ERC-20
In short: ERC-20 is the Ethereum token standard for fungible assets, meaning tokens where every unit is identical and interchangeable, in the same way that one…
ERC-20 is the Ethereum token standard for fungible assets, meaning tokens where every unit is identical and interchangeable, in the same way that one euro is worth the same as any other euro.
Why it matters
The standard defines a common set of functions that every compliant token contract provides, such as checking a balance, transferring tokens and allowing another address to spend tokens on the owner's behalf. Because all ERC-20 tokens behave the same way, wallets, exchanges and DeFi applications can support new ones without custom work. Two practical points follow: sending an ERC-20 token requires ETH to pay the gas fee, and many tokens also exist on other networks, so a deposit must be sent on the network the receiving service expects.
Example
A user sends a stablecoin from their wallet to an exchange deposit address. On the deposit page they choose the Ethereum (ERC-20) network, because the same stablecoin may also be offered on other networks, and a deposit sent on the wrong one may not arrive. The transfer is executed by the token's contract, and the gas fee is paid in ETH, not in the stablecoin itself.