How Are Tokens Created?

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This post contains sponsored advertising content. This content is for informational purposes only and not intended to be investing advice.

Tokens enable developers to develop a cryptocurrency without needing to build a blockchain. This makes the process of creating cryptocurrencies much simpler, faster and less expensive.

When you hear the word “token,” your mind probably goes straight to cryptocurrency. 

As such, the term is often misunderstood and can cause individuals of different backgrounds to stay far away from it altogether.

However, tokens are extremely versatile and valuable and often have nothing to do with cryptocurrency. As blockchain technology continues to develop to allow further economic freedoms and opportunities – we need to be positive and ignite excitement. Nonetheless, the following discussion will examine what tokens are and how they are created. 

What is a Token?

In broad terms, tokens are non-mineable digital units of value that exist on a blockchain. They come indifferent forms and can be used for a variety of purposes. Strictly speaking, tokens are not cryptocurrencies like bitcoin or Ether that act as the native asset of a given blockchain but transferable units of value issued on top of a blockchain.

Tokens are typically issued by companies using existing third-party blockchains such as the Ethereum blockchain, as exemplified by the ERC-20 tokens that were sold and issued through initial coin offerings (ICOs) in 2017. Tokens differ based on their specific characteristics. The main classification uses functionality to divide tokens into security and utility tokens. Utility tokens generally function as a medium of exchange within an ecosystem or represent access to a service. Conversely, security tokens are tokens that represent a stake in some external asset or enterprise. 

How To Create a Crypto Token

Generally speaking, the easiest route to create a token is by using dedicated DIY platforms. This option is common because it allows entities to quickly create a token for an ICO without writing a single line of code. The following options allow you to create tokens for the purpose of raising funds: 

After choosing a platform, a token creator must decide on the fundamental properties of a token. For example, you need to decide whether you want to be able to:

  • Mint 
  • Burn
  • Create roles to manage the token
  • Assign ownership.

Conversely, to create an advanced token with functionality tied closely to a decentralized application (dApp) ecosystem, a team of blockchain developers is required. Moreover, for token issuers looking to list their token on a trading platform, registered trading platforms such as INX can be utilized. INX is an alternative trading system that allows issuers to list digital securities in a safe and straightforward manner, the first SEC-registered IPO on the blockchain.

The steps a developer team takes follow: 

Step 1: Define the Token Properties

Defining token properties is essential to outline what the coin will do, including determination of:

  • Total supply
  • Auxiliary functions to check balances on addresses and verify and enable transactions
  • Symbol name and number of decimals

Step 2: Develop a Smart Contract

All tokens are governed by a smart contract -  a type of computer software that is programmed as an automated self-enforcing contract. When writing a smart contract, developers consider features including and not limited to the immutability of the contract, potential staking features, ownership attributes and token recovery functionality. 

Step 3: Run Quality Assurance on a Test Chain

The next step is to identify bugs and replace them with new smart contracts. As a result, many developers run multiple tests on a test blockchain like Rinkeby or Ropsten. Developers may also use tools such as Safe Math — a Solidity library protecting a contract from calculation mistakes. 

Step 4: Deploy to Blockchain 

Deploying a smart contract to the blockchain is the final step and relatively straightforward. Depending on the tool used by developers, they’ll need to send a transaction with compiled contract code without specifying a receiver. Before deploying in a mainnet (such as Ethereum), developers often ensure the contract runs flawlessly on a test net (users can send and receive tokens). 

Where are Tokens Created?

Smart contracts are integral to creating a token on a blockchain. When creating a token, you implement a smart contract in accordance with specific token standards. These token standards vary depending on the blockchain in which you want to make a token.

Tokens can be created for different blockchains. At present, you can choose from numerous chains. Each one has specific rules and standards for developing tokens, so the features of a given token rely heavily on the blockchain they are built on top of. 

As of March 2022, Ethereum currently trumps all blockchains in terms of total and per-second transactions. Additionally, Ethereum has approximately the same amount of active addresses as Bitcoin.

Its dominance is the primary reason why most crypto tokens live on Ethereum (ERC-20 tokens). In fact, many successful tokens were first developed on Ethereum before migrating to their own chain. For example, Binance Coin (BNB) was first developed as a token on Ethereum before migrating to its own chain where it became a cryptocurrency — the native currency of the Binance chain.

INX has the ability and experience to create tokens.  In 2021, INX created and launched its own token, which provides users exposure to its net revenues.  INX has also announced several partnerships with organizations that have agreed to move forward with launching their own tokens. These tokens trade on top of the Ethereum blockchain (ERC-1404) and are available for users to trade 24/7/365. A major advantage of these tokens is that if they are lost or stolen, INX can make users whole.  INX’s platform is secure and robust, and is a highly regulated entity.  Thanks to its security system, due diligence, and commitment to adopt regulations, users can feel safe with INX.

Final Thoughts

Overall, it can take less than a month to create a token if you need it for a basic ICO; however, it can take up to four months to create a utility token closely connected with a dApp. Every day, more tokens are being created as dApps continue to grow and amass more users. The creation process is progressively becoming faster and more efficient. INX is an excellent way to list and trade regulated security tokens and cryptocurrencies at a retail and institutional level. The platform is built according to SEC, EU and FINRA regulations, offers world-class safety and supports a broad range of security tokens and cryptocurrencies. 

This post contains sponsored advertising content. This content is for informational purposes only and not intended to be investing advice.

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