amount to recipient and fee collector equally

D. Deduct 1% from amount, send fee to collector, send rest to recipient

Solution

1. Step 1: Calculate fee and net transfer

   Calculate 1% fee from amount, subtract it to get net amount to recipient.

2. Step 2: Transfer fee and net amount correctly

   Send fee to fee collector address and net amount to recipient to implement fee deduction.

3. Final Answer:

   Deduct 1% from amount, send fee to collector, send rest to recipient -> Option D

4. Quick Check:

   Fee deducted and sent correctly = Deduct 1% from amount, send fee to collector, send rest to recipient [OK]

Hint: Subtract fee from amount before sending tokens [OK]

Common Mistakes:

• Adding fee on top of amount instead of deducting
• Sending full amount to recipient and fee separately from sender
• Splitting amount equally between recipient and fee collector