ERC-20 Tokens: Transfers, Allowances and Risks
ERC-20 is an Ethereum interface for fungible tokens, including balance, transfer and allowance functions. Compliance describes an interface, not a guarantee about an issuer’s assets, governance or token value.
How it works
A direct transfer moves tokens controlled by the caller. approve grants an allowance to a spender, and transferFrom can use an available allowance under the token’s implementation. Names, symbols and decimals are metadata conventions; the contract address and chain identify the token. Extensions and unusual implementations require separate review.
Worked example
Alice has 100 tokens and approves a spender for 20. If that spender validly transfers 7 from Alice under ordinary allowance behavior, balance becomes 93 and remaining allowance 13. This differs from sending 20 immediately. Revoking the remaining permission does not reverse the 7 already transferred.
Amounts, prices and scenarios are fictional teaching examples. They exclude any effects not explicitly stated and are not trade recommendations.
Limits and common mistakes
Unlimited approvals increase exposure to malicious or compromised spenders. Nonstandard return values, transfer fees, privileged minting, freezes and upgradeable logic can change expected behavior. Review the actual verified implementation, not only a copied ticker.
Knowledge check
Does approving 20 tokens necessarily transfer 20 tokens immediately?
Read the explanation
No. It typically establishes permission for later spending. Understand the spender and allowance as well as the immediate transaction result.
References and further reading
- ERC-20 token interface specification
- Ethereum developer documentation: accounts, transactions and gas
- Ethereum improvement specifications
These sources explain the underlying concepts and specifications. They do not endorse QBMFX Academy. Check the relevant market, protocol version and reporting rules before applying an example.