To understand why Ethereum can become the foundation of the Web3 ecosystem, we have to talk about ERC-20, a seemingly simple yet incredibly crucial technical standard.

**Early Chaos**

Before ERC-20 was introduced, how chaotic was the token ecosystem on Ethereum? Imagine all the appliances in your home, each with a different plug shape—one for the refrigerator, another for the TV, and yet another for the washing machine. That was a true reflection of that era.

Every newly issued token was like a "custom plug." Wallets wanting to support it had to develop a separate set of code. Exchanges needing to list the new token also had to write individual interfaces. The entire ecosystem had no possibility of scaling, and efficiency was extremely low.

**The Power of Standards**

The emergence of ERC-20 changed all that. This protocol is actually very simple—it stipulates that all tokens issued on Ethereum must implement certain "basic actions." Transfers, approvals, balance inquiries... these functions have a unified standard interface.

What does this mean? It means wallet developers can write one set of code to support all tokens adhering to the ERC-20 standard. Exchanges can connect to thousands of tokens in a unified way. The ecosystem thus gained unprecedented efficiency and scalability.

Thanks to this standard, the later DeFi ecosystem found fertile ground. Lending protocols, decentralized exchanges, liquidity mining... these now-common innovations are all built on the ERC-20 foundation.

**Advantages and Risks**

But ERC-20 also brought a problem that still troubles users today—the misuse of the approval mechanism.

ERC-20 stipulates that you can authorize a contract or address to transfer tokens on your behalf. This is a powerful feature that makes complex DeFi operations possible. But at the same time, it has become a hotbed for scams and theft incidents. Many users have had their wallets emptied due to careless approvals.

Authorization itself isn't the problem; the issue is that users often do not understand what approval means, or they are tricked into clicking malicious links. This is the contradiction between the original intent of the protocol design and its real-world application.

**What if There Were No ERC-20**

Imagine a world without this standard. Uniswap wouldn't exist—it needs to support thousands of tokens, which was impossible before standardization. Lending protocols are the same; they require unified interfaces to operate efficiently. Liquidity aggregation, cross-currency swaps, automated market makers... these core functions of modern DeFi would be impossible to realize.

Today, what we call "on-chain finance" is actually built on foundational standards like ERC-20. It is precisely countless seemingly minor standardization decisions that enable a decentralized blockchain network to form an efficient ecosystem.

**Final Thoughts**

ERC-20 didn't make anyone directly money, but it did something more important—it allowed all tokens to circulate in the same world, following the same rules. This is the true backbone of Ethereum, the invisible spine supporting the entire ecosystem's development.

Once you understand this, you can better grasp why Ethereum has become the leading smart contract platform, and why ecosystem standards are so critical to blockchain development.