The role of the ERC-20 token standard in a financial revolution: the case of Initial Coin Offerings

The year of 2017 saw a surge of interest in a curious new way to raise capital: the 'Initial Coin Offering' (ICO). In this style of crowdfunding, investors exchange a general-purpose cryptocurrency, such as Bitcoin (BTC) or Ethereum (ETH), for a branded and special-use blockchain token, which somehow underpins or represents the project that is being funded. Billions of dollars worth of capital has already been raised through these schemes, and these huge transfers have motivated diverse, and often skeptical, commentary. However, the technical standards which underpin these schemes have often passed unremarked, even though they were, arguably, the catalyst for the huge growth witnessed in this sector. The present work will elucidate how an informal standard for smart contracts on the Ethereum blockchain, labelled ERC-20, has enabled the wide proliferation of special purpose fundraising tokens. Crucially, the ERC-20 standard allows frictionless interoperability, so that any compliant Ethereum wallet software can transact and monitor the full range of compliant tokens. In this way, the short and rather dry ERC-20 document allows any Ethereum wallet to control a diverse portfolio of token investments, and it is precisely this interoperability that has permitted the vast capital transfers of the ICO era. The present work will briefly survey the short history of this technology and will discuss some implications that this disruption presents for technical standardisation bodies.