ERC-20 Explained: Breaking Down Key Functions and Their Roles

Exploring the Basics of ERC-20 Tokens

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Akanimo
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ERC-20 Explained: Breaking Down Key Functions and Their Roles

As beginner smart contract writers, encountering ERC-20 tokens is inevitable. It has become the backbone of most tokens on the Ethereum blockchain, enabling seamless interaction between smart contracts and decentralized applications.

This technical article is made to dive deep into the logic that makes up the erc-20 token, line by line.

Let's dive in

What is the ERC-20 Token?

The erc-20 token is built based on the EIP-20: The Ethereum Improvement Proposal (EIP) 20, which defines a standard interface for tokens on the Ethereum blockchain.

Analysis

// SPDX-License-Identifier: MIT
pragma solidity ^0.8.24;

interface IERC20 {
    function totalSupply() external view returns (uint256);
    function balanceOf(address account) external view returns (uint256);
    function transfer(address recipient, 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 sender, address recipient, uint256 amount)
        external
        returns (bool);
}

Core Functions

As with the interface syntax, for you to be able to create an Erc-20 token, your functions have to implement every method stated in the IERC20 .

function totalSupply() external view returns (uint256);

  • The first function totalSupply returns a uint256, which is the total supply of the token .

  • the visibility external ,which means it can be accessed only outside the contract , when it has been deployed.

  • The view modifier, which means it can only be read, and does not modify the state

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

The balanceOf function returns the account balance of another account with address

  • It takes in a parameter address account which is an ethereum address . The address is queried , and returns an integer which is the balance.

  • the visibility external, which means it can be accessed only outside the contract , when it has been deployed.

  • view modifier, which means it can only be read, and does not modify the state

transfer

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

The transfer function allows one wallet address to send an ERC20 token to another

it takes in two parameters the recipient address , and the uint256 amount.

It returns a boolean, to confirm true if successful and false if reverted.

transferFrom

function transferFrom(address sender, address recipient, uint256 amount)
        external
        returns (bool);

The transferFrom function takes in three parameters:

  • address sender: The _from address which you are sending from

  • address recipient: The _to address

  • uint256 amount: The value as an integer.

It returns a boolean to confirm true if successful and false if reverted.

Approve

function approve(address spender, uint256 amount) external returns (bool);

The approve function allows the owner of the account permit another wallet to spend their tokens for them.

It takes in 2 parameters

  • address spender : the address of the spender

  • uint256 amount: the value of the token

It returns a boolean value indicating whether the approval was successful true or not false.

Allowance

function allowance(address owner, address spender) external view 
    returns (uint256);

This function returns the remaining number of tokens that the spender is allowed to transfer from the owner account. It takes in 2 parameters:

  • address owner: where it runs checks to confirm the owner of the token

  • address spender:the ethereum address of the spender

It returns a value which is the amount the spender can still withdraw from the account.

Events

  • The transfer function emits an event event Transfer(address indexed from, address indexed to, uint256 value); when value tokens are moved from one account (from) to * another (to). It triggers even if it is a zero value.

  • The approve function emits an event event Approval(address indexed owner, address indexed spender, uint256 value); when the allowance of a spender for an owner is set by a call to {approve}. The value is the new allowance.
    It triggers only when the approve call is successful

Implementation

Examples of these implementation of the above is the Oppenzeppelin ERC-20 or the Consensys ERC-20

Conclusion

Mastering ERC-20 token functions is essential for navigating and innovating within the Ethereum ecosystem. Whether you're building or exploring, this knowledge will empower your journey in the blockchain space.

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