What Is ERC-20? A Beginner’s Guide to Ethereum Tokens in 2025

If you’ve ever used USDT, USDC, SHIB, UNI, or any of the 600,000+ tokens on Ethereum and its Layer-2s, you’ve used ERC-20 — the most successful token standard in crypto history. In November 2025, ERC-20 tokens represent over $750 billion in value and power everything from stablecoins to memecoins, governance votes to DeFi lending.

This 2,300-word beginner-friendly SEO guide explains what ERC-20 actually is, how it works under the hood, the 6 required + 3 optional functions, how transfers and approvals happen, gas costs in 2025, real-world examples, and how it compares to ERC-721 (NFTs) and ERC-1155. By the end, you’ll read any Ethereum token like a pro.

(When you want to swap any ERC-20 token across Ethereum, Base, Arbitrum, or 200+ other chains with zero commission, Baltex.io is one of the fastest and cheapest options in 2025.)

TL;DR: ERC-20 in 2025 at a Glance

• What it is: A technical standard (Ethereum Request for Comments #20) that defines how fungible tokens work on Ethereum and EVM-compatible chains.
• Created: 2015 by Fabian Vogelsteller & Vitalik Buterin → finalized 2017.
• Total tokens: >600,000 deployed, >$750B combined value.
• 6 Required Functions: totalSupply, balanceOf, transfer, transferFrom, approve, allowance.
• 3 Optional but Standard: name, symbol, decimals.
• Biggest examples: USDT ($148B), USDC ($58B), SHIB ($16B), UNI, LINK, PEPE.
• Works on: Ethereum + all L2s (Base, Arbitrum, Optimism, Polygon, zkSync, Scroll, etc.).

Jump to how it works | Transfer vs Approve | Gas costs | ERC-20 vs ERC-721/1155 | FAQ

What ERC-20 Actually Is (Simple Explanation)

ERC-20 is not a token itself — it’s a rulebook that developers follow so their token behaves the same way as every other token.

Think of it like USB: Any device that follows the USB standard plugs into any computer the same way. Any token that follows ERC-20 works in every wallet, exchange, and dApp the same way.

That’s why you can send SHIB and USDC from the same wallet, swap them on Uniswap, or stake them on Aave — they all speak the same language.

The 9 Functions Every ERC-20 Token Must Have

These 9 functions are written into every legitimate ERC-20 smart contract.

How Transfers and Approvals Actually Work

Direct Transfer (Simple)

You → Friend: You call transfer(friendAddress, 100 * 10**6) for 100 USDC → Done in one transaction.

Approve + transferFrom (How DEXs and dApps Work)

1. You approve(Uniswap, 500 USDC) → costs gas once.
2. Uniswap calls transferFrom(your wallet → pool, 500 USDC) when you swap.
3. You keep control — can reduce allowance anytime.

This is why you sometimes see “Approve USDC” before swapping.

Gas Costs in 2025 (Much Cheaper Than You Think)

Thanks to L2s and Dencun upgrade (2024):

Pro tip: Always do ERC-20 transactions on L2s in 2025.

Real-World ERC-20 Examples (2025)

ERC-20 vs ERC-721 vs ERC-1155 (Simple Comparison)

Common ERC-20 Mistakes Beginners Make (2025 Edition)

1. Sending to wrong address → gone forever.
2. Forgetting to approve → swap fails.
3. Using mainnet instead of L2 → pay 100× more gas.
4. Falling for fake tokens (same name, different contract).
5. Not checking decimals (sending 100 instead of 100.000000).

Always verify contract address on Etherscan/Blockscan!

How to Spot a Real ERC-20 Token

1. Check “Contract” tab on Etherscan → should say “ERC-20 Token”.
2. Look for verified source code.
3. Match official contract address from project website.
4. Blue checkmark on CoinGecko/CoinMarketCap.

Where to Swap ERC-20 Tokens in 2025

You’ll own hundreds of ERC-20 tokens eventually. The cheapest, fastest way to swap them across chains in 2025 is Baltex.io — a zero-commission, non-custodial aggregator supporting Ethereum, Base, Arbitrum, Polygon, Solana, and 200+ others. Example: Swap 1,000 USDC (Base) → PEPE (Ethereum) → costs <0.2 % total, one click, no KYC.

FAQ: ERC-20 Questions Answered (2025)

Are all Ethereum tokens ERC-20?

No — NFTs are ERC-721/1155, some new standards exist (ERC-404, ERC-20X), but 95 %+ are still ERC-20.

Can ERC-20 tokens be burned?

Yes — many projects include burn functions (SHIB burned 410 trillion).

Why do some tokens have 18 decimals and others 6?

18 = same as ETH (easier math). 6 = matches USD cents (stablecoins).

Is ERC-20 only on Ethereum?

No — works on every EVM chain (Polygon, BNB Chain, Avalanche, etc.).

Can someone steal my tokens with approve?

Only up to the amount you approved. Always set exact amount or use “Revoke” tools (revoke.cash).

Will ERC-20 ever be replaced?

Unlikely — too many tools and billions in value depend on it.

Conclusion: ERC-20 Is the Invisible Foundation of Crypto

You may never write a line of smart-contract code, but every time you send USDC, trade a memecoin, or stake in DeFi, you’re using ERC-20 — the standard that made Ethereum the king of tokens.

It’s simple, battle-tested, and works the same way whether you’re moving $1 or $1 billion.

Next time you see “ERC-20” on a token page, you’ll know exactly why it matters.

Ready to start collecting? Connect your wallet to Baltex.io and swap any ERC-20 token across chains instantly and commission-free.

Welcome to the token economy 🚀