ERC-20 standard – an awesome base for our own cryptocurrency

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by Dmitry Elisov
Oqtacore CTO
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Apart from doing some projects for our clients, we for example build ERC-20 cryptocurrency tokens for fun and do other projects.

One of such endeavors was building our crypto token. 

ERC20 token

Ethereum is a blockchain similar to Bitcoin, but also very different. On the Bitcoin network, people can only send simple transactions “N bitcoin from A to B”. On the Ethereum network, Vitalik Buterin introduced a very cool concept of smart contracts. Smart contracts are also transactions, but they can have some logic, for example, “only send N Ethereum from A to B if B has less than Z Ethereum”. This may be a smart contract of a parent fulfilling the child’s account if it has insufficient funds. The user can send a transaction at any moment, but it will execute only when the condition is satisfied. 

Smart contracts can have their storage of data. One example of such storage would be to store a number against every Ethereum user. Let’s say that it shows which users have how many of something. For example, let’s say that we have our own coin CryptoTrust. And inside the smart contract storage, we store who of users has how many of CryptoTrust coins.

Yes, it means that we have a cryptocurrency inside cryptocurrency! And we haven’t created a blockchain, we just use Ethereum. The best thing is that transactions on Ethereum are hundreds of times cheaper than on Bitcoin. So the operation of your token based on Ethereum is practically free. That’s why Ethereum is so popular – it allows the implementation of some practical ideas with ease. 

ERC-20 is a smart contract standard that earned billions of dollars

Many of the tokens that you know of are just tokens created with smart contracts. Their developers have not created anything apart from marketing materials and earned millions of dollars by selling freshly created coins. It is called an ICO (initial coin offering).

The smart contract movement quickly gained strength and users started implementing smart contract standards. There are many hundreds of standards now, but some of them are very popular among developers.

One of such smart contract standards is ERC-20. It is a completely written code where you just fit in the name of your token and the number of digits after the decimal point. Everything else is ready and failure-proof as it was tested by millions of transactions worldwide. The code of the ERC-20 standard is open-source and is conveniently published on github.

Nowadays, there are more than 200,000 ERC-20-compatible tokens exist on Ethereum’s main network. Yes, that many! 

We have to admit that using the ERC-20 standard is not only laziness. It is also a convenient way for crypto exchanges and other platforms to work hundreds of tokens. What otherwise would require connecting to each blockchain separately, can be done easily for all the tokens at once. Every ERC-20 compliant token gets easy access to the trading markets and brings money to its creators.

ERC-20 smart contract diagram

Building our own smart contract

We wanted to build a token that could represent some real-world’s currency. For that, it needed to have two digits after dot (usual Ethereum tokens can have up to 19 digits after dot!).

Using the ERC20 token is relatively easy. We have to define some sets of rules by which the token will go from one person to another. In our case, we wanted to set the limited possibility to divide our token and to have it look like a real Russian rouble. 

We are experienced software engineers and easily created our token based on the technology described above. We had to read the documentation for the ERC-20 standard, create our development environment on Ethereum and implement the smart-contract.

Next step in having your crypto token

If you want to have your crypto token, there is a high chance that you want to sell it on exchanges. This is where the most trouble starts – you need to have an ICO that can only be correctly led by expensive groups of law experts. An ICO can cost up to $500,000 but will result in your token appearing on such exchanges like Bitfinex and Kraken. 

Another issue that you will have is registering a company in a crypto-friendly country. The best choice are Switzerland, Czech Republic and Estonia – they have very innovative laws and make it easy to have a crypto-related business.

 

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