Not all cryptocurrencies are created equal. Bitcoin has its own blockchain, but many other cryptocurrencies have to run as a second layer on other platforms.
ERC-20 tokens run on top of the Ethereum blockchain alongside its native currency – ‘Ether’ and can act similarly as either a currency or a representation of other tokens of value such as shares of a company, loyalty points or more.
These tokens all operate under an ERC-20 standard that ensures all tokens built on top of the Ethereum blockchain are able to interact with each other seamlessly. This feature is in place to ensure that accounts and wallets can send, receive and transfer a token the same way they would every other token.
The name ERC-20 can be broken into two parts – ERC – which stands for Ethereum Request for Comment and – 20 – which is simply a way of ordering the token among the many thousands that appear on exchanges every day.