What are an ERC20 Tokens? Create your own ERC20( Ethereum ) token
What are an ERC20 Tokens? Create your own ERC20( Ethereum ) token
An ERC20 token stands for Ethereum Request for Comments which is a blockchain-based asset with similar functionality to bitcoin, ether, and bitcoin cash: it can hold value and be sent and received.
ERC20 tokens exist on the Ethereum platform and that in itself consists out of a blockchain that is capable of storing transactions and a virtual machine that is capable of running smart contracts.
It’s important to understand that tokens live on the Ethereum blockchain. They benefit from its technology. They aren’t independent and rely on Ethereum’s blockchain and platform.
The native currency on the Ethereum network is Ether. But besides Ether, it can also support other tokens and these can work like currencies but they can also represent shares of a company, loyalty points, gold certificates and so on…
But we’re running ahead a bit. Let’s first look at how tokens come into existence.
A token can be created by a smart contract
. This contract is not only responsible for creating tokens but also for managing transactions of the token and keeping track of each tokens holder’s balance. To get some tokens you have to send some Ether to the smart contract, which will then give you a certain amount of tokens in return.
So when you want to create your own token, you write a smart contract that can create tokens, transfer them and keep track of people’s balances. That sounds pretty easy but it’s also quite risky. For starters, once a smart contract is deployed it cannot be changed anymore, so if you made an error you can’t fix it.
That could be quite catastrophic. Imagine a bug inside your contract’s code that causes people to lose their tokens ora bug that would allow others to steal tokens. And then there is the problem of interoperability.