Four years ago today, Ethereum developer Fabian Vogelsteller proposed the twentieth improvement suggestion in the EIP repository. This improvement would result in the creation of a token type that would end up being the technical standard used for all smart contracts on the Ethereum blockchain and would play a massive part in the 2017 cryptocurrency bull run. On November 19, 2015, the ERC-20 token was conceived, and crypto would never be the same again.
The Crypto Dark Ages
The importance of the ERC-20 token in the cryptocurrency sphere cannot be overstated. Ethereum was the first platform to combine smart contracts with blockchain technology, but the first projects built on it had no common standard, making it extremely hard to issue a token or build successfully on it. Issuers developed blockchains and token standards to their own specifications, including functions for transferring tokens, making simple transactions complex affairs with lots of coding required. Mistakes were easily made and funds easily lost. Ethereum had potential, but it was still extremely hard to use.
Enter ERC-20. In one swift move, the Ethereum token and development ecosystem was standardized and streamlined, with the result that issuing and trading tokens became both easier and safer. Any ERC-20 token could now be received into a single Ethereum address, making token transfers simple and allowing easy purchase of other tokens with ETH. If they wanted to, investors could hold an unlimited amount of different ERC-20 tokens in the same wallet, while exchanges could also suddenly list a theoretically infinite amount of ERC-20 tokens in the same way. It was this combination of easy development, easy purchase, and easy storage of ERC-20 tokens that blew the Initial Coin Offering (ICO) market wide open.
ICO’s Take Ethereum to the Moon
2017 is seen as the ICO boom period with $6.2 billion raised for new projects over the course of the year, but it is easy to forget that 2016 saw $90 million raised for new projects despite the ERC-20 technology still being in its infancy. In the days before exchange giants such as Binance, decentralized Ethereum-based exchanges such as EtherDelta became a popular landing ground for new projects, while online wallets such as MyEtherWallet became hugely popular due to the ability to hold thousands of ERC-20 tokens in it with just one Ethereum address. ICO returns were making headlines, and with investing in them now easier than ever, it was no surprise that Ethereum led the way in the alt charge of 2016-17, rising from $1 on November 19, 2015 to $1,500 a little over two years later, almost entirely on the back of the ICO boom – people wanted to invest in ICOs, and to do that you needed to buy ETH.
A Repeat Unlikely
Two years on from these heady days and ERC-20 may not quite be the innovative powerhouse it once was, particularly with Initial Exchange Offerings (IEOs) taking much of the traffic away from self-run ICOs and other platforms offering superior speed and flexibility, but plenty of tokens still choose ERC-20 as their pre-mainnet ICO platform due to its solid history and fundamentals.
With other Ethereum token standards being developed, IEOs taking more of a market share, and plenty of competition that wasn’t there in 2017, Ethereum may never again experience what it experienced in 2016-17, but there will always be a place for it in the hearts of any ICO investors of the time. To those people, the words ‘gas war’ will never mean the same thing again.