ERC-20 is the technical rulebook that most tokens on the Ethereum network follow. Rather than describing one specific coin, it defines a shared interface, a set of functions and events a smart contract must implement, so that wallets, exchanges, and other applications can all interact with any compliant token the same way.

The standard, proposed by developer Fabian Vogelsteller in 2015 and formalized as EIP-20, requires six core functions: checking total supply, reading an account balance, transferring tokens directly, transferring on someone else's behalf, approving a third party to spend a set amount, and checking that remaining allowance. Two events, Transfer and Approval, log activity on-chain so balances can be tracked reliably. Most tokens also add optional metadata: a name, a ticker symbol, and a decimals value that determines how divisible the token is.

Because the interface is standardized, a single wallet or decentralized exchange can support thousands of ERC-20 tokens without custom integration work for each one. Every token has its own contract address, which is how software distinguishes one from another. The approve/transferFrom pattern, while widely used by decentralized finance protocols, has also been a recurring source of phishing risk, since users can unknowingly grant unlimited spending allowances to a malicious contract. Later standards, including permit-based approvals, were designed to reduce that risk.