The universe of cryptomonedas and blockchain is so wide and wonderful that we never get tired of developing articles that allow us a greater understanding of the language that is used in it, knowledge is power ... they say there. Do you know what a Token with ERC20 protocol is?

Sure it's some relative of R2-D2 and C-3PO of the Star Wars saga!

That was sure what many of us thought at the beginning, however, afterwards, in the entire universe created by George Lucas, we discovered that it was something else.

The vast universe of the Blockchain and the almost unlimited capacity it has to develop new entrepreneurship and business schemes has generated a boom in terms of the production of increasingly original and innovative investment models.

These ventures require, like any other business, an initial investment to start operations, for this the entrepreneurs put into circulation the so-called ICO (Initial Coin Offering), to capture the financial resources they require to achieve their goal.

The ICOs are offered as new opportunities in the cryptocurrency market, the profit margin, between the initial purchase price and the value that the token acquires, of a project that ends up being a success, is a great incentive for these investments. Risk it is for this reason that ICOs achieved great popularity among investors, among them those based on the Ethereum ERC-20 protocol that makes them more solid and reliable.

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What is an ERC20 token?

In the world of cryptocurrencies, a token can represent a currency that serves as a means of payment or exchange on a certain platform. In this case, the token ERC20, rather than a currency, is a protocol for issuing currencies based on or supported by the platform. of Ethereum smart contracts, these tokens are built on top of the Blockchain of that platform.

But why do they call ERC20?

Its name means, Ethereum Request For Comments and the number 20 is established as a standard identification to differentiate it from the rest of the tokens.

The perfect example, to explain the meaning of this protocol, would be to compare it with the HTTP (Hypertext Transfer Protocol), which defines the syntax and semantics used by the software elements of the web architecture (clients, servers, proxies) to communicate, through HTML (HyperText Markup Language). Then the ERC20 becomes a set of rules or standards that allow different token systems to communicate in their own language.

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What is the difference between an ERC20 token and a cryptocurrency?

The fundamental difference between an ERC20 and another cryptocurrency such as Steem, bitcoin or ether, is that the ERC20 do not have their own blockchain as the rest of the cryptocurrencies, they already use the Ethereum, so any transaction that is made with that token will be made through the Ethereum platform, for which GAS must be invested as a tariff, Gas is the unit to measure the computational expense of the Ethereum network.

In spite of the above, the ERC20 token, being a cryptoactive like any other, can be commercialized just as other cryptocurrencies do and their transactions can be monitored through Blockchain of Ethereum.

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What is required to comply with the ERC20 protocol?

In order to comply with the ERC20 protocols and therefore be used as a means of payment, the new tokens generated through the Ethereum platform must comply with the following functions:

• Quantification of the total number of tokens issued or generated.
• Possibility of determining the total balance of the token generating account
• Possibility of exchange and transfer of the token
• Ability to use it as a means of payment or investment in another cryptoactive

Even not fulfilling all these characteristics and depending on their capabilities, some tokens can be compatible and interact with some functions of the ERC20 protocol.

Benefits of the ERC20 protocol

By establishing rules and standards in the issuance of cryptoactives, the ERC20 allows developers to create new technologies with a much lower margin of error, since they have clear conditions necessary for them to integrate and interact in the network, these benefits we can point out as follows:

• Uniformity in the use of technology and a standard protocol, making the work easier for developers
• Greater ease for understanding each type of tokens generated, since all will be based on the same principles of functionality
• Greater liquidity of the ERC20 tokens, since they are used in a large part of the ICO and as a basis for future projects.
• Reduction of risks to break contracts, having no impediments or incompatibilities between different tokens
• Ease in the processes of exchange of tokens between users, to the standard features, even being able to dispense with intermediaries in transactions

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Wallets compatible with ERC20 tokens

To support the use of ERC20 token and Blockchain Ethereum, in the issuance of ICOs, it is essential to have a compatible and secure portfolio to protect them, in the network there is a wide variety of options compatible with this protocol, with hardware being the option more optimal and safe, however we list below other free and recommended options available on the web:

• MyEtherWallet
• Ledger Nano S
• Trezor
• Metamask
• Mist

It is very important that we know the protocols that govern the creation of new cryptoactives, we do not know when the wind blows in our favor and we must be prepared, so that an innovative idea can generate our first emission of ICOs. As always, your opinion is very important on this interesting topic.

! Thank you for reading!