(We made a page about this: https://balance.io/erc20-tokens)
The most popular form of “token” is the ERC-20 token. This is a standard of token that lives on the Ethereum blockchain. The term ERC-20 stands for an Ethereum Request for Comment number 20, which effectively means it was the 20th major improvement proposed by one of the Ethereum contributors.
How are they created?
Every day, thousands of ERC-20 tokens are created on the Ethereum network by developers around the world. They are built with code which is then published on Ethereum. The code conforms to the ERC-20 standard which defines things like the number of tokens, ticker symbol, and how to transfer them from one wallet to another.
What are tokens used for?
Tokens can represent anything: from a part of a new protocol to a share in a company. Today, lots of tokens are being created in Initial Coin Offerings (ICOs) where you are investing into a new project in the crypto-currency space. Each of these projects has a different reason for launching a token. The vast majority of them are useless. Some of them have the potential to be incredibly valuable.
How can I tell if it is ERC-20?
Although lots of tokens live on the Ethereum blockchain, many do not. Some tokens exist on other blockchain platforms like Neo, Omni, Nxt and Waves. There are many coins that exist on their own chain. For example, Bitcoin, Litecoin, Zcash, Stellar, DCred andTezos are all coins that are totally separate. A quick way to find out if a token is running on Ethereum is to check CoinMarketCap.com/tokens and see the platform section.