15 Minutes Guide to Creating an ERC20 Token Based on Ethereum

ERC-20 Token. Brief Review

Ethereum ERC-20 tokens are coins of third-party projects that work on the Ethereum blockchain. They are based on the ether network, use its power to conduct transactions, support its addresses and wallets, but at the same time have their own tickers, issue, rate and value.

For example, although EOS is an ERC20 token, it boasts a capitalization of $ 11.5 billion, which is more than the absolute majority of independent cryptocurrencies that are mined by mining.

Most often, ERC-20 tokens are issued during the ICO in order to attract funding from investors (the token generation process is called TGE, from Token Generation Event). Projects issue a certain number of coins and sell them to everyone for bitcoins or ethers. It turns out something like startup shares or certificates confirming ownership of the asset. In addition, tokens can also act as an internal currency within the application system, individual stake coins, bonuses in the loyalty program, etc.

It should be understood that although ERC-20 tokens work on the ether blockchain, this does not mean that they will necessarily go on the stock exchange and increase in price by thousands of percent. Yes, of course, there are very promising projects with great potential and a great team that have a great future and can shoot. But there are also absolute shitcoins that are created to collect millions from investors and disappear into the night. Therefore, you need to be careful.

The Technical Side of the ERC20 Token Issue

In fact, ERC-20 tokens are smart contracts on the Ethereum blockchain that comply with a single unified standard and work within the framework of the Ethereum team. Accordingly, ERC-20 is a single standard that includes a set of basic rules for the contract and ensures its compatibility with the network. ERC stands for “Ethereum Request for Comments”, and 20 is the offer number.

The unified standard ERC-20 was first formulated in 2015. Before its existence, all smart contracts were quite heterogeneous, which could cause compatibility problems between them, and wallets would have to significantly add code for each specific token. In total, the set of rules includes 6 mandatory parameters and 3 more recommended ones:

Two functions related to the issue of ERC20 tokens — totalSupply (the total number of coins and the inability to create new ones when their maximum number is reached) + balanceOf (the initial number of coins that belong to the creators);

Two functions for making transactions between users — transfer + transferFrom;

Two functions for transaction verification — approve and allow.

Despite the fact that all smart contracts correspond to the same protocol, they assume different functionality, and of course, they have completely different vulnerabilities. Only the laziest ones have not heard about leaks in ether contracts. Even one story with a DAO contract or a Parity wallet is worth considering. From a more recent past, you might note the recently found batchOverflow and ProxyOverFlow bugs. Several exchanges even suspended accepting deposits and withdrawing ERC-20 tokens due to the fact that hackers can generate huge amounts of coins, transfer them to regular addresses and manipulate prices.

Examples and Practical Use of ERC-20 Token

There are a great many ERC-20 tokens — today, there are almost 85,000 of them. The most successful are the well-known EOS. Its market capitalization exceeds 11.5 billion dollars (fifth place among all cryptocurrencies). But the most expensive coin is IDXM from the Aurora team, the creators of the first decentralized IDEX exchange, which costs almost 4,300 dollars.

When you participate in airdrops and bounties, you are most often asked for an Ethereum address and then credited to your wallet with nothing more than ERC-20 tokens. In the future, these coins can go on the stock exchange, and their rate will increase by hundreds and thousands of percent. That’s how it was possible to earn 500–4000 REBL on the Rebellious airdrop, which reached up to $ 1,440 at the price peaks.

Many players creating ARC20 tokens do not know it, but in the Crypto Kitties game, each cat is also a unique ERC20 token. Accordingly, since all cats have a unique 32-bit code, there are more than 4 billion possible phenotypes and genotypes in the application, which means that the total issue is 4 billion coins.

And when you join the Rubus Crypto Fund investment fund and send ethers to the address of the smart contract, then RTO tokens for a similar amount in dollars are dropped into your wallet. Their rate directly depends on the total value of all available assets and the current portfolio of the fund.

Legal Aspects of Token Creation and Usage

From the legal point of view, the situation with tokens is even vaguer than cryptocurrencies’. Regulation of this area in various countries either does not exist at all or is inclined towards “ban”. This situation is uncertain due to various factors, which include:

A large amount of ERC20 token related fraud. Since the essence of the token became most widespread in connection with the ICO, many of which were “scams”, this left a negative imprint on the concept.

The “youth” of the cryptocurrency world. Blockchain technology has made serious innovations in the world of financial technologies. First of all, this is the complexity of regulating this sphere in connection with the use of decentralization technologies, fake anonymity. Secondly, it is a new field of the global economy.

For now, the legislation does not regulate the work with tokens in any way, and it does not contain this concept at all. However, work is actively underway in this direction, and now the bill “On digital financial assets” is being considered. To date, it can be argued that the issue of a token by anyone in the legal field is not illegal, but at the same time, its use in areas regulated by law is also impossible since this concept is outside the legal plane. You simply will not be able to put tokens on the balance of the organization or conduct any banking operation related to them. On the other hand, they can be used for tasks such as the implementation of bonus programs, points, various customer loyalty systems and, in general, as an innovation that distinguishes your business from others and allows you to work on a global infrastructure scale.

As in many other areas of human activity, there are various tools that can be used both for good purposes and for harm. An ERC20 token is just a tool. And the goals of its creation and use, as well as its liquidity, compliance with legislation and others, are on the shoulders of the token issuer. In addition, the issue of trust in the issuer is a question from a completely different, non-technological area.

Making an ARC20 Token

Creating an ARC20 token and conducting an ICO is definitely not a rocket science task.

Preparing for the ICO, you should understand that the ICO is a pure marketing event. If you think that you will need a staff of programmers to conduct it, it’s a serious mistake. You’ll need marketing staff, as well as a normal amount of currency, to attract public attention. Yes, there are ICOs that happened without serious investments (due to their idea/experience/connections), but let’s not flatter ourselves with hopes and deceit — to collect a million dollars, you will have to invest thousands of dollars in ICO.

There are many ways to create your token. The simplest and the most popular are:

• Go to Waves/Cryptonotestarter (or analogues) and release your coin in 1 minute right in the interface.
• Solidity/Pyethereum (Ethereum-based token). Using the knowledge and/or the ERC20 smart coin writing standard (in fact, the source code of the coin with many blackjack variants) to sign a contract.To launch your token, you need to take the source code of the ERC20 token, change a couple of lines and upload the contract to the network by one of the clients (of.client Ethereum / Metamask / etc).

What Is a Token Smart Contract?

This is a data structure (read the table) consisting of the connection of the Ethereum address = number of tokens (integer).

This is a set of functions that verify ownership of a certain number of ethereum based tokens, token transfer = debiting (subtraction operation) tokens from a user with a certain address and replenishment (addition operation) of another user’s “balance” inside the data structure, and other logic.

When a smart contract is accessed, you either read data from its data structure (for free, publicly available) or write them there (for a fee, on behalf of your wallet). Since the write operation will take place in the Ethereum blockchain network, you will need to pay miners for such a transaction. The more calculations inside your smart contract, the more you will need to pay.

To Issue an ERC20 Standard Token, You Need:

Step 1

• choose a name, for example, Best Coin
• choose a symbol, let’s make it BEC
• choose the number of ethereum based tokens, it is unchanged, for example, 10,000
• choose whether the tokens will be divided, if so, how many decimal places will be the maximum

If you trust the community, you can use the utilities — this or others. The problem with such services is that they do not provide source code, only byte code. Therefore, there is no confidence in their purity. But most often, such things are written by guys with a name, so you can still trust it.

Step 2

Deploy the Token

Enter this data into the smart contract available by the link. Download both .sol files. Go to the remix editor. Download both files.

Files are loaded with the Load(Open) button. Select both files.

Open NewToken.sol, put the necessary values in <brackets> instead of variables:

totalSupply — total number of tokens

name — the full name of the token

decimal — the number of zacks after the decimal point. The fact is that in contracts, everything is stored only in integers. Therefore, you should specify the number of characters if you want to be able to credit a non-integer number of tokens.

• Symbol — a symbol for exchanges
• Buy ads
• Unplug

It should turn out something like this:

Save it. It remains to upload the contract to the network. For example, install it in the Ropsten test net. Any client will be required for the deployment. Let’s use MetaMask — it does not know how to compile smart contracts on Solidity, so we will compile first.

In the right part of the remix editor, open the compile tab. By default, the contract is compiled automatically. By selecting your contract in select and clicking Details, you can view the bytecode and other information.

To deploy, click Run, select Injected Web3, select the Account that we will deploy (it should load automatically if you have MetaMask installed in the browser). Enter the necessary information in the fields (gas, value), click Create.

MetaMask picks up the action from the page.

Click Submit. Your contract is sealed. The dispatch is confirmed in MetaMask by an icon with a document (it leads to the transaction page) and the inscription “Contract published”.

A sealed smart contract is a token.

Step 3

Token Operations

Ethereum based token transactions require two wallets — the one that already has them (by default, the contract creator, the ERC20 standard) and the one that needs to transfer them.

Perform operations with our token (transfer it, for example). We can either on the etherscan contract page (link in MetaMask) or on the remix page.

Blue here — read operations, pink — write operations.

To transfer ERC-20 tokens, enter the recipient’s address and quantity. After that (and entering data into the blockchain, of course), you can check your balance or the balance of the recipient of the tokens with the operation balanceOf.

Done!

Where to Keep Your Tokens?

Hardware

Ledger Hardware Wallet

Ledger Nano S is a wallet that meets all modern security standards. To protect, purchase and manage more than 1,500 tokens from a smartphone or desktop, there is a Ledger Live application. Maximum security is provided by its own integrated OS.

Examples of supported tokens: USDT, LINK, BNB, LEO, MKR, USDC.

Ledger Nano S wallet is certified by ANSSI, the French cybersecurity agency. Built-in authentication regularly makes sure that the device has not been compromised by a third party. The certified chip provides protection against attacks of any complexity.

Ledger’s main competitor is the Trezor wallet. The main feature is reasonable checks of the firmware and bootloader, so no one will be able to embed unauthorized programs to steal keys into the wallet.

Hardware. What else?

• Coolwallet
• KeepKey
• ChronoMint

Online (Web)

MyEtherWallet is an open-source platform focused on keeping and managing ERC-20 tokens. Although work is done through the browser, all the keys are stored with the user, and a wallet is only a convenient tool for accessing funds.

Another convenient option is the MetaMask browser wallet — an extension for Google Chrome. Allows to perform & confirm transactions in a couple of clicks. It works with absolutely all tokens placed on the ether blockchain.

Other online wallets for ERC-20:

• MyCrypto
• Coin Wallet

Mobile

Enjin

Enjin is a mobile wallet for Ethereum tokens and not only. It has a well-thought-out security architecture that uses keyboard protection methods (Enjin Secure Keyboard), encryption and other measures. It is easy to use, helps to view and sort your tokens, and make transactions.

Examples of supported tokens: SNX, ENJ, OMG, BUSD, UMA.

Other mobile wallets for ERC-20:

• Trust Wallet
• Atomic
• imToken
• Infinito

Desktop

Atomic Wallet

Atomic Wallet is a decentralized multi-currency and multiplatform wallet. The wallet uses BitTorrent and atomic swap technologies for the free exchange of assets between chains. Atomic also supports instant exchange options based on Changelly and ShapeShift.

Prospects of ERC20 Token

The emergence of the ERC-20 standard accelerated the growth in the ICO space due to the unification of functions that simplify the development of tokens. The protocol has also strengthened the synergy between ICO startups, exchanges and wallet services. Most likely, in the future, the ERC-20 protocol will be expanded and supplemented with functions to combat the main problems and vulnerabilities of tokens.

Practical Use of ERC20

At first, tokens were used during the initial fundraising for the development of the company. They were a digital asset with fixed obligations. Tokens were purchased directly from developers and could not be sold or bought anywhere else. The Ethereum ICO took place in 2014 and raised more than $16 million. Ethereum has attracted the attention of representatives of many industries, as it can be used to optimize and digitize inefficient business processes in the future.

TERC-20 tokens belong to the cryptocurrency if they have their own blockchain and they can be traded on exchanges. Examples of ERC20 tokens that have created their own blockchain are Tron and EOS. Tron created its own blockchain because of its promise: blockchain games are becoming more popular every day. EOS is a competitor to Ethereum, mainly used for decentralized exchanges and gambling.

Tokens are now assets in the form of money and valuables that grant membership in the program or confirm ownership. They are traded on exchanges on a par with cryptocurrencies, used as points in loyalty programs, as well as certificates of ownership of assets.

Reliable ERC20 standard stablecoins trading on the main crypto exchanges operate on the cryptocurrency market.

Stablecoins are digital currencies with a fixed exchange rate: 1 unit of tokens is equal to 1 unit of the corresponding fiat, for example, the dollar.

Unlike conventional cryptocurrencies, stablecoins are not subject to exchange rate fluctuations. The issued stablecoins are confirmed by real money saved in the bank. The accounts of the issuing companies are audited every month.

Which Popular Tokens Use the ERC20 Standard?

A single standard, ease of creation and compatibility with platforms have led to the widespread distribution of ERC20 tokens. Below are some examples of popular tokens using the ERC20 protocol.

USDT Tether

A stablecoin was issued by Tether Limited in 2015. It is pegged to the US dollar. The value of USDT Tether is backed up by US dollars on the company’s accounts.

Other fiat currencies have their own stablecoins. For example, Binance GBP is backed by the British pound, and STASIS is backed by the euro.

The old system was based on the Omni protocol based on the Bitcoin blockchain. Due to high tariffs and long confirmation of transactions, the company decided to use the Ethereum blockchain.

WETH

ETH, or ether, is the base currency of Ethereum. Using the RELAY application, it can be changed to ERC20 tokens.

WETH is “wrapped ETH” or “Ether in a shell”. It was introduced because ETH appeared before the adoption of the ERC20 standard and did not comply with it. Decentralized platforms based on Ethereum exchange tokens between users based on smart contracts. In order for the exchange to be correct, the tokens must be of the same standard.

WETH is used to exchange ETH tokens for the corresponding ERC20 protocol.

Numerous network users, including large corporations with capital, are interested in the development of the base currency.

Among them:

• the Wrapped Ether system, which owns more than 2 million ETH worth $ 380 million;
• one of the leading cryptocurrency exchanges, Binance, $ 370 million;
• Bitfinex exchange, less than 2 million ETH.

LCS

LocalCoinSwap is a decentralized platform that provides users with the opportunity to directly purchase and sell cryptocurrency using any of the available payment methods. LCS allows you to find a buyer or seller of currency and make a transaction without involving websites and wallets. The platform uses a traditional deposit system, which stores cryptocurrency funds that are subject to exchange. When the payment is confirmed by the buyer and seller, the system sends coins to the buyer. The platform gives the right to receive dividends in a ratio of 1 to 1 at the end of the quarter.

Are There Any Decent ERC20 Tokens That Are Worth Investing in Both in the Long and Short Term?

You can take a closer look at these ERC-20:

WaltonChain (WTC)

Supply chain projects are good as they aim to fix solutions in the real world. VeChain is good, but they are no longer ERC20, so WTC is a good alternative. There is room for more than one in this market, and being Chinese, having RFID integration into a smart contract looks like a winning combination from an investment point of view.

Lendingblock (LND)

Lendingblock allows hedge funds, exchanges, asset managers, traders, miners and market makers to find liquidity, generate additional returns, facilitate arbitrage strategies, resolve short positions and fix the views of market participants. It’s a huge market, and LND has a tiny market cap. So if they hack it, it will cost a lot of money.

The 0x Protocol (ZRX)

The 0x protocol is a decentralized open-source exchange (DEX) that was developed specifically for ERC-20 tokens that will be traded on top of the Ethereum blockchain.

Holochain (HOT)

It is a project “beyond the blockchain”, which is infinitely faster and cheaper than Ethereum. One of the popular crypto projects of all time, and it will aim for markets like Amazon AWS with more speed and less cost. This could be the next internet, completely decentralized.

Howdoo (UDOO)

It is an opportunity to become the biggest gainer in our top 5. A social media network and content delivery platform that gives users control over their data rewards them for allowing ads and allows content creators to receive free tips, subscription channels, and a one-time payment for content. All advertising is in UDOO, so the usefulness of the token is huge. There is also a small market capitalization, and the exchange of fiat for cryptocurrency will be built into the application wallet, so users will not have to worry about cashing out and withdrawing funds using exchanges.

Why Should I Choose an ERC20-Enabled ICO?

The reason why it is worth supporting an ERC20-enabled ICO follows the features of this standard. Such a project will be guaranteed to be compatible with others using similar specifications. This will allow you to freely operate a new token within the Ethereum blockchain and simplify the listing procedure on exchanges.

A token without the support of the standard will be deprived of these advantages, which can create problems for its promotion and, as a result, ICO support will become unprofitable for the investor. In addition to previous, one ERC20 wallet can be used for any ICO using the standard in question.

We in ICODA are trying to make blockchain technologies more accessible to a wide range of users and remind potential issuers of criminal liability for fraud, as well as call on other participants in the process to be vigilant and attentive when performing transactions with tokens.