A comprehensive analysis of Ethereum Token Development

 

Ethereum tokens refer to a form of digital assets built on top of the Ethereum blockchain network. Anyone is allowed to create a token on top of Ethereum. The tokens can represent any asset in the form of gold, any native currency used for settlement of transactions, or financial instruments such as bonds and shares. All the tokens have some characteristics in common such as a fixed supply, constant inflation rate, and used for a variety of purposes.

Some of the different applications of Ethereum Token Development are

 

  • Augur – It is a popular decentralized market prediction platform where users can bet on the outcome of different upcoming events. They have issued an Ethereum supported token called Reputation (REP). With more than 11 million REP tokens available, they managed to raise a whopping $5.3 million through a well-organized crowd sale. The outcome will be settled through a decentralized reporting pool preventing any chances of corruption. Anyone who lies about their outcome will have to give up some of their REP tokens. This incentivizes people to act honestly in the Augur system and boost the value of their REP tokens. The REP token holders, the wagers, and the market creators work on the Augur platform. The advantages of Augur lie in its correct future predictions made for markets and it is free from the dangers of human greed as it does not depend on a central entity for market predictions. Many token holders have accused Augur of discrimination as early buyers of the REP token get more rewards than newer buyers. If Augur is increasingly adopted, it will help the gambling and forecasting industries immensely.

 

  • Golem – It is an innovative project spearheaded by Julian Zawistowski that allows people to rent out their spare computing power to others. It aims to make computing power easily accessible to everyone at a low cost. Their Ethereum-based token is Golem Network Token (GNT). With over 1 billion GNT in existence currently, they raised $8.6 million in funds by selling 82% of the token through a crowd sale. The tokens can be used as payment of currency for renting the computing power. Golem’s token is more of a usage token. Though they have a monetary value, they will not give any particular rights or privileges within the network itself. Requesters, providers, and software developers handle the entire Golem network. Golem’s benefits are it helps people living on the lower economic strata to get access to world-class computer machines. The value of the GNT has been steadily increasing over the years. With a robust sandbox environment, it can prevent potential hacks easily. Software developers are given a solid platform for releasing and showcasing their software by using underutilized computer equipment. The timeframe is very long for Golem as it will take eight years to run at an optimal state according to the roadmap mentioned in its whitepaper. Many token holders have complained of potential latency issues due to the over-usage of the platform.

 

  • Bancor – Bancor functions as a smart token where users are allowed to create new cryptocurrencies. It can be held or traded against reserve tokens. Holders of other currencies are provided sufficient liquidity. There is no need for middlemen in the trading of different cryptos. This provides two main benefits as it solves the problem of low liquidity for small tokens and reduces the dependency on crypto exchanges.

 

  • ERC20 tokens – ERC20 tokens is a standard interface established by Ethereum. ERC stands for Ethereum Request for Comments. It consists of details such as the total token supply, account balance, transfer of the token, and approval of spending of the token as a monetary asset. ERC20 facilitates easy interaction with other smart contracts and decentralized applications on the Ethereum blockchain network. They have a couple of advantages as they can be used in smart contracts, decentralized applications, and the Ethereum virtual machine (EVM). The token implementation process is easy to understand even for a novice trader. It is highly liquid and risk-free. Its cost depends on the features, time for designing, testing, and implementation.

 

The step by step process in Ethereum Token Development

 

  • The developer must be well-versed in the Solidity programming language which is used to code in Ethereum.
  • Whoever creates the smart contract will get access to all the tokens.
  • The sender will receive an equivalent amount of token for the Ethereum that he invests in the Dapp.
  • The developer issues a set of tokens with a pre-determined price which would be increased or decreased depending on the success of the crowd sale. The more the demand, the less the supply, the higher would be the price of the tokens and vice-versa.
  • Whoever wants to purchase the tokens will have to send a specific amount of Ether to the official crowd sale address.
  • Once the transaction has been completed, the corresponding amount of tokens will be transferred to the concerned party immediately.
  • All the transactions related to the purchase and sale of tokens will be recorded in the open distributed ledger powered by blockchain technology.
  • In case the developer wishes to change the number of tokens originally issued, he has no option but to create a new application from scratch.
  • Hence any old application created cannot be changed in any way due to the irreversible nature of the blockchain network.
  • The tokens will derive a large value only if investors have a lot of trust in it. It depends on the credibility of the developers and the kind of service provided by the Dapp.

 

Future in store for Ethereum Token Development

With more focus shifting towards the need for freedom in operations, many decentralized applications are being developed rapidly. New tokens are being steadily supplied due to increased activity on the Ethereum blockchain network. The token economy will continue to grow stronger in the years to come as anything and everything can be tokenized easily. However, only a select few tokens will experience tremendous growth in their value. Tokens can be used as an effective store of value across borders irrespective of economic downturn.

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