Apprendre avec le sourire

You may have heard of bear and bull markets; both referring to economic conditions within a market. Think about how a bull attacks, lifting you up with its horns. 

A bull  market or bullish market describes a condition within a financial market where the prices are rising or are expected to rise. The term "bull market" is most often used to refer to a financial market but refers as well to any asset that is tradable such as bonds, real estate, commodities, and currencies. Bull markets indicate investor confidence, optimism, and expectations that strong results will continue for an extended period of time.

There are two ways to What is a Bull Market?

A bull market refers to a financial market condition in which the prices of securities or assets are rising or expected to rise over an extended period. In a bull market, investors are optimistic about the future prospects of the market and are willing to buy securities, pushing prices higher.
‍

Bull markets are often associated with economic growth, strong corporate earnings, and low unemployment rates. In these conditions, investors are confident that businesses will continue to perform well and that the overall economy will continue to expand, leading to higher stock prices.
‍

Recognizing a Bull Market

To recognize a bull market, investors need to look for a sustained period of rising prices across the market or a specific asset class. This period can last anywhere from a few months to several years.
‍

Another way to recognize a bull market is through technical analysis. Technical analysts look at charts and other market indicators to identify patterns that signal a market trend. In a bull market, technical analysts may look for higher highs and higher lows in price movements over time.
‍

Impact of a Bull Market

A bull market can have a significant impact on the economy, businesses, and investors. When the stock market is performing well, businesses may have easier access to capital and credit, which can lead to increased investment and growth.
‍

A bull market can also lead to increased consumer confidence, as investors feel more optimistic about the economy and their financial futures. This can lead to higher consumer spending, which can, in turn, fuel economic growth.
‍

On the other hand, a prolonged bull market can lead to a market bubble, where prices become overinflated and unsustainable. This can lead to a market correction, where prices drop significantly, and investors may suffer losses.
‍

In conclusion

Bull markets can have a significant impact on the economy, businesses, and investors. Recognizing a bull market and understanding its impact can help investors make more informed investment decisions. However, it's essential to remain vigilant and avoid investing solely based on market trends, as market bubbles can lead to significant losses.

approach a bull market: selling stock for high profits or holding in hopes of rising prices in the future. Alternatively, you can also buy more assets, but most would not recommend buying on a high.

‍

Investing centers around making gains off of your initial capital. When determining the potential gains one could make there are a number of variables one needs to consider, such as how much capital one has put into the investment and what returns are associated with that asset class.

This led to the creation of ROI (return on investment), a measure that allows anyone to calculate the net profit or loss of an investment in percentage form. 

What is return on investment?

All investments, including stocks, bonds, real estate, and small businesses, come with the goal of making more money than you put in. The money you earn over and above your initial investment is called profit. When discussing investment profitability, people often use the term ROI, meaning return on investment. This metric expresses the amount of net profit one can earn/earned as a percentage of what the initial investment was.

ROI can help you assess if buying property or investing in a business is worth it. It's also helped companies determine the value of adding new products, building more facilities, acquiring other businesses, advertising campaigns, etc.

ROI (return on investment) is the percentage of gain or loss on an investment relative to the total cost of the investment.  In other terms, it's a way to compare different investments in order to figure out which ones are worth pursuing. For example, you could calculate ROI to decide whether selling one stock and buying another would be a good idea.

While there is no limit to a return on investment theoretically, in practice, no investment is guaranteed to have any return. If your ROI is negative, it means you not only failed to make a profit but also lost some of your original investment. The worst possible outcome would be -100% ROI, meaning you completely lost your initial investment. An ROI of 0% signifies that you at least recovered the money you put in, but gained nothing beyond that.

While ROI is often used as a marker of profitability, it isn't foolproof. There are several limitations to calculating ROI as your only measure which include the time frame in which you will earn back your investment, inflation rates, how risky a venture is, and additional maintenance costs that may be incurred.

Calculating ROI terminology

Before we dive in, let's first cover some basic terminology.

Net profit or net income

Net profit is the amount of money left over after all operating costs, such as the cost of transaction costs or maintenance costs, and other expenses have been accounted for and subtracted from the total revenue. It is used to measure profitability. Net profit can also be called net income, net earnings, or the bottom line.

Total cost of investment

This figure will look at the amount of money invested in a particular investment.

How to calculate ROI: the ROI formula

The ROI formula is a simple equation that looks at the price change of the asset and the net profits (the initial cost of the investment minus its value when you sell it). When calculating ROI you would use this formula:

ROI = (Net Profit / Total Cost of Investment) x 100

To factor trading costs into your ROI figure, you'll use: 

ROI = ((Value of Investment - Cost of Investment – Associated Costs) / Cost of Investment) x 100

As an example, let's say you buy 5 shares of $100 each in Twitter, equating to $500. You sell them a year later for $150 each, equating to $750. Let's say you paid $5 commission on each trade, costing you $25 in trading fees. 

ROI = (($750 - $500 - $25) / $500) x 100 = 45%

This means that you made a 45% return on investment on that particular investment.

How to determine a strong ROI

A "good" return on investment is any number above 0, as this means you made some profit. However, the ideal ROI should be higher than what you could've earned had you chosen another investment (the next best thing). 

To compare this, investors often compare their earnings to what they could've made on the broader stock market or in a high-yield savings account. Using the S&P 500 as a control, over the past four decades it has made gains of around 7% (after inflation). An ROI is generally considered to be a strong one if it beats the stock market in the long term. 

It's always important to note that past performance does not equate to future results. Another pearl of wisdom to remember is that high rewards generally come alongside high risks. If an investment promises very high ROIs, consider this also means that it comes with high risks. 

Therefore, a strong ROI will vary depending on the investment's level of risk, your goals, and how much risk you're willing to take.

Where the ROI formula falls short

The main limitation of using this return on investment ROI formula as a marker of success is that it doesn't show how long it took to earn the money back. When comparing various investments, the time it takes to mature will have a significant impact on the profits you could earn.

For instance, a year loan versus a bond held for five years versus a property held for 10 years will all have varying ROIs once you've established how long it will take to earn the specified ROIs. 

In this scenario, the ROI calculations mentioned above skimp on the full story. It also doesn't account for risk. For instance, the loan repayments could be delayed or the property market might be in a slump, all affecting the potential profits earnable.

With many variables, it becomes harder to predict what the exact ROI calculation on an investment will be, so be sure to factor this in when using the return on investment ROI formula to determine how attractive an investment opportunity or business venture is. 

ROI alternatives

Although the return on investment doesn't consider how long you keep an asset, it's essential to compare the ROI of investments held for comparable lengths of time as a more clear performance measure. If that's not possible, there are a few other options.

Average Annual Return

Also known as annualized return on investment, this adjusts the ROI formula to factor in the timing. Here you would divide the ROI by the number of years you hold the asset.

Compound Annual Growth Rate (CAGR)

This option is more complicated but yields more accurate results as it factors in compound interest generated over time. 

Internal Rate of Return (IRR)

This measure factors in the notion that profits earned earlier outway the same profits earned later, taking into account interest that could've been earned and factors like inflation. This equation is quite complicated but there are online calculators one can use. 

Conclusion

A return on investment (ROI) is a formula used to calculate the net profit or loss of an investment in percentage form. The ROI calculation can present valuable information when investing capital or determining profitability ratios. The ROI equation looks at the initial value of one investment and determines the financial return. A negative ROI indicates that the investment returns were lower than the investment cost.

Vous avez probablement entendu ce terme circuler dans la cryptosphère. Dans cet article, nous allons expliquer ce qu’est un portefeuille fiat, pourquoi vous pourriez choisir de l’utiliser, et comment en créer un si vous le souhaitez.

Qu'est-ce qu'un portefeuille fiat ?

Un portefeuille fiat est un espace numérique où vous pouvez stocker, envoyer et recevoir de l’argent en monnaie fiduciaire. C’est un peu comme un compte bancaire en ligne, mais il s'agit simplement d’un compte qui contient des fonds en monnaie fiduciaire.

La plupart des plateformes d’échange de cryptomonnaies proposent des portefeuilles fiat en plus des portefeuilles crypto, offrant ainsi aux utilisateurs un moyen plus rapide et pratique pour acheter et vendre des actifs numériques. Avec un portefeuille fiat, vous pouvez éviter les délais des virements bancaires lorsque vous déposez de l’argent sur une plateforme d’échange.

Les portefeuilles fiat sont également utilisés dans les produits fintech et nécessitent une licence de monnaie électronique pour fonctionner. Dans ces cas-là, les utilisateurs peuvent souvent bénéficier de fonctionnalités supplémentaires en stockant leur argent dans ces portefeuilles.

Avant de continuer, rappelons qu'une monnaie fiduciaire est une devise émise par un gouvernement, comme le dollar américain, l’euro, la livre sterling, ou toute autre monnaie majeure. Ces devises sont spécifiques à un pays ou à une région et sont régulées par la banque centrale locale.

Comment fonctionne un portefeuille fiat ?

Un portefeuille fiat, tout comme un portefeuille crypto, est utilisé pour stocker de l’argent. L’argent dans un portefeuille fiat, contrairement à celui dans un portefeuille de cryptomonnaies, est simplement de la monnaie fiduciaire classique, comme celle que vous avez dans votre compte bancaire traditionnel.

Vous pouvez utiliser un portefeuille fiat sur une plateforme d’échange de cryptomonnaies pour effectuer rapidement des transactions entre une monnaie fiduciaire et une cryptomonnaie sans passer par votre banque, ou sur une plateforme fintech pour d'autres usages. Les portefeuilles fiat servent de pont entre les mondes de la finance traditionnelle et celui des cryptomonnaies.

Pourquoi utiliser un portefeuille fiat ?

Les utilisateurs d’un portefeuille fiat recherchent avant tout la liquidité. Sans portefeuille fiat, un virement bancaire peut prendre plusieurs jours ouvrables, ce qui peut poser problème dans certaines situations :

• Si vous souhaitez acheter ou vendre des cryptomonnaies rapidement en période de volatilité
• Si vous ne voulez pas que votre portefeuille subisse les conséquences des fluctuations du marché

Par exemple, si la valeur d’un actif crypto chute brusquement, vous pourriez devoir attendre plusieurs jours pour que votre argent soit déposé sur la plateforme pour acheter cet actif. Avec un portefeuille fiat, la transaction se ferait rapidement, vous permettant d'agir plus vite.

Est-il sûr d'utiliser un portefeuille fiat ?

La sécurité d’un portefeuille fiat dépend entièrement de la plateforme sur laquelle il est hébergé. En termes de sécurité, il n’y a pas de différence entre les portefeuilles crypto et les portefeuilles fiat ; leur niveau de protection est lié à celui de la plateforme.

Les fournisseurs de portefeuilles crypto et fiat utilisent des mesures de sécurité robustes pour protéger les actifs des utilisateurs. En plus du chiffrement des données, les fournisseurs encouragent l’utilisation de l’authentification multi-facteurs, combinant un mot de passe fort à une autre mesure de sécurité, comme des données biométriques ou un mot de passe temporaire.

Comment utiliser un portefeuille fiat sur Tap

Si vous souhaitez utiliser un portefeuille fiat sécurisé, vous pouvez le faire via l'application Tap. Depuis l'écran d'accueil, sélectionnez l'option "Portefeuille Cash", puis choisissez le portefeuille fiat spécifique. Vous pouvez ensuite choisir entre un paiement par carte bancaire ou un virement bancaire, et effectuer la transaction.

Les fonds seront disponibles dans votre portefeuille fiat dès que le virement bancaire sera confirmé, après quoi vous pourrez les utiliser comme bon vous semble. Vous avez également la possibilité de transférer des fonds depuis votre portefeuille fiat directement vers votre compte bancaire, en sélectionnant cette option depuis la devise fiat de votre choix.
‍

Vous avez probablement déjà rencontré le terme "token" dans vos aventures crypto, ou entendu parler de Bitcoin et Ethereum décrits comme des tokens, mais que signifie tout cela ? Dans cet article, nous allons détailler ce qu'est un token, comment distinguer un coin d'un token et comment il peut être utilisé comme outil pour stocker de la valeur.

Définition d'un token

Un token, dans le sens cryptographique du terme, représente un actif ou une utilité particulière. Il est important de noter que les termes "tokens" et "cryptomonnaies" sont souvent utilisés de manière interchangeable, bien qu'ils diffèrent techniquement. Les tokens se classent généralement dans l'une des trois catégories suivantes :

1. Tokens de paiement :
   Ces tokens permettent aux utilisateurs d'acheter des biens et des services en dehors de la blockchain, offrant une alternative aux monnaies traditionnelles.
2. Tokens de sécurité: 
   Similaires aux introductions en bourse (IPO) sur le marché boursier, les tokens de sécurité offrent aux utilisateurs une participation ou donnent droit à des dividendes dans un projet blockchain.
3. Tokens utilitaires:
   Les tokens utilitaires offrent aux utilisateurs l'accès à un service au sein d'un écosystème particulier, similaire aux points de fidélité sur une carte Starbucks. Ces points ont de la valeur dans leur propre écosystème mais ne peuvent pas être utilisés en dehors.

Coins vs Tokens

Pour être plus technique, lorsqu'on explore les pièces par rapport aux tokens, les tokens sont catégorisés comme des actifs crypto qui ont été construits sur une autre blockchain, tandis que les pièces sont construites sur leur propre blockchain. L'Ether, par exemple, est le token natif de la blockchain Ethereum, cependant, la plateforme permet aux développeurs de créer une gamme de standards de tokens par-dessus.

Sur la base de ces informations, tous les tokens ERC-20 sont donc catégorisés comme des tokens et non comme des pièces. USD Coin (USDC) et Tether (USDT) sont donc des tokens car ils sont construits sur la blockchain Ethereum. Bien que chaque réseau soit géré par sa propre direction, les deux utilisent la blockchain Ethereum pour faciliter toutes les transactions.

Comment les tokens sont-ils échangés ?

Tout comme les pièces, les tokens peuvent être achetés, vendus et échangés sur des plateformes d'échange, ou envoyés directement d'un portefeuille à un autre. Cela est facilité par la technologie blockchain, de la même manière que les pièces sont transférées d'un endroit à un autre. Contrairement aux pièces, qui sont toutes de nature fongible, les tokens peuvent parfois être non fongibles, ce qui signifie qu'ils ne sont pas identiques en valeur et en fonction.

Les tokens sont envoyés en utilisant l'adresse du portefeuille compatible blockchain du destinataire. L'adresse est souvent représentée par un code-barres sous forme de QR code, ou par un long code alphanumérique. Toutes les transactions ont lieu à partir du portefeuille contenant les tokens et sont envoyées directement au portefeuille du destinataire sans nécessiter d'autorité centralisée comme une banque. Les tokens peuvent généralement être achetés sur des plateformes d'échange, souvent avec Visa ou Mastercard, ou échangés entre utilisateurs.

En quoi un NFT est-il différent d'une cryptomonnaie ?

Les tokens non fongibles (NFT) sont tous différents les uns des autres car ils représentent chacun un objet du monde réel, qu'il s'agisse d'une œuvre d'art numérique ou d'une bouteille de vin fin. Le Bitcoin peut être échangé contre n'importe quoi dans le monde, alors que les NFT sont de nature unique et, bien qu'ils aient de la valeur, ils ne peuvent pas être utilisés de manière interchangeable.

À quoi servent les NFT ?

Les NFT sont utilisés pour représenter un actif particulier, qu'il soit physique ou numérique. Une fois créés, ces tokens représenteront de façon permanente cet actif et ne pourront pas être modifiés. Par exemple, un NFT pourrait représenter un appartement à Londres tandis qu'un autre pourrait représenter une chanson de Kings of Leon. Les possibilités sont infinies, et les marchés sont énormes.

Les utilisateurs peuvent facilement échanger des NFT sur des places de marché (via un site web ou une application mobile) telles que OpenSea ou Rarible. Une fois que vous possédez un NFT, vous êtes crédité des droits de propriété de l'actif que le NFT représente. En raison de la nature de la technologie blockchain, cela est affiché de manière permanente sur le registre public du réseau pour que quiconque puisse le vérifier. Ce processus garantit que la propriété d'un NFT ne peut pas être modifiée et que l'information est disponible pour que quiconque puisse la créditer.

Notez que plusieurs réseaux blockchain supportent actuellement la création de NFT, et le détenteur aura besoin d'un portefeuille spécifique à cette blockchain pour détenir le NFT.

Les tokens sont-ils réglementés ?

En ce qui concerne la réglementation, les pays du monde entier élaborent actuellement des cadres juridiques pour mieux intégrer les cryptomonnaies dans notre système financier actuel. Cela inclut les tokens.

Une fois que les cryptomonnaies seront réglementées par les autorités gouvernementales, elles pourraient offrir au monde des cas d'utilisation inédits comme la gestion d'une ordonnance dans une pharmacie ou des services cliniques, ou pour fournir un retour d'information au support informatique. Bien qu'il y ait de nombreux tokens disponibles sur le marché aujourd'hui, il est probable que ce ne soit que la partie émergée de l'iceberg en termes de leur potentiel pour améliorer les problèmes rencontrés dans le monde entier.

An asset can be described as a resource or item that provides future economic benefits to the individual, corporation, or country that owns it. Assets have long had a place in a company's balance sheet, but today take on a broader identity when associated with the broader financial sector. From financial assets to assets that provide future economic value, below we outline everything you need to know about assets.

What does the term "asset" mean?

Assets can refer to an item or resource that holds economic value, with the individual, company, or country that owns it being able to expect future monetary benefits. Assets can be held to maintain liquidity or sold to make a profit. These assets are usually assigned a dollar value upon which their liquidity or potential profits can be judged. 

Assets owned by an individual are referred to as personal assets, while assets owned by a company or corporation are referred to as business assets.  

Assets are used to increase net worth, raise business value, and more. Assets can be physical or intangible, such as gold or Bitcoin. Individuals and companies alike use assets as a means to provide and prove solvency, financial health, and equity. They can be used as liquidity to secure loans or can be sold to make a profit. Business success probability is generally worked out by subtracting liability from total asset value. 

An asset can be considered a resource that in the future can generate cash flow, whether it's manufacturing equipment or a patent. 

Assets can be categorized into current assets, fixed assets, tangible and intangible assets, operating assets, and non-operating assets. 

How do assets work?

Individuals, companies, and governments accumulate assets with the expectation that they will provide short-term or long-term economic gains in the future. Assets do not promise gains though, as assets can either appreciate or depreciate in value, with gains only realized after the sale. This volatility can affect the sale value and change the overall solvency of a person, corporation, or country.

Solvency implies that the assets held are enough to manage or pay back outstanding liabilities. Companies usually use a balance sheet, covering current assets, liabilities, and equity, to evaluate how the held assets suffice against their liabilities. But before we delve deeper into the broad topic of assets, let’s dissect the current most common types of assets. 

Types of assets 

There are 6 main examples of assets that can be broken down into the categories listed below. The definition of assets is broad so one asset may fit into one or more asset classification categories. These are the most popular types of assets. 

Current Assets (business assets)

Current assets can quickly be converted into cash, otherwise referred to as liquid assets, and are used to pay bills or settle liabilities promptly. Some examples of current assets include but are not limited to cash and cash equivalents, accounts receivable, inventory, or prepaid expenses.

Fixed Assets

Fixed assets, otherwise referred to as non-current assets, are assets that are purchased for long-term use, more than 12 months usually, and are not likely to be converted quickly into cash. These assets hold future economic benefit. Some examples of fixed assets include land, buildings, or equipment.

Tangible Assets

Tangible assets refer to assets that you can see and touch, also known as physical assets. These types of assets would be considered as cash, inventory, buildings, stock, machinery, or furniture.

Intangible Assets

Intangible assets refer to an asset that lacks physical substance, the opposite of tangible assets, and can not be touched or seen. Types of intangible assets would be considered as intellectual property, patents, cryptocurrency, licenses, grants, and secret formulas.  

Operating Assets

Operating assets refer to assets owned by a business for daily operations or to generate revenue through usage. Some examples of operating assets include but are not limited to inventories, patents, equipment, secret formulas, and licenses.

Non-operating Assets

Non-operating assets refer to assets that are not necessarily used for business activities but may still create profits in the future. Some examples of non-operating assets include vacant land, marketable securities, short-term investments, and long-term investments.

Definition of an asset 

As already discussed, the definition of an asset is too broad, and even when broken down into categories does not captivate the true potential. While patents are considered an intangible asset, with rights usually stored digitally, it is also vital operating asset for some businesses. 

Bitcoin is another example of an asset breaking barriers, considered an intangible asset, stored digitally. Bitcoin could also be referred to as a current asset, or liquid asset. 

Inventory is a current, tangible, operating asset. It can be one or all at the same time. This just goes to show there is no one definition of an asset or asset type, but it is rather up to how the investor chooses to use said asset. 

But it is important to remember that tangible assets can not be intangible assets. Current assets can not be fixed assets. And operating assets can not be non-operating assets. There may be some exceptions, but this is a general rule to remember. 

Assets vs liabilities

Whether you are working out an entrepreneur's net worth, or a company's value, liabilities play a massive role in the solvency of an individual, cooperation, or country. When you minus liabilities from assets, you can work out Fund Balance, also referred to as Net Assets or Equity.

In order to figure out a company's fund balance, you would need to evaluate its balance sheet. Viewing their balance sheet depends on whether the company is private or public, with public companies being legally required to provide their balance sheets in annual reports. 

To put it simply: Assets - Liabilities = Equity 

Understanding assets and their economic value

The definition of assets is limitless, even the sapphire necklace you inherited from your grandmother could be considered a current and tangible asset. The value of the necklace could be profited from immediately, or you could wait for a sapphire shortage to claim even more.

The basics of assets within personal and professional lives differ, and we hope through this article you could come to a greater understanding of the differences and similarities. 

Assets remain an item or resource that a person, business, or government can expect to generate a cash flow. Whether it be a fixed or current asset, the goal of acquiring assets is to eventually profit from them. Gold, Bitcoin, houses, cars, secret formulas, and patents are all classed as assets, rightfully so, as they have the ability to generate value in a cash equivalent. 

Now that you know more about assets, and the value they are supposed to hold, do your own research and find an asset that fits your investment needs and wants. 
‍

You've likely come across the term "ERC-20" in your crypto endeavours, with plenty of these token standards currently ranked in the top 10 (even top 100) cryptocurrencies. But what does ERC-20 actually mean, and what is a token standard? In this piece, we're uncovering everything you need to know about these popular crypto terms.

To start things off, ERC stands for Ethereum request for comment.

What is a token standard?

Let's start at the beginning. When Ethereum was created to provide developers with a platform on which to build decentralized apps (Dapps), the team incorporated several token standards. 

These token standards allow new projects to create, issue and deploy various functioning tokens on the blockchain. Each token standard is a smart contract that holds a set of particular "rules" that must be followed in order to be created.

In recent years a number of blockchain platforms that provide Dapp creation functionality have created their own token standards, however, for the sake of this article we are only looking at Ethereum.

The most popular token standards on Ethereum are the ERC-20, ERC-721, ERC-777, and ERC-1155 tokens. Each holds its own functionality and would be utilized depending on what the Dapp intends to use it for, i.e. will it be a transferable asset or be used to hold ownership rights. 

What is an ERC-20 token?

By far the most popular token standard utilized on the Ethereum network, the ERC-20 token is a fungible token that can be bought, sold and traded in the blockchain ecosystem. To date over 350,000 ERC-20 tokens have been created. 

Similar to the functioning of other cryptocurrencies like Bitcoin and Litecoin, ERC-20 tokens also hold value and are able to be bought and sold, however, they operate solely on the Ethereum blockchain. This means that all ERC-20 transactions conducted are executed on the Ethereum blockchain network.

The rules associated with this particular token ensure that it can function optimally on the Ethereum blockchain, and must be submitted to the community leadership for approval prior to its launch. While some rules are mandatory and others optional, the required ERC-20 rules are as follows:

• total supply: defines the total supply of the token
• balance of: indicates how many tokens are in a wallet address
• transfer To, Transfer From: must be able to be transferred from one user to another
• allowance: ensures that wallets have a sufficient amount before making a transaction
• approve: checks total supply against transactions

The optional elements are centred around the token's name, its ticker symbol and how many decimal places it would have %u200BFor instance, Ethereum's token name is Ether, its ticker symbol is ETH and it is divisible by up to 18 decimal places.

Examples of ERC-20 tokens are Augur (REP), Basic Attention Token (BAT), Maker (MKR), USD Coin (USDC) and OmiseGO (OMG).

Can you mine ERC-20 tokens?

ERC-20 tokens, unlike Ethereum and its native coins (ether), cannot be mined. That is, new tokens are 'minted' when a planned initial token offering (ICO) or security token offering (STO) event takes place. Usually, these events involve users sending ether to a smart contract address and in return receiving the newly minted ERC-20 token.

An ERC-20 token is technically a smart contract so it's possible for the developer team behind an ERC-20 token to issue new tokens at will. However, this isn't recommended because users would be less likely to trust these tokens if they could be minted at will. There must be a measure of scarcity in order for tokens to be valuable.

The pros & cons of ERC-20 tokens:

Some of the main benefits of ERC-20 tokens include: 

Fungible

Fungible ERC20 tokens are interchangeable, just like cash. Although the coins are technically distinct, they function in exactly the same way. You can trade one for another and they will be functionally equivalent, just like cash or gold.

Fungible tokens are fantastic, and there's a lot of value in the technical aspect. On a technical level, it's worth noting that fungible tokens don't add extra value to goods. They're typically beneficial in a variety of commercial scenarios.

Broad adoption

The popularity of ERC-20 tokens is quite apparent in the cryptocurrency industry. The number of exchanges, wallets, and smart contracts that already support newly-launched tokens has made it easy for new projects to integrate with them. There is plenty of developer support and documentation to go around.

Flexibility

The first thing to note about ERC-20 tokens is that they are highly flexible and may be used in a variety of circumstances and applications. This is due to the fact that these tokens are very customizable. They can be used in a lot of different scenarios such as Loyalty points programs, in-game currencies, or digital collectibles such as NFT's.

Some of the main cons of ERC-20 tokens include:

Mainstream

The popularity of ERC-20 tokens is also their greatest weakness. There are so many projects using the same standard that it's difficult to stand out from the crowd without differentiating your token in some way. Moreover, since they're essentially all the same on a technical level.

Fraud and Scams

It takes minimal effort to create a simple ERC-20 token, meaning that anyone could do it for good or bad purposes. As such you want to be careful with what you're investing in when considering blockchains projects because there are some Pyramid schemes masquerading as legitimate projects out there and trying to get unsuspecting investors involved in their scams. As a result, when looking at blockchain projects, you need to be cautious with what you invest in.

Other ERC Token Standards

While there is a large range of ERC tokens available, below we've outlined the most popular ones (excluding the ERC-20 one as it is listed above). 

ERC-721 

This token standard is for a non-fungible token (NFT) which gained huge popularity in the last year across the gaming and digital art worlds. These tokens represent ownership of something, and cannot be used interchangeably. 

ERC-777 

An evolution of the ERC-20 token, the ERC-777 provides more usability, particularly pertaining to its ability to mint or burn tokens. It also holds improved transaction privacy and an emergency recovery function. 

ERC-1155

This token standard allows for the creation of both utility tokens and non-fungible tokens. Making trading more efficient, the token standard allows for bundling of transactions which in turn saves costs. 

Learn more about cryptocurrencies and blockchain

You can learn more about crypto basics from our specially created Learn centre, which covers everything a trader ought to know about cryptocurrencies and the blockchain industry.