Module 5

Crypto assets and Crypto currencies

• ERC20 and ERC721 Tokens
• Comparison between ERC20 & ERC721
• NFT
• ICO
• STO
• Different Crypto currencies.

1
 What does ERC mean?
• ERC stands for Ethereum Request for Comments. An ERC is
authored by Ethereum community developers in the form of a
memorandum describing methods, behaviors, research, or
innovations applicable to the working of the Ethereum ecosystem.
• It is submitted either for peer review or simply to convey new
concepts or information. After core developers and community
approval, the proposal becomes a standard.
• Therefore, as a result, we have a set of standards or proposals (e.g.
for tokens). Actually, these rules are simple set of functions that
Smart Contract should implement.
• In return, contracts, implementing the standard can be used via a
single interface. The best example is ERC-20 standard. All Smart
Contracts implementing this standard, by default can be listed to
crypto exchanges without any extra technical work.

2
 ERC20 and ERC721 Tokens
• ERC20 and ERC721 are two different standards for creating tokens
on the Ethereum blockchain.
• Ledger: It is a file that is constantly growing.
• Permanent: It means once the transaction goes inside a blockchain,
you can put up it permanently in the ledger.
• Secure: Blockchain placed information in a secure way. It uses very
advanced cryptography to make sure that the information is locked
inside the blockchain.
• Chronological: Chronological means every transaction happens
after the previous one.
• Immutable: It means as you build all the transaction onto the
blockchain, this ledger can never be changed.

3
 ERC20 Tokens
FUNGIBILITY
• ERC20 tokens are fungible, meaning each
token is interchangeable with any other
token of the same type. For example, one
ERC20 token representing a particular
cryptocurrency is identical to another ERC20
token of the same cryptocurrency.

4
 ERC20 Tokens
Implementation
 ERC20 tokens are implemented as smart
contracts on the Ethereum blockchain.
These contracts typically include functions
to transfer tokens, check balances, and
approve token allowances.

5
 ERC20 Tokens
Standards
 ERC20 defines a standard interface for
Ethereum tokens, outlining specific
functions and events that token contracts
must implement to be ERC20-compliant.
This standardization ensures
interoperability between different ERC20
tokens and compatibility with wallets and
exchanges.
6
 ERC20 Tokens
Use Cases
 ERC20 tokens are widely used for various
purposes, including crowdfunding (Initial
Coin Offerings or ICOs), decentralized
finance (DeFi) protocols, utility tokens for
accessing decentralized applications
(DApps), and representing assets like
stablecoins and security tokens.

7
 ERC721 Tokens
Non-Fungibility
• ERC721 tokens are non-fungible, meaning
each token is unique and distinct from all
others. Unlike ERC20 tokens, ERC721
tokens represent individual assets or
digital collectibles, each with its own
unique attributes and properties.

8
 ERC721 Tokens
Implementation
 ERC721 tokens are also implemented as
smart contracts on the Ethereum
blockchain, but each token is identified by
a unique token ID and can have specific
metadata associated with it, such as
name, description, and image.

9
 ERC721 Tokens
Standards
 ERC721 defines a standard interface for
Ethereum non-fungible tokens, specifying
functions for token ownership, transfer,
and metadata retrieval. This
standardization enables interoperability
between different ERC721 tokens and
compatibility with marketplaces and
platforms supporting non-fungible assets.
10
 ERC721 Tokens
Use Cases
 ERC721 tokens are primarily used for
representing unique digital assets, such as
digital art, collectible items, virtual real
estate, in-game assets, and other forms of
tokenized ownership. They enable provable
ownership and scarcity in digital
environments, facilitating the creation and
trading of rare and valuable digital assets.
11
 Comparison ERC20 & ERC721
Fungibility: ERC20 tokens are fungible, while
ERC721 tokens are non-fungible.
Use Cases: ERC20 tokens are suitable for
representing currency, utility, or security
tokens, while ERC721 tokens are used for
unique digital assets and collectibles.

12
 Comparison ERC20 & ERC721
Interoperability: ERC20 tokens have
standardized interfaces for transfer and
management, facilitating interoperability
between different tokens and platforms.
ERC721 tokens offer more flexibility in defining
token properties and attributes, catering to
diverse use cases and creative applications.
Scarcity and Ownership: ERC20 tokens have
identical properties and can be divided into
smaller units, while ERC721 tokens represent
unique assets with distinct ownership and
characteristics.
13
 ERC-20 v. ERC-721
• Most tokens currently built off the Ethereum blockchain are
ERC-20 tokens.
• ERC-20 tokens are highly useful and liquid, and have been
used to raise billions of dollars through ICOs.
• Many serve as utility tokens, which allow holders of those
tokens to access a particular dApp and its services.
• ERC-721 tokens, however, are purposefully non-fungible.
• By design, ERC-721 tokens are each given a unique and
indivisible set of properties, unequal to other tokens on its
blockchain.
• Unlike ERC-20 tokens, which can be divided nearly
infinitesimally (a powerful tool for a future with distributed
micro-lending and crowd-lending), ERC-721 tokens cannot be
divided, as they represent one unique asset in its entirety (the
same way the Babe Ruth baseball cannot be split in half and
maintain its value).
• As the explosion of CryptoKitties has demonstrated, ERC-721
tokens will usher in a world of crypto-collectibles, where
people recognize unique scarcity on the blockchain just as
they do in the physical world.
 ICO & STO
• Initial Coin Offering (ICO) and Security Token Offering (STO)
are fundraising mechanisms used by blockchain projects to
raise capital, and cryptocurrencies come in various types.
 ICO (Initial Coin Offering)
• Definition: An ICO is a fundraising method used by startups
or projects to issue digital tokens or coins to investors in
exchange for funding. These tokens typically represent
future utility or access rights within the project's
ecosystem.
• Token Types: ICO tokens can represent various forms of
value, including utility tokens, which provide access to a
product or service, and security tokens, which represent
ownership or investment in the project.
• Regulatory Status: ICOs have faced regulatory scrutiny in
many jurisdictions due to concerns about investor
protection, securities laws compliance, and potential fraud.
Some ICOs have been conducted without proper regulatory
oversight, leading to investor losses and legal challenges.
ICO Basics
What Is ICO?
• Borderless new way of raising funds by leveraging cryptocurrencies
(mostly) via the Internet
• Fundraising mechanism in which new projects sell their underlying
crypto tokens without financial intermediaries
• Cost-effective machanism for decentralized fund raising that creates
benefits to issuer and investors
ICO Basics
Major Parties in ICOs

Blockchain

Creation of
Online Token
communications
TOKEN Issuer

Offering of
Token

Investors
THB, USD
ICO Basics
Major Steps of ICOs
ICO Basics
IPO, Crowdfunding and ICO
Important Factors IPO Crowdfunding ICO

Issuers Public Companies SMEs, Startups SMEs, Startups

Large Companies
Investors Public Angel Investors Blockchain investors

Documents Prospectus Memorandum of White Paper

Information and other
documents
Timeframe (months) 12 or more 1–3 3–6

Costs High Moderate Low

Investment Channels Offline Online Online
ICO Basics
Funds Raised by ICOs in 2017

Sources: ICO Launch Group

ICO Basics
Top ICOs in 2017

Sources: ICO Launch Group

ICO Basics
ICOs for Different Projects

Milk products Rental cars Renewable Casino

energy s

Coffee Manufacturin Scholarship Touris Agricultur

g s m e
 STO (Security Token Offering):
• Definition: An STO is a fundraising method similar to an ICO
but involves issuing security tokens that represent
ownership in an asset, equity, or debt in a regulated
manner. STOs typically comply with securities regulations
and offer investors greater protection and transparency.
• Regulatory Compliance: STOs are subject to securities laws
and regulations, such as Know Your Customer (KYC), Anti-
Money Laundering (AML), and investor accreditation
requirements. Issuers must comply with regulatory
requirements to offer security tokens to investors legally.
• Investor Protection: STOs offer investors legal rights and
protections, such as ownership rights, dividends, profit-
sharing, or voting rights, depending on the underlying asset
or investment structure.
 Why Security Tokens?

• With ICO’s being used for pump and dump schemes with no path to
redemption, it is becoming increasingly difficult for investors to
establish trust and invest in any cryptocurrency project.

• This is where Security Token Offering comes in. Security Tokens or

digitized assets are financial securities that are compliant with SEC
regulations.

• They provide the investors with an array of financial rights, such as

equity, dividends, profit share rights, buy-back rights, and much more.

• All the rights are written in the smart contract, and the underlying
tokens are traded on the blockchain.
 Difference between Security Token and Utility Token

Security Token

A Security Token is backed by external,

tradeable assets that give the power or
authority to the investors, as they are the
embodiment of shares of company stock.
Utility token

A Utility token is not designed to be an

investment; it represents the future access
to a company's product or service, and it
gives the token holders no rights or stake
in the company.
 Features of Security Token Offering

• Programmable Equity
• Fractionalization of larger assets
• Increase in Liquidity
• SEC Compliant
• Secure Wallet
• Global Capital Investment
• Greater market efficiency
• No Intermediaries
• Own Blockchain
• Fractionalization of larger assets

The STO is the representation of a

company’s stock, so the concerned company
can break their more substantial assets and
provide it as STO to the token holder.

• Increase in Liquidity

Every Security Token owned by the company

would have the said asset liquified, so
that it can be bought or sold at its set
price.
• SEC Compliant

The U.S Security and Exchange Commission

(SEC) is responsible for encompassing
the listing requirements of exchanges.
STOs are fully compliant with SEC
laws.
• Secure Wallet

The Wallet is designed as a multi-

signature, multi-device wallet on a
blockchain with an elliptic curve
cryptography, which makes the storage of
funds secure.
• Programmable Equity

The digitization of asset allows you to

take control of illiquid asset into an
equity issuance through a programmable
code.

• Global Capital Investment

The Security Tokens provide trust and

reliability for institutional investors to
join in the crypto-market, leading to a
larger pool of capital investment.
 • Greater market efficiency

Provide security to investors with its

recognizable structure and its affiliated
technological advancement, leading to
investors gaining trust and their investment
in the project.
• No Intermediaries

There are no intermediaries between the company

and investors, hence reducing the cost of
commissions for the middleman.
• Own Blockchain

The Security Tokens are developed on your own

blockchain, thereby giving full control to
you. No more worries of gas prices and
changes in protocol or regulations.
Other Types of Cryptocurrencies
• Currency Tokens (Cryptocurrencies):

-> Examples: Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC).

->Purpose: Used as digital currencies for payments,

remittances, and store of value.

->Characteristics: Designed for peer-to-peer transactions,

decentralized and censorship-resistant.
Other Types of Cryptocurrunices
• Utility Tokens:

• Examples: Ethereum-based ERC20 tokens, Binance Coin

(BNB), Chainlink (LINK).

• Purpose: Provide access to products, services, or

functionalities within a blockchain ecosystem.

• Characteristics: Issued by blockchain projects or platforms,

used for specific purposes within the ecosystem.
Other Types of Cryptocurrunices
• Security Tokens:

• Examples: Tokenized securities, asset-backed tokens,

equity tokens.

• Purpose: Represent ownership, equity, or investment

in real-world assets, businesses, or projects.

• Characteristics: Subject to securities laws and

regulations, offer legal rights and protections to
investors.
Other Types of Cryptocurrunices
• Stablecoins:

• Examples: Tether (USDT), USD Coin (USDC), Dai (DAI).

• Purpose: Maintain stable value by pegging to fiat currencies

(e.g., USD, EUR) or other assets (e.g., gold, commodities).

• Characteristics: Designed to minimize price volatility and

provide stability for transactions and investments.
Other Types of Cryptocurrunices
• Non-Fungible Tokens (NFTs):

• Examples: CryptoKitties, Decentraland (LAND),

CryptoPunks.

• Purpose: Represent unique digital assets, collectibles, or

ownership rights in virtual worlds or games.

• Characteristics: Non-fungible, indivisible tokens with

unique attributes and properties, used for digital art,
gaming, and virtual real estate.
Other Types of Cryptocurrunices
• ICO and STO are fundraising methods used by blockchain
projects, while cryptocurrencies come in various types,
including currency tokens, utility tokens, security tokens,
stablecoins, and non-fungible tokens. Each type of
cryptocurrency serves different purposes and has unique
characteristics, catering to diverse use cases within the
blockchain ecosystem. Investors should conduct thorough
research and due diligence before participating in ICOs,
STOs, or investing in cryptocurrencies, considering factors
such as regulatory compliance, project fundamentals, and
investment risks.
 Reference
• https://medium.com/crypto-currently/the-anatomy-of-
erc721-e9db77abfc24
• https://en.wikipedia.org/wiki/Cryptokitties
• https://www.cryptokitties.co/Technical-details
• https://thebitcoin.pub/t/cryptokitties-isn-t-about-the-
cats-hint-erc-721/23883
• https://ethereum.stackexchange.com/questions/36394
/how-to-create-your-own-erc-721-nft-token
• Please refer the reading list for the ERC 721 token in
the link below for more reference:
https://medium.com/crypt-bytes-tech/reading-list-erc-
721-nft-token-standard-7524b64ef5df