Creating a cryptographic token is a time-consuming and complex process that involves the following:
1. Form a team for project definition and planning
Build a small team led by a project manager (PM). This team needs a software architect and a few business analysts. Look for competent people with blockchain experience.
- This team should do the following:
- Create a white paper if you plan to launch an ICO (Initial Coin Offering);
- Gather functional requirements based on your use case, e.g., decentralized real estate platform, decentralized identity management, etc.;
Decide on the non-functional requirements like scalability, performance, maintainability, etc.;
- Finalize the project scope;
- Identify the blockchain development platforms and tools;
- Create a comprehensive project plan.
- Consult our blockchain project planning guide if you need help.
2. Deciding the kind of crypto token to create, e.g., stablecoins, utility tokens, etc.
You need to decide the kind of cryptographic token to create for your business. The 3 types of tokens are as follows:
- Utility tokens: You use them if you want to give access to your blockchain-based platform to customers. Many companies that launched ICOs created this kind of token. Storj, the decentralized cloud storage platform is an example.
- Commodity tokens: You might create a crypto token that’s backed by another real-world asset. The price of the token depends on the underlying asset. Stablecoins are good examples. Tether, a stablecoin has its price pegged to USD.
- Security tokens: Security tokens are tokenized securities investment contracts. Issuers of security tokens comply with securities regulations. They are registered with regulators like SEC (Securities and Exchange Commission) in the US. Aspen Coin is an example.
3. Choosing Ethereum, a blockchain platform to create digital assets
We recommend you use Ethereum to develop crypto assets. It offers the Ethereum Virtual Machine (EVM), a popular platform for developing blockchain applications.
You can code smart contracts using Solidity, a proprietary programming language of Ethereum. Smart contracts are pieces of code with the following characteristics:
- They are open-source.
- They contain “If-Then-Else” statements, and they transfer cryptographic assets based on predetermined conditions.
- Smart contracts execute autonomously.
- You can’t modify a smart contract after deploying it.
- The execution results of smart contracts are irreversible.
You can develop decentralized apps (DApps) on the Ethereum blockchain. DApps are web apps with the following characteristics:
- You can code the front-end with any technology, however, DApps must run smart contracts in the back-end.
- DApps are open-source.
- DApps store data on a decentralized blockchain.
- You can modify a DApp only after achieving a consensus in the users’ community.
- No one user can hold the majority of the crypto tokens.
- There’s a rich ecosystem of Ethereum blockchain development tools.
4. Deciding the kind of Ethereum crypto tokens to create
You have finalized your business requirements, which include the kind of digital assets to create. Ethereum has different standards for crypto tokens. You now need to decide the Ethereum standard to use. Study the following standards:
Fungible tokens are most commonly available. One such token is exactly the same as another fungible token from the same blockchain-crypto project. Ethereum offers the ERC-20 standard for these.
Non-fungible tokens (NFTs)
Non-fungible tokens (NFTs) are unique crypto assets. One NFT is different from another NFT from the same project. Many organizations use them to tokenize digital arts and digital collectibles. Ethereum offers the ERC-721 standard for these.
A standard for managing fungible, semi-fungible, and non-fungible tokens
Do you need to manage fungible, semi-fungible, and non-fungible tokens? Use the Ethereum standard ERC-1155.
Ethereum standards for security tokens
Ethereum offers standards like ERC-1400 and ERC-1404. You can use them if you plan to issue security tokens. ERC-1400 is a general standard for security tokens. ERC-1404 incorporates transfer restrictions, i.e., who can buy/own a security token.
5. Hiring an Ethereum blockchain development team
You need to hire experienced people for the following roles:
- UI designers;
- Ethereum blockchain developers with Solidity skills;
You might think of hiring developers on a freelance platform, however, we don’t recommend that. Freelance platforms don’t offer any project management support. Blockchain projects can be complex, and managing them with part-time freelancers can be hard. You need to find replacements if freelancers leave the project mid-way.
Hire from trustworthy software development companies. They offer full-time developers. Such companies provide management support, and they offer a replacement in the case of a turnover.
6. Installing the required tools to work with the Ethereum blockchain platform
Install the following tools by following the instructions on their website or Github:
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- Eth-lightwallet: You need to buy Ether, therefore, you need a crypto wallet. Eth-lightwallet is a user-friendly wallet.
- Ganache: It’s an easy-to-use Ethereum blockchain client.
- Truffle: Truffle is a development environment for Ethereum. You can use it to organize, compile, test, and deploy smart contracts.
- MetaMask: It’s a browser extension as well as a crypto wallet. MetaMask enables you to communicate with Ethereum even if you don’t run a full node. You need dummy Ethers to test smart contracts, and you can use MetaMask for this.
7. Configuring the tools to use with the Ethereum blockchain network
Use our Ethereum blockchain development guide to configure the above-mentioned tools:
- Create your public and private keys for eth-lightwallet.
- Set up your password and private seed for MetaMask.
- Open Ganache and run an instance.
- Configure the “aconfig.js” so that Web3.js can work.
- Update your “config.js” file with the private and public key information from eth-lightwallet.
- Connect MetaMask to Ropsten. Ropsten is a testnet, i.e., “test network” to test Ethereum smart contracts.
8. Developing smart contracts to create a crypto token
To develop a cryptographic token using the Ethereum blockchain platform, you essentially create a smart contract. Use the appropriate Ethereum standard, e.g., ERC-20, ERC-721, etc.
Use Remix, an IDE (Integrated Development Environment) to develop Ethereum smart contracts. You need to code them using Solidity. Use Truffle to organize your smart contracts.
9. Creating smart contracts to build an Ethereum DApp (Decentralized app)
Developing an Ethereum DApp involves creating its front-end and back-end. For the back-end, you need to develop smart contracts again. Code smart contracts using Remix.
Keep the logic of smart contracts simple due to the following reasons:
- You need to review and test smart contracts thoroughly. One can’t modify smart contracts after deploying them. You will find it easier to review and debug simple code.
- Running smart contracts requires Ether. Complex logic and computation requirements in a smart contract require mode Ether.
10. Reviewing blockchain code
You need a structured blockchain code audit including auditing smart contracts. This process should include both manual and automated reviews of code.
The reviewer needs to do the following for a comprehensive blockchain code audit:
- Get a locked-down version of the source code;
- Understand the project and study its documentation;
- Conduct a preliminary code review;
- Have a static code analysis;
- Analyze the code quality;
- Look for common vulnerabilities;
- Conduct a functionality analysis;
- Look for optimization opportunities;
- Report all errors and suggestions;
- Track the action items for closure.
The reviewer should look for the following common errors:
- Shadowing of variables;
- Vulnerable storage pointers;
- Overflows and under-flows;
- Errors that can facilitate a DoS (Denial of Service) attack;
- Incorrect validation of cryptographic signatures;
- Generating random numbers in an insecure manner;
- Timestamp dependencies;
- Making incorrect assumptions when ordering transactions;
- Access control issues;
- The lack of checking the values returned from low-level calls;
- Short address attacks.
11. Testing the Ethereum blockchain smart contracts
Do the following to test your smart contracts:
- Buy dummy Ether for testing smart contracts. Get them from the MetaMask Ether Faucet. You will use them on Ropsten. Since it’s a test network, Ropsten doesn’t need real Ether.
- Ensure that you have an open connection between MetaMask and Ropsten.
- Navigate to Remix, and deploy your smart contracts to Ropsten. Confirm this action in MetaMask.
- Test the smart contracts thoroughly by running all the relevant test cases.
12. Deploying smart contracts to create DApps and crypto assets
Take the following steps to deploy the smart contracts on the Ethereum main network:
- Buy real Ether from a crypto exchange like Binance.
- Make sure that you have a Ganache instance running.
- Navigate to the appropriate Truffle directory where you stored the smart contracts.
- Run the “Truffle deploy” command to deploy your smart contracts.
Congratulations! You have just developed, tested, and deployed crypto tokens and a DApp on the Ethereum blockchain network!
Creating crypto assets on Ethereum requires the ability to code, test, and deploy Ethereum smart contracts. Developers don’t need to develop new cryptographic algorithms for this. They need a basic understanding of cryptography, however, they need Ethereum development skills.
Creating digital assets using an existing blockchain network like Ethereum is easier than creating a new blockchain network. You can use the rich ecosystem of tools to create Ethereum DApps. Creating a new blockchain involves development from scratch including the network.
Most DeFi apps use the Ethereum blockchain platform, and we are experts in it. We have developed applications involving different flavors of DLT (Distributed Ledger Technology) including public and private blockchain networks. We can help you to create a DeFi app.