ETHereum was founded in 2014 by Vitalik Buterin to position itself as an open-source platform for launching decentralized applications (DApps). Since its launch, the Ethereum blockchain has attracted developers, organizations and entrepreneurs, spawning a growing number of users launching smart contracts and distributed applications.
A large part of its ecosystem growth can be attributed to an important framework for creating tokens on the ETHereum blockchain. In this article, we will learn about the ERC-20 standard of the Ethereum network and how to buy ERC20 tokens on the open market.
What are ERC20 tokens?
In ETHereum, ERC is Ethereum Request for Comments. These are technical documents outlining the programming standards of the Ethereum network. ERCs are designed to establish conventions that make it easier for applications and contracts to interact with each other.
Written by Vitalik Buterin and Fabian Vogelsteller in 2015, ERC-20 proposes a relatively simple format for ETHereum-based tokens. By following the outline, developers don't need to reinvent the wheel. Instead, they can build on what is already in use across the industry.
This means that once new ERC-20 tokens are created, they are automatically linked to services and software (software wallets, hardware wallets, exchanges, etc.) that support the ERC-20 standard.
How to buy ERC20 tokens?
Traditionally, to buy an ERC20 token, you first had to buy ETHereum (ETH) and then use ETH to buy an ERC20 token of your choice. For this, you will need a cryptocurrency wallet to store your purchased coins. Here is a guide for using the BitKan APP or Metamask wallet.
1. Download BitKan APP or Metamask wallet
Cryptocurrency wallets like BitKan APP or Metamask wallet are able to buy and store ERC20 tokens.
2. Select BitKan APP or Metamask wallet username
As part of setting up your BitKan APP or Metamask wallet, you will need to choose a username. This username allows other BitKan APP or Metamask wallet users to easily send you cryptocurrencies.
3. Safely store your recovery phrases
When you create a new self-custody wallet, you will be given a recovery phrase of 12 random words. The recovery phrase is the key to your cryptocurrency, which means that anyone who has your recovery phrase can access your assets. It is important not to share your recovery phrase with anyone.
We strongly recommend writing them down on paper and storing them safely.
Remember, do not share your recovery phrase with anyone. The BitKan APP or Metamask will never ask you for a recovery phrase. If you lose your recovery phrase, BitKan APP or Metamask will not be able to help you access your wallet.
4. Understand and plan for ETHereum network fees
Transaction fees vary depending on how busy the network is, how complex the transaction is, and how fast you want the transaction to complete. So, at least on the ETHereum blockchain, you will always need to set aside some ETH to pay transaction fees due to the congested nature of the network.
5. Buy ETH and transfer it to BitKan APP or Metamask wallet
If you don't have a BitKan APP or Metamask account, you need to create one to buy ETHereum (ETH). See their website for detailed instructions if necessary.
6. Use your ETH to buy ERC20 tokens in the trading tab
If you are using the BitKan APP on your phone, you can purchase ERC20 tokens directly within the app:
1. Click on the "Transaction" tab, where you can exchange ETH for any token of the Ethereum standard (ERC-20 token).
2. Select ERC20.
3. Enter the amount of ETH you want to exchange for ERC20 tokens (remember to leave enough transaction fees).
4. Confirm your purchase and follow the on-screen instructions to complete.
If you are using the Metamask wallet extension:
1. Click the "Convert" button.
2. Search for ERC20 and enter the amount of ETH you want to exchange for ERC20 tokens (remember to leave enough transaction fees).
3. Confirm your purchase and follow the on-screen instructions to complete.
Can you mine ERC20 tokens?
ETHereum (ETH) itself is a mineable, blockchain-based proof-of-work consensus algorithm.
Advantages and disadvantages of ERC20 tokens
Advantages of ERC20 Tokens
Fungible
ERC-20 tokens are fungible, which means that each unit is interchangeable with another. If you hold BitKan tokens (KAN), it doesn't matter what specific token you own. You can swap it out for someone else's and they'll still be functionally the same, just like cash or gold.
If your tokens are designed to be some kind of currency you don't want, this is ideal as a single unit with distinguishable characteristics that make them irreplaceable. This could cause some tokens to become more or less valuable than others, defeating their usefulness.
flexible
ERC-20 tokens are highly customizable and can be tailored for many different applications. For example, they can be used as in-game currency, loyalty point programs, digital collectibles, and even represent fine art and property rights.
Popularity
The popularity of ERC-20 in the cryptocurrency industry is a very compelling reason to use it as a blueprint. There are tons of exchanges, wallets and smart contracts that are already compatible with the newly launched tokens. Also, developer support and documentation is plentiful.
Disadvantages of ERC-20 tokens
Scalability
Like many cryptocurrency networks, ETHereum is not immune to growing pains. In its current form, it doesn't scale well, and trying to send transactions during peak hours can result in high fees and delays. If you launch an ERC-20 token and the network is congested, its availability may be affected.
This is not a problem unique to ETHereum, but rather a secure distributed system as a necessary trade-off of the blockchain trilemma. The community plans to address these issues when migrating to Ethereum 2.0, which will implement upgrades such as Ethereum Plasma and Ethereum Casper.
scam
While not due to problems with the technology itself, the ease with which the coin can be launched may be seen as a downside in some respects. Creating a simple ERC-20 token requires very little effort, meaning anyone can do it, for better or worse.
Therefore, users should invest with caution due to the number of pyramids and Ponzi schemes masquerading as blockchain projects. Users should always do their own research before investing to draw their own conclusions as to whETHer the opportunity is legitimate or too good to be true.
Epilogue
The ERC-20 token standard has dominated the crypto asset space for years, prompting new users to enter the space to purchase ERC20 tokens as their first cryptocurrency. We hope our guide on "How to Buy ERC20 Tokens" will further accelerate the adoption of digital assets and help beginners get started with relative ease.
That said, the ERC-20 standard does lack some of the features that other standards bring, and it remains to be seen whETHer subsequent types of contracts will replace it.
