Ethereum Virtual Machine (EVM) chains have become a cornerstone in the world of blockchain technology. One of the frequently asked questions about EVM chains is the number of decimals used for their native tokens. Let's delve deep into this topic and provide a comprehensive understanding.
What are EVM Chains?
Ethereum Virtual Machine (EVM) chains are a set of blockchains that run on the Ethereum protocol. They utilize the Ethereum's smart contract functionality, allowing developers to create decentralized applications (DApps) that can run on multiple chains. This interoperability has made EVM chains highly popular in the decentralized finance (DeFi) and broader blockchain ecosystem.
Decimals in EVM Chains
The Standard: 18 Decimals
The default number of decimal places used in an ERC20 token is 18. This standard was established because Ether, the native token of the Ethereum blockchain, has 18 decimal places. The ERC20 token standard was designed to be compatible with Ether, ensuring seamless transactions and integrations.
Flexibility in Decimals
While 18 decimals is the standard, it's essential to note that token creators have the flexibility to choose a different number of decimals. This can be achieved by invoking the _setupDecimals function during the token's creation. For instance, Tether (USDT), a popular stablecoin, has an implementation with only 6 decimals.
Native Tokens vs. ERC20 Tokens
It's crucial to differentiate between native tokens and ERC20 tokens. Native tokens, like ETH in the Ethereum chain, serve as the primary currency for transactions and gas fees. On the other hand, ERC20 tokens are assets created on the Ethereum platform, adhering to a specific set of standards.
Why the Emphasis on Decimals?
Decimals play a pivotal role in token transactions. They determine the smallest unit of the token that can be transferred. With 18 decimals, it allows for precise transactions, especially when dealing with micro-transactions or complex financial operations in the DeFi space.
FAQs
Q: Why do most EVM chains use 18 decimals for their tokens?
A: The 18 decimal standard was established because Ether, Ethereum's native token, uses 18 decimals. The ERC20 token standard was designed to be compatible with Ether.
Q: Can token creators choose a different number of decimals?
A: Yes, token creators can opt for a different number of decimals by invoking the _setupDecimals function during the token's creation.
Q: What's the difference between native tokens and ERC20 tokens?
A: Native tokens are the primary currency for transactions on their respective chains, while ERC20 tokens are assets created on the Ethereum platform, adhering to a specific set of standards.
Q: Why are decimals important in tokens?
A: Decimals determine the smallest unit of the token that can be transferred, allowing for precise transactions.
