Tokens and smart contracts: because blockchain is much more than cryptocurrencies

Although at Cysae we try to move away from the perception that blockchain is only cryptocurrencies, we understand that it is a very common confusion. Therefore, create erc20 token in this post we are going to talk about tokens and smart contracts. Anyone who understands a bit of the subject will be thinking about Ethereum and, rightly so, they are well on their way.

What is a token and what is a smart contract?

Token is generally defined as a “thing” that serves as a representation of another “thing”. In the cryptocurrency blockchain, a token often represents a financial value or a digital asset, similar to how casino chips symbolize fiat money only to be used on various machines and games of chance.

Cryptocurrencies are the newest form of digital money and are intended to be a unit of value or payment method. On the other hand, tokens represent an asset or utility, they are transferable goods and can represent coins, loyalty points, assets in a game or basically any asset that is fungible or tradable.

For its part, a smart contract or smart contract is divided into two parts. It is made up of an agreement between two or more parties where it is defined what will be done, how it will be done, when it will be done, what are the consequences of not doing it… (the specification of the object of the contract and its circumstances) but, in its In turn, it is made up of the ability to execute and enforce yourself autonomously and automatically, without intermediaries or mediators.

Take, for example, a food vending machine. This machine is programmed so that when a user enters a certain amount of money and presses a combination of numbers, the product automatically comes out of the machine to be delivered to the user. This combination of actions is known as “if… else…” , which applied to our example would be, “if the user enters a certain amount of money and presses a certain combination of numbers, then a certain product is delivered”.

Where is the relationship between tokens, smart contracts and blockchain?

Having these clear concepts, we are going to look for the relationship and the point of connection between them. For this, it is necessary that we talk about Ethereum . It is a decentralized platform on which smart contracts are executed. This means that, although it is decentralized (it uses blockchain technology, as is the case with Bitcoin), it is not a digital currency, but rather what is executed are smart contracts.

Developers take advantage of Ethereum’s existing infrastructure to build their applications or contracts (scheduled orders) that run on a custom blockchain, as opposed to miners who choose to build an entirely new blockchain. At the same time, the tokens strengthen the Ethereum ecosystem by driving demand for “Ether”, Ethereum’s native currency, needed to power the smart contracts on which the tokens are issued.

Ethereum tokens are simply digital assets that are built on top of the Ethereum blockchain.

What is an ERC20 token?

ERC-20 is a token belonging to the decentralized smart contract platform Ethereum. Its name means, “ Ethereum Request For Comments ” and the number 20 is set as a standard ID to identify it from others.

The main difference is that the ERC20 token does not have its own blockchain like cryptocurrencies, but rather they circulate on the Ethereum block chain. Taking this into consideration, any transaction involving the token will be carried out and will depend on the Ethereum network. erc20 token creator These tokens conform to certain parameters and their use will allow new projects to use the Ethereum blockchain to promote their projects, since most ICOs are carried out on this platform.

What are the advantages of building a token “on top” of Ethereum?

Mainly, these tokens built using the ERC20 standard benefit from the existing Ethereum infrastructure, instead of having to build an entirely new blockchain for them, thus saving time and resources.

In addition, the creation of new tokens strengthens the Ethereum ecosystem, thus boosting the demand for Ether and, as a consequence, making the network even more secure.

Last but not least, one of the great advantages is its interoperability. If these tokens are created on the Ethereum network they all use the same standard and therefore they will be easily interchangeable and will be able to work easily with other Dapps (which, in “Ethereum language” means an app that does not depend on a central system, but rather depends on of the community of users that use it) of the same ecosystem.

If developers know in advance how a token works, it will be easier to integrate it into their projects and a Dapp will be able to interact more easily with different sub-currencies.

Since most ICOs today are based on this standard, anyone who is professionally engaged in the blockchain-based industry or involved in cryptocurrency investment should understand what it means and why it is so important, as well as study new standards that appear over time. At Cysae we can help you solve your doubts and immerse yourself in this innovative field with so much future.

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