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February 8, 2025
“Decentralized financing (DEFI) and cryptocurrency (Crypto) explained: a guide to the ERC-20 tokens”
In recent years, the world of finance has undergone a serious transformation, partly due to the development of decentralized technologies. One of the areas that has received enormous popularity is based on applications based on blockchain, especially the Cryptocurrency protocols and DEFI protocols. In this article, we immerse ourselves in the basics of cryptographic, gas, DEFI and ERC-20 tokens, providing an overview of their importance and cases of use.
What is cryptocurrency?
Cryptocurrency is a digital or virtual currency that uses cryptography for security and is not controlled by one government or financial institution. The most famous cryptocurrency is Bitcoin (BTC), but other popular options include Ethereum (ETH) and Litecoin (LTC). Each cryptocurrency has its unique properties, applications and benefits.
What is DEFI?
DEFI concerns decentralized finances. This applies to the financial services system that works in the field of blockchain technology and provides access to traditional banking services. DEFI protocols allow users to borrow, borrow, invest, invest and borrow commercial assets more efficiently and safely.
ERC-20 token
The ERC-20 standard is the standard of the Open Source token made by Ethereum Labs (Ethereum). This allows programmers to create and install their own blockchain applications at Ethereum Framework. ERC-20 tokens are used as a replacement medium, as a store store, and can be traded on various stock markets.
How does the ERC-20 work?
ERC-20 tokens are based on the top of the Ethereum network and operate on many key rules:
- Tokenomics : The full range of the ERC-20 token is 100 million.
- Intelligent agreement : ERC-20 requires intelligent agreements for managing, sending and trading tokens.
- Decentralized exchange (DEX) : ERC-20 tokens can be replaced with decentralized exchanges such as Uniswap or Sushiswap.
Gas
Gas is a measuring unit for the calculation of efforts to perform transactions in the blockchain network. Basically, measure the time and resources needed to confirm the transaction. Higher gas prices indicate more complex transactions, which may result in slower transaction processing time.
How does gas work?
Here is an example of gas operation in practice:
- Create a transaction : The user wants to transfer ERC-20 tokens from one wallet to another.
- Calculation of gas costs : blockchain network calculates gas costs based on transactions (such as the number of transactions, data size).
- Payment for gas fee
: The user pays a calculated gas fee for the network to confirm the transaction.
Application
Cryptocurrency, DEFI and ERC-20 tokens revolutionized the financial world, offering a safer, transparent and more efficient method of transactions. Understanding these concepts is necessary for those who are immersed in the world of applications based on blockchain. Because the DEFI ecosystem is constantly growing, it is crucial to be up to date with the latest achievements and technologies shaping this space.
more sources:
- Ethereum.org (Ethereum website)
- Coinmarketcap (Coin market data platform)
- Decentralized financial (DEFI) phypaper
- Documentation of the token ERC-20
Note: This article is a simplified explanation for complex topics. If you do not know blockchain and cryptocurrencies yet, it is necessary to learn exactly before immersing in these areas.