Learn how you can create a coin and start your own tokens (ICO) on Ethereum Blockchain!
In the world of cryptocurrency, smart contracts and blockchain projects are the trending topics now. But wait a minute, how familiar are you really with Initial Coin Offerings (ICOs)?
Well, Initial Coin Offerings have been all the craze as all of the cryptocurrency projects have raised billions of US Dollars in Ethereum (ETH), Bitcoin (BTC), and other cryptocurrencies as revenue. Most of the current ICOs are ERC-20 tokens; Ethereum Virtual Machine created these tokens which have a few hundred lines of code.
WHAT ARE ERC-20 TOKENS?
This is a standard that specifies how smart contract tokens should behave so that they can work well with other platforms. More so, the Ethereum platform permits you to create your own token which people can buy using Ethereum (also referred to as Ether), the traditional cryptocurrency of the Ethereum blockchain.
HOW DOES THE ETHEREUM BLOCKCHAIN WORK?
Ethereum is a blockchain, like Bitcoin, and it keeps records of account balances for people who own Ether. The Ethereum platform allows you to create your own token without creating a new blockchain. This means that you can create an Ethereum token using a smart contract.
Example: This illustrates how an ERC-20 token smart contract works.
Let’s say that we want to create a token by the name “Malcolm Token” with the ticker “MAL.” Additionally, there will be 100,000,000 of these tokens available.
The smart token contract will keep records of some basic token attributes such as recording the name “Malcolm Token.” It will also keep the ticker that you see on the cryptocurrency exchange and the total supply of the tokens available. Further, it records who owns Malcolm Token and how much they own.
So, just like any other cryptocurrency, ERC-20 tokens are transferable from one account to another as payment. People can buy these tokens in a crowd-sale just like an ICO. Equally, you can trade ERC-20 tokens on a cryptocurrency exchange that supports it, which all do.
HOW ERC-20 TOKENS WORK
Ethereum helps developers to write apps that run on blockchain with smart contracts. They assist in reading and writing data to the blockchain and execute code as well.
In relation to ERC-20 token, a smart contract regulates every aspect of the behavior about how the tokens work and record token ownership (as well as account balances).
ERC-20 is an API specification which specifies how they should build Ethereum tokens. This is a standard adopted by the cryptocurrency community which grants token support in a variety of use cases. Remember, our aim is to build a token that is compliant with this standard so that it is compatible with other tokens and receives global acceptance.
Applying the ERC-20 standard ensures that a token is compliant for the following use cases:
- Buying of tokens in a crowd-sale (ICO)
- Trading on cryptocurrency exchanges
- Sending tokens from one account to another – wallet transfers
The ERC-20 standard dictates the interface that the smart contract must respond to, and specifies the structure of the smart contract, as well as the types of tasks the smart contracts must accomplish.
A CROWD-SALE: HOW DOES IT WORK?
One of the popular ways of distributing ERC-20 tokens is by holding a crowd-sale, or initial coin offering. Crowd-sales are the avenues by which a company can raise capital for their business through the creation of their own ERC-20 token which investors can buy using Ether.
Whenever a crowd-sale happens, the company gets Ether as a liquid capital which the investors paid. The company also get a reserved amount of the ERC-20 tokens that they sold in the crowd sale.
An investor must connect to the Ethereum blockchain with an account for him/her to take part in a crowd-sale. The account has a wallet address that can store Ether and ERC-20 tokens that were actually bought in a crowd-sale.
The investor will have to visit a crowd-sale website which links to a smart contract, as the smart contract governs all the standards on how crowd sale works. The smart contract fixes the price of the token in the crowd-sale and regulates how the crowd-sale behaves.
Anytime an investor buys tokens on the crowd-sale website, they transfer Ether from their wallet to the smart contract. The smart contract immediately sends the purchased tokens to their wallet.
Crowd-sales have different sizes and shapes as well as many phases including Pre-ICO, ICO, and ICO bonus phases. Each of these phases can take place at different points in time and behave differently. They can have whitelists which serve to prevent certain investors from purchasing the tokens.
PRACTICAL STEPS TO CREATING AN ICO ON THE ETHEREUM BLOCKCHAIN
Since you have picked Ethereum to launch your ICO, the first step you need to take is to create a token. For those who are not tech-savvy, you can find the lists of the code you need to use on Ethereum’s website, www.ethereum.org. Download and run the wallet app, which is available for free download from the website above.
Click on “Deploy New Contract” and create a token. Pay attention to “Construction Parameters” where you can control how fast a block will be rightfully mined. Before you create a new contract, Ethereum will show you the cost of Ether required and the gas input needed.
So, here are the steps:
1. IMPLEMENT ERC-20 INTERFACE, HOSTED WITH GITHUB
You don’t need to write all the code required in Solidity – Ethereum’s programming language. Just copy the code from the following repository: https://github.com/OpenZeppelin/zeppelin-solidity/tree/master/contracts/token.
Open https://remix.ethereum.org and make two files: SafeMath.sol and ERC20.sol, paste the above code into these two files respectively.
2. IMPLEMENT THE FUNCTIONS
Now, you need to implement the functions we defined in our interface. For this reason, you will combine BasicToken.sol and StandardToken.sol from OpenZeppelin into a single file and call it StandardToken.sol.
What do these functions do?
balanceOf: This returns the balance of an Ethereum address.
Allowance: It checks how much an Ethereum address is truly allowed to spend on your behalf.
transferFrom: Shows the address to transfer from if that address allows you to spend some tokens.
Approve: It sets a number of tokens a specified Ethereum address can spend on your behalf.
Event Transfer and event Approval: This will key in an output event onto the blockchain.
Transfer: It transfers an amount to an address of your choice.
3. ADD YOUR PERSONALITY
Great work! Congratulations for coming this far. That was the toughest part. The last step here is for you to specify a name, symbol or ticker, and supply for your token. You can just enter the parameters you want when creating the contract in the remix.
Following the create button, enter a name, symbol or thicker, number of decimals, and total supply in that order and press create.
That is it! You have successfully created your first token or ICO on the Ethereum blockchain. You can test the functions or workability by sending tokens to the addresses you will find in the drop-down menu which is next to “account” in the remix.
This is a rough guide to the steps involved in the creation of an ICO through the Ethereum blockchain. There are many resources online and on Ethereum’s website to guide you through the process. Use them all to ease your journey to your own token!
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