As mentioned before, ICOs are made up of a "token," which represents a portion of the investment that has been made to a project that is starting, but there is a term you'll constantly find while talking about this matter: ER20 Token.

What is an ER20 Token?

Well, to understand this, it is necessary to know several things, the tokens ERC20 are part of Ethereum's network, a decentralized platform where smart contracts are executed, although it is not a digital currency, people who buy and sell them, obtain benefits from them.

On the other hand, a token is defined as an object that serves as a representation of something else. In the blockchain, a token gives meaning to a financial value or a digital asset, which in comparison would be like a casino chip, which can have values ​​of 10, 100, 1000, etc.

Taking into consideration the above, the ERC20 tokens are those that are under a standard and 99% of the tokens of Ethereum ICOs implement this standard. Other tokens are the ERC223 and the ERC721, which create solutions to the problem that the ERC20 has.

Example of this is, if someone wants to send 4ETH by means of an ERC20 token to a contract that's not compatible with ERC20, the 4 ETH (about $ 3,000), will be lost in limbo because the transaction would not be rejected.

To solve this problem the ERC223 standard enters the game, which allows the transaction to be rejected and thus you do not lose your ethers. There are several projects that have the backing of this standard, such as TriForce Tokens, which allows the user who is interested in investing in the currency to be sure that in case of sending a considerable amount of ether, they can have certainty that will not be lost.

Why do most ICOs use ERC20? The answer is very simple, is just the way in which you can structure and register the token, which is easier.