Ethereum wants to create an ecosystem where everything works together seamlessly as part of its vision for a ‘world computer‘ – and that includes the tokens required to power it.
Launched in 2014 by a band of coders and an upstart teenager, ethereum was designed to make it possible for anyone to code nearly any type of app and deploy that on a blockchain. Many of these decentralized apps (or ‘dapps’ for short) needed their own token that could, among other things, be sold and traded easily.
To that end, nearly 18 months ago, the ERC-20 token standard was born.
It’s hard to overstate how important that interface has been. By defining a common set of rules for ethereum-based tokens to adhere to, ERC-20 allows developers of wallets, exchanges and other smart contracts, to know in advance how any new token based on the standard will behave.
This way, they can design their apps to work with these tokens out of the box, without having to reinvent the wheel each time a new token system comes along.
As a result, almost all of the major tokens on the ethereum blockchain today, including those sold in the recent surge of ethereum-based initial coin offerings (ICOs), are ERC-20