What are ERC-20 Tokens?
|— ERC-20 tokens do not have their own blockchain: they reside on top of the Ethereum Blockchain.|
— ERC-20 tokens are stored on Ethereum addresses and sent using Ethereum transactions.
— To send ERC-20 tokens you will need to use Ethereum Gas.
— You can store your ERC-20 on your hardware wallet using the ETH application.
— You can manage your ERC-20 tokens directly in Ledger Live, in your ETH account. You can also use other compatible wallets such as MyEtherWallet or MyCrypto.
You’ve probably heard about ERC-20 tokens but what exactly are they?
ERC-20 tokens can represent a diverse range of digital assets. Like other crypto assets, they can have a value and be sent and received.
The difference between ERC-20 tokens and cryptocurrencies such as Bitcoin, Ethereum, Litecoin…is that ERC-20 tokens don’t have their own blockchain but reside on top of the Ethereum blockchain.
As of today, more than 200 000 ERC-20 tokens coexist on the Ethereum blockchain and because they live on this blockchain, they benefit from its technology. They are stored on Ethereum addresses and sent using Ethereum transactions.
How is a token created?
As tokens live on another blockchain, their creation is a much easier process as you do not have to modify the codes from a particular protocol or create a blockchain from scratch.
To create a token on the Ethereum blockchain, one must write a contract.
The contract is actually a piece of code, stored on the Ethereum blockchain that will be executed when either someone or another contract requests it.
This contract is not only responsible for creating tokens, but also for handling its transactions and keeping track of the balance of each token’s holders.
As the Ethereum blockchain is public, it is possible to review the code of the contract and understand how it will behave.
The ERC-20 standard
Anyone can write a contract on the Ethereum blockchain. Therefore, it’s possible to create various types of tokens.
Following the launch of Ethereum, the immense rise of altcoins was fueled by the standardization of token contracts — the first standard to emerge was the ERC-20.
The ERC-20 standard is simply a list of functions and events that each contract must implement to respect the standard.
For instance, these functions allow someone to determine the balance of one token holder or allow transfer of the token from one address to another.
The name, ticker, supply, and behavior of the contract can be completely different from one another, but as long as they implement the basic ERC-20 functions, they are all ERC-20 compliant. Failing to meet these requirements means it cannot be considered an ERC-20 token.
Fortunately, the standardization of ERC-20 has enabled different tokens operating on the Ethereum network to be compatible with a multitude of storage solutions, including Ledger hardware wallets.
How to identify a token ?
Sometimes tokens may use the same ticker but different smart contract address.
That’s the case with HOT for instance.
HOT ticker is used both for HoloToken and for HydroProtocol token.
However, both tokens are using different smart contract addresses :
HoloToken : 0x6c6ee5e31d828de241282b9606c8e98ea48526e2
HydroProtocol : 0x9af839687f6c94542ac5ece2e317daae355493a1
In case of doubt, always check the smart contract address of your token. This information allows for a unique identification of the token.
How to receive ERC-20 tokens?
To receive an ERC-20 token, you simply have to send it to your Ethereum address. Because ERC-20 tokens only exist on the Ethereum blockchain, you can safely use any Ethereum address provided by your Ledger Hardware wallet. As a consequence, ERC20 are always stored in an Ethereum account.
How to send ERC-20 tokens?
When you send an ERC-20 token, in fact you are informing the token contract that a transfer operation is required.
To be executed, a contract on the Ethereum blockchain will require a fraction of Ether, called Gas. That’s the reason why sending an ERC-20 token will also consume a small bit of Ether from the account they are stored in. As a consequence, you cannot send ERC-20 if your Ethereum balance is too low or empty.
Can I store my ERC-20 on my Ledger hardware wallet ?
The Ledger Nano S, Nano X and Blue hardware wallets are all compatible with the ERC-20 standard. As the ERC-20 tokens are actually running on the Ethereum blockchain, there is no specific application for a token. Instead you can simply use the Ethereum application. Ledger hardware wallets support today more than 1250 ERC-20 tokens.
How to manage my ERC-20 tokens with my hardware wallet ?
Ledger is excited to support ERC-20 tokens directly on Ledger Live, allowing you to easily manage your assets from a single application. To do so, you first need to create an Ethereum account in Ledger Live and receive your tokens on this account. Full instructions here.
Ledger hardware wallets are also compatible with various services using the Ethereum blockchain, such as MyEtherWallet or MyCrypto.
Is my ERC-20 supported on Ledger Live ?
All ERC-20 compliant tokens can be stored on Ledger hardware wallets thanks to the Ethereum application. However, Ledger Live only supports for now the most commonly used 1250 ERC-20 tokens. This number will be in constant evolution. To find out if your token is supported on Ledger Live, kindly check this link.
Keep learning! If you enjoy getting to grips with crypto and blockchain, check out our School of Block video Ethereum Layer 2.