ERC20 Token Smart Contract and Economics: Ether Token Guide

The ERC20 Token

The Ether token smart contract platform is one of the most popular smart contract systems for current Initial Coin Offerings (ICOs). The most widely used smart contract is the ERC20 token.


This necessitates the creation of a token guide in order to comprehend what ERC20 is and the list of ERC20 tokens.


ERC20 tokens (ERC stands for Ethereum Request for Comments) were created by Vitalik Buterin, the founder of Ethereum, with the support of Fabian Vogelsteller, as a result of posting token technical specifications on the Ethereum network in 2015. It is now one of the most widely traded token standards!



The Ethereum platform was used to create ERC20 tokens. As a result, it's a lot easier to combine the tokens' design and functionality with other initiatives in the ecosystem. They can be used with a variety of tokens and have their own set of features. Furthermore, as an Ethereum-based token built on the foundation of smart contracts, ERC20 allows you to design custom token characteristics rather than creating a custom blockchain from the ground up.


On Etherscan.io, more than 8,631 ERC20 token contracts have been created as of today. Check out this platform, which is meant to teach you all you need to know about Ethereum's blockchain and ERC20 tokens. Own tokens should be created on one of three test nets: Ropsten, Kovan, or Rinkeby. Here's where you can learn more about a test and primary nets.


There are seven functions and two events in ERC20. These were identified as the bare minimum for normal operation inside the Ethereum ecosystem by developers. They oversee the token transfer process and have access to data about a token that users can examine. Tokens of various sorts will normally function in the same way in this fashion.


  • Compliance

The ERC20 standard allows for the creation of a token exchange system that improves token liquidity. As a result, the complexity of the token release procedure will be reduced when adding a new token to a platform. Also, regardless of amount, the system can facilitate trading between tokens A and B, A and C, A and Z, and Z and M.


The majority of ICOs are traded on marketplaces that do not value live communication.


  • Allowance

Two addresses can be created repeatedly and transferred unidirectionally using this technique. A token owner's wallet address and a wallet address are used in transactions as two independent wallets.


  • Approval

The Approve feature allows an owner's wallet to authenticate a transaction and mark it as his own. It can be implemented using only two parameters: the owner's address and the number of tokens to be transferred. It provides a precise answer as to whether or not it is confirmed.


  • Balance

This function takes an address (token owner) as an input parameter and returns a single public constant (unit balance). It specifies the total number of tokens contained in a given address. Keep an eye on the transactions because they are typically apparent.


  • Supply in total

The Total Supply function displays the smart contract's surroundings. It can usually be defined in two ways:


  1. a variable that is hardcoded

  2. transferring funds from the wallet of origin

  • Transfer

The Transfer feature is the most important since it ensures direct cash transfer based on the recipient's address and the number of tokens being sent. On receipt of the tokens, a report with the transfer return value is sent.


  • Transferring to

The wallet owner's address, the receiving wallet's address, and the number of tokens sent are used to implement this function. As a result, smart contracts carry out a transaction based on criteria provided by the wallet owner. Additionally, the wallet owner can send tokens to an address directly. The transaction's success or failure is indicated via the output function.


The Ethereum Virtual Machine, which is powered by the computational capacity of every Ethereum node, executes all functions. ERC20 tokens will now be able to participate in the automation of complicated business processes and jobs in cloud-like virtual machines. With hundreds of nodes acting as a distributed data centre, Ethereum is currently the second-largest blockchain. If you're launching a new blockchain and need computational power for nodes to connect to the network, Ethereum already has it and makes it available to ERC20 tokens.


Find out more about ERC20 tokens to gain a better understanding. Smart contracts are self-executing contracts that are used to exchange money, property, and shares. Discover a wealth of information on the benefits of smart contracts!


What Is Token Economics, and How Does It Work?

Token economics is a concept that defines tokenized ecosystems and encourages customers to make desired economic decisions and/or begin acting in ways that are appropriate for the new ecosystems. Customers' success is influenced by a variety of economic, psychological, social, cognitive, and emotional aspects. This is a critical component of every token's consensus. While technical consensus is based on mining rules and encryption, each token's economic component is unique (or nearly so). Economic consensus in Bitcoin, for example, is based on user agreement that Bitcoin has real value. It might be the value of flight miles, the data value hashed in the token, and so on for different tokens.


Tokens come in a variety of shapes and sizes.

To begin, everyone must understand the many types of tokens accessible in order to determine their worth and if they would be a good investment. Let's have a look at the most common types:


  • Asset tokens can be used to represent a real-world product or asset. Their popularity has risen in recent years. Investors, on the other side, do not want them because they depreciate the token. This is why clients should thoroughly examine things before forming an opinion.

  • Utility tokens are the most fundamental crypto tokens for network use. This covers things like intersystem currencies, access keys, and identification characteristics, among other things. Ethereum is worth highlighting because it is capable of writing and running smart contracts on the global blockchain.

  • Equity tokens, like stocks, deliver something to their owners. They can be more profitable if more people buy them.

Each sort of token is well-liked and practical. The success of a purchase, on the other hand, is determined by its kind, which must meet all relevant conditions. A token must be able to:


  • be appealing to customers, and be supplied with the necessary features to keep users for the long term

  • create a product that is both intriguing and promising

  • have the necessary growth potential:

  • Both the overall supply and the initial price cannot be too high.

  1. There can't be any more tokens minted

  2. the overall supply will expand as a result.

  3. create enough interest in the token to pique people's curiosity

  • Computational power has an incentive mechanism. You'll need someone to supply mining power or another form of value to the coin in addition to users, and this must be compensated.

The white paper explains how the token will function on the platform. All features must be planned ahead of time. Decide if it'll be transportable and if it'll have any other important qualities. All of this data aids in the creation of token specifications for smart contracts. To show your ICO in the best possible light, contact us for a professionally written smart contract and/or white paper. Then, on the smart-contract side, it will be implemented.


Tokens are typically used to collect funds for a project. This can be accomplished in a variety of ways. For example, during an ICO campaign, Cryptoauxiliary collected tokens and used them to create electric vehicles. The tokens were then sold at a discount to investors who already owned them. The token can also be exchanged for cash.


As a result, a token must be appealing to attract users. To get their interest, a coin needs to have a strong vision and a distinctive project concept. Within its specialised ecosystem or business, it must propagate a driving mission to alter the world.


Of all, the world's most significant breakthroughs are the result of people who live like modern Moses: truly enthusiastic communicators who not only do their jobs well while making a significant impact, but also live up to their own high standards and play a vital role in any endeavour. People will pay close attention to someone like them and remember, follow, and trust them. They have the potential to change the lives of tens of thousands of people.


Vitalik Buterin, co-founder of Ethereum, is one of these individuals. Take a look at this video to learn more about the Ethereum system. It's really simple to comprehend.


The History of Coins

Bitcoin is a pricey cryptocurrency that is difficult to obtain and transfer. It is also limited and finite, making it an investment for the long run. The technological consensus technique known as Proof of Work is primarily responsible for Bitcoin's restrictions.


In a blockchain network, Proof-of-Work (PoW) is an innovative technical consensus algorithm. It's used to verify transactions, create new blocks for the chain, and keep it safe from hackers. PoW miners are rewarded for solving mathematical problems – not for the results, but for the value provided by the mining process. The key concept is to verify that the miner is a real machine that contributes to the network's processing power. Block mining rewards and transaction fees for transaction processing and packaging in a new block are examples of mining incentives. However, because thousands of miners are working on the same assignment at the same time, this procedure is time and energy intensive, and the reward will only be given to the first person to complete the task.


Did you know that on January 22, 2018, Ethereum introduced the Proof of Stake Consensus Protocol? Take a look at the outstanding description of this amazing event!


Proof-of-Stake, or PoS, in general does not reward the miner because he is picked based on his wealth (stake). Miners collect transaction fees as a result of this. It is also the responsibility of nodes who verify blocks with their stake. If a node validates a block that contains a fraudulent transaction, the person's whole stake is forfeited, but the node that discovered the scam is rewarded. As a result, nodes are eager to compete with one another. It's like an accountant who signs transactions, but if he cheats, his own house will be burned down, as Vitalik Buterin describes it.


Compare the advantages of the PoS system to those of the PoW system.

Tokens are more than just a means of exchange. They also serve as a monetary unit in other situations. Tokens include properties that are comparable to Bitcoin, but they are designed for usage in a wider range of applications.


Tokens will be faster and more valuable for platform users thanks to PoS ERC20. The token economy will be altered as well, as there will be no need to include more nodes. The volume of each transaction, not the structure, will be the primary engine of system expansion.


Game Theory

The difficult mathematics of game theory is used to obtain network user consensus. Only when users acquire value from tokens as a result of positive conduct can incentive programmes fulfil their goals.


When it comes to cheating vs. cooperation, Nicky Case's book The Evolution of Trust covers the most typical sorts of behaviour. This is a common occurrence in a blockchain system because it aids in the discovery of solutions in tough situations and, of course, the prediction of the opponent's next move.



Consider a particular machine with two players each holding a coin. They must choose between cooperating and cheating.


If two players each put in one coin, they will end up with two coins. Positive behaviour will constantly be rewarded in this manner, and their transaction will be successful.


If someone refuses to give up his coin, he is left with three coins. Cheating is portrayed as the ideal approach since, at the very least, you will not lose. The world, on the other hand, is a well-balanced system. The boomerang rule is always effective. Everything you do will eventually come back to haunt you.


They will not make a profit if both players cheat. As a result, system design limits harmful behaviour (i.e., fake transactions will not be validated due to consensus.)


This notion can lead to two different sorts of player behaviour:

  1. If they lose, people who cheat

  2. People who simply repeat the opponent's actions

There are a few different types of behaviour, and cheating is growing more dangerous. Some players, on the other hand, employ the forgiving and cooperation strategy. This aids in both determining the best course of action and avoiding the logical game's trap.


With the evolution of trust, the most common errors people make result in them losing, and repeated activities with other players can be identified. On the popular TV show Golden Balls, there's an interesting episode about "the divide or steal game." The most brilliant games, as seen in this movie, are mind games. Obviously, the best strategy is to convince your opponent that there is only one option, which will certainly lead to victory.


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