Why Scammers Love The ERC20 Standard – Launch a Token in 30 minutes!

ERC20 tokens can fuel amazing systems and generate solid organic value. But they’re not suitable to be used as global currencies! Just because a metal has golden color and is shiny does not mean it can replace gold. What makes the difference is not the appearance, but the constitutional essence: “code” in the case of different blockchain assets! Let us never believe in speeches that affirm how an amazing ERC20 token can beat Bitcoin or Ethereum and become a global currency. It can take years to build the infrastructure to run a safe coin. Blockchain experts can create an ERC20 token in 30 minutes.

For a million and one reasons, tokens are not good as global currencies. Here is one: how could I expect one specific crypto asset to become successful in the extremely competitive industry and achieve the role as a global currency, if in order to transact with my particular asset a fee must paid in another – more powerful and essential – asset? ERC20 tokens are light programs implemented on Ethereum. Each time you want to run the program – in other words, each time you want to transact with your tokens -, you must pay a fee in Ether. Ether is the commodity that has the best chance of becoming massively adopted with every transaction, not your token!

Scammers love the ERC20 Standard because during this short period of cryptocurrencies, similar to how people have still not yet been able to distinguish gold from metals that resemble gold like bronze, copper or some cheap alloy, the same is true of blockchain coins and tokens. In 2019, this trend does seem to be changing. Nevertheless, there are still many people that consider an ERC20 token may ever deserve to reach a value similar to Bitcoin or Ethereum. Perhaps, their experience using Bitcoin or Ethereum somehow leads them to think that there isn’t much difference. “Anyway, a Bitcoin and a token is the same thing: just data!” Wrong! If you consider that all kinds of data are the same, then, prepare to be scammed one thousand times over!

One can compare the value or utility of an ERC20 token to that of a coupon of a supermarket or miles that can be accumulated in popular frequent flyer programs. Coupons can be used to purchase real merchandise at local supermarkets. In a sense, they could be considered a sort of local money. Although this is true, it does not mean that they are an ideal medium that could become a global currency. Airline mileage is valuable as well, albeit only when used inside its closed network, not at a global scale. If some scammers tell you that their token will reach mass adoption and that you will be multimillionaire, do careful research. Mass adoption as global currencies is not what Ethereum’s token standards are built for!

The best way to understand the relatively lower level of value that a regular ERC20 token deserves – especially if one compares an ERC20 token to coins like Bitcoin or Ether -, is to go through the experience of manually creating one. If you are not a programmer and have no idea of how Ethereum and Solidity work, then it might take you seven or eight hours, or even an entire day to follow a tutorial. Since ERC20 is a public standard, 99% of your code is actually already built and available for free, open-source. Just need to copy it, add your token name, supply, a few other parameters and voila… you have your token! If you don’t have time, just pay $100 or $200 to a student of Software Engineering and they will deploy your token in a few hours. A professional Ethereum dev could even do it in less than 30 minutes.

Are all ERC20 token scams, then? No! Not at all! In fact, ERC20 is an amazingly useful standard that is being utilized properly in dozens of excellent projects. The fact that many scammers use this standard thanks to its simplicity does not mean that it is no good. ERC20 Standard is a treasure of humanity! “Easy to use” is one of the most desirable properties in an innovation actually. ERC20 and other similar standards are good for millions of use cases. They are just not very convenient to be used for a global currency or payment systems at scale as some coins are, since those coins probably have their own complete blockchain working with a specific kind of algorithm to back up the particular use cases of the coin.

Tokens are marvelous if they are used as coupons or mileage points, commonly referenced as fuel for such programs or a business. One can guess that some tokens will probably be lucky enough to be used as open money in the future. Indeed, exceptions do exist! One radical example is Wrapped Bitcoin, an ERC20 token whose value is the same as Bitcoin: 1 BTC per token. Some tokens might excel insanely. However, these would be exceptions to a general rule: tokens are not designed to behave as global currencies. Tokens are exceptionally efficient to be used as value units inside a modern organization. As the organization grows, their market price may rise accordingly. Some tokens can even become a profitable way to store value, better than real gold for example. All this is true. But we must be careful, and not believe that a supermarket coupon is a better technological advancement than your regular US Dollars.