What is the ERC20 algorithm?
ERC stands for Ethereum Request for Comment, and 20 is the number that was assigned to this request. The clear majority of tokens issued on the Ethereum blockchain are ERC-20 compliant.
The difference between these tokens and other currencies (e.g. Litecoin) is that the ERC20 token is mounted on the Ethereum network. It uses the Ethereum address and can be sent via Ethereum transactions.
Tokens that meet these necessary requirements will be considered as 'ERC20 Tokens'. These tokens are valuable assets on blockchain, which can be sent and received just like Bitcoin, Litecoin, Ethereum and other cryptocurrencies.
ERC20 Token Standard is a set of 6 functions
The ERC20 Token Standard is a set of 6 functions and 2 events that need to be included (in a specific agreed upon language and format) in a smart token contract in order to enable interoperability across multiple interfaces and distributed applications (DApps). The 6 functions relate to how tokens can be transferred (either by its owner or on behalf of its owner) and how to access data about the token (name, symbol, total supply, and account balance). The 2 events are transfers and approvals, and how they need to be formatted.
ERC-20 is still in draft form, which means it was not supported by the Ethereum community. However, most of the new coins are now based on the ERC20 platform. As the standard is still low, there may be some problems. Addressing these issues creates a long-term development momentum. One problem with Ethereum tokens is that the tokens are sent directly to a smart contract that will cost you money.