How good are the tokens of the standard ERC-20

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ERC-20 is the first and most common standard for tokens working on the Ethereum blockchain, which was introduced in 2015.

The standard ERC-20 code provides 6 functions:

-totalSupply determines the total number of tokens;

-balance0f shows the account balance specified by the address_owner parameter, where _owner is the address;

-transfer implements the transfer of tokens from the primary address to the address of a specific user;

-transferFrom is used to transfer tokens from one user to another;

-approve checks if there are tokens on the smart contract and ensures that funds are written off from the account in an amount not exceeding the value determined by the function parameter.

-allowance verifies that there are enough tokens in the sender's wallet to transfer them to the recipient.

Also ERC-20 provides two types of events:

transfer - transfer of tokens between accounts;
approval - this event is activated when the approve function is successful.
From these functions and events you can see how ERC-20 tokens are transferred between addresses, and how their owners receive the necessary information. In addition, they ensure the efficiency of new tokens on the Ethereum platform.

After the appearance of this standard, the ICO market began to grow very quickly, as ERC-20 contains a list of rules that future tokens must comply with. This made life easier for developers, who previously had to create standards for tokens for compatibility with the blockchain, wallet, exchanger and DApps.

What happened next?

The ERC-20 standard was the first, and eventually it turned out that it was imperfect: back in 2017, there were reports of funds lost during a transaction, and in February 2018, the developer with the pseudonym Dexaran described an error affecting ERC-20 tokens, and warned users of Github about it.

According to him, the main problem was related to smart contracts. The fact is that the transaction is considered completed when a successful transfer of funds. If an error occurs, the transfer must be rejected, and in the case of ERC-20 tokens and a smart contract that does not support this standard, the system does not reject or accept the transaction, and as a result, the tokens are frozen or lost.

This happens in two situations.

Using the transfer function to send tokens to a specific address
Depositing a smart contract, for which you need to use a combination of the approve and transferFrom functions.
Using the approve function, the user gives the smart contract permission to withdraw funds, which is done using the transferFrom function.

In cases where a user makes a deposit on a smart contract using the transfer function, the transaction will be considered successful and the network will accept it normally, but the smart contract itself will not recognize it - and because of this error, the Ethereum ecosystem has already lost millions of dollars.

Domino effect
Users of the Ethereum platform have had to deal with security problems before, remember at least the infamous hacking of the DAO project in 2016. To eliminate its consequences and return the funds to the network, hard forks were held, and the new blockchain continued to work under the name Ethereum, and the network members who did not agree with this decision retained the old blockchain called Ethereum Classic.

In April 2018, some cryptographic exchanges (for example, OKEx) suspended the placement and withdrawal of ERC-20 tokens due to a batchOverflow error. OKEx representatives wrote about this:

“Malicious attackers can create a huge number of tokens and place them at regular addresses in order to further manipulate the market.”
After OKEx, Poloniex Exchange made a similar decision relating to all ERC-20 standard tokens, and at HitBTC they initiated an internal audit, during which part of the deposited funds was blocked.

What will happen next?
ERC-20 tokens are effective and convenient, but there are errors in their code that can lead to loss of funds. The ERC-20 protocol is not always suitable for the purposes of the creators of a particular token, and, of course, no one guarantees that the created token will be useful, valuable or functional.

In addition, one of the drawbacks of the ERC-20 standard is the very simple creation of tokens, which facilitates the holding of ICOs and leads to the abundance of similar tokens, and therefore, makes life much harder for investors.

But despite all the fears and warnings, the number of ICOs using ERC-20 is still growing. Which of these can be concluded? What is more important for startups to attract money than to ensure the safety of their assets.