Ethereum is to blockchains as Bitcoin is to cryptocurrencies! While Ethereum does not have so much of claim to fame as the Bitcoin, it still can be considered a superhero in the crypto world.
The Ethereum blockchain allows you to create your own cryptocurrency or token. These tokens can be purchased using Ether, the native cryptocurrency of the Ethereum blockchain.the tokens and their behavior are defined by the standard which is commonly known as the ERC-20 standard. All the tokens that are created on the Ethereum blockchain need to be compliant with the ERC-20 standard. This compliance ensures that the transactions can happen without any hiccups.
How Does the Ethereum Blockchain work?
Just like Bitcoin blockchain, Ethereum is an immutable and transparent digital ledger. It keeps an account of the balances, the transactions and all the other records on the blockchain. However, the key difference between Ethereum and Bitcoin is that the former is a platform that allows you to create your own new token without creating a new blockchain. You can create your own Ethereum token with a smart contract and in compliance with the ERC-20 standard.
The Initial Steps
It is the smart contract that governs all the parameters of the new token that you create. The smart contract has to specify a lot of information, including but not limited to the name,the symbol and the number of tokens that can be purchased in a crowd sales which is very much similar to an ICO.
ERC-20 tokens can be transferred from one account to another and its means of payment very much similar to any other cryptocurrency. The tokens can also be bought and sold on a cryptocurrency exchange that has agreed to list these tokens.
Understanding Crowdsale or ICO
ERC-20 can be distributed in a variety of ways and the most popular among them is the ICO. Initial Coin Offering or ICO as it is commonly abbreviated is one of the ways to raise capital for any business with ERC-20 token that can be purchased by investors using the native currency of the Ethereum blockchain called Ether.
The company, after launching the ICO, gets its capital in the form of Ether or any other crypto/fiat currency.. An investor can connect the Ethereum blockchain with an account and fund their wallet with Ether that can be purchased using fiat currency for other cryptocurrencies. The smart contract governs the rules of how the crowdsale works. When an investor wants to purchase tokens, they can send coins from their wallet to the smart contract and this smart contract immediately dispenses the tokens that are worth the value of the Ether that was transferred. The specific set of ERC-20 tokens that were set aside from the crowd sale can be used for specific members like the founders of the company and the advisory board.
How Do ERC-20 Tokens Work?
The ERC-20 standard ensures that the wallet transfer, the transaction on cryptocurrency exchanges and the purchasing of tokens on the crowd sale do not face any issue with compliance. The specification commands the interface that the smart contract must respond to.
The ERC-20 standard of the smart contract ensures the following:
- The smart contract stores an admin account for the crowdsale address.
- It stored the number of tokens and the token price.
- It implements the functions to purchase tokens and end the token sale.
Blockchain App Factory Ethereum Token Development Services
Blockchain App Factory with its experience and expertise in multiple blockchains like Hyperledger, Stellar, and the Ethereum, helps you build your own tokens and even initiate the crowdsale through an ICO. Our team of Blockchain development experts will make sure that your tokens are compliant with the standard, both of ERC-20 and the regulatory requirements of your geography.