ERC20 converter

2021-09-27

Reference
Bringing ERC20 to Cardano
Cardano Documentation: Learn About Native Tokens

According to DeFi Pulse and the above blog, there are $75 billion worth of cryptocurrency locked up in DeFi (at the time of writing).
There are more than 400,000 contracts based on ERC20, including Binance Coin (BNB), Tether (USDT), Uniswap (UNI), and Dai (DAI).

Challenges for Ethereum

Ethereum’s challenge is the rapid rise in cost and energy consumption due to PoW (Pull of Work). It is considered difficult to solve in the near future.

Cardano’s solution

In contrast, Cardano uses PoS (Proof of Stake), which consumes far less power than PoW, making it environmentally friendly and keeping fees low. In addition, as the number of nodes increases, the transaction processing capacity can be improved (scalable). The core of the system is the Ouroboros proof-of-stake consensus mechanism.

ERC20 converter

The ERC20 converter is a tool to migrate ERC20 tokens from the Ethereum platform to the Cardano platform. Once migrated, the tokens will be translated into Cardano’s native tokens (*1). It can also be reverted by burning it on Cardano. It is intended to facilitate communication by enabling bi-directional conversion between blockchains.

Future examples

SingularityNET will be deployed on the testnet as a first example, allowing AGI tokens to be migrated onto Cardano (through a 1:1 exchange) as AGIX tokens. Users can specify and manipulate the Cardano Daedalus Testnet address from their ERC20 converter account to migrate, and can check their activity from Etherscan and Cardano Explorer. Once migrated, the user can use the Daedalus wallet for payments, etc.

More tokens will be supported as more ERC20 converter partners are added.
An update will be presented at Cardano360 on May 27th.

*1) Native tokens

The Mary hard fork in March added support for multi-assets. The classifications of assets represented on the block chain include ADA, credentials, roles, and quantity of goods. Multi-asset is supported when it is possible to track ownership and transfer of different types of assets on a network or accounting ledger. (When a cryptographic asset ledger deals with a single type of asset, it is called a single-asset ledger.

A native token is a type of asset that has some value and acts as an accounting unit. They can be used for payments and transactions and can be transferred to an exchange address. Native means that these tokens are supported on Cardano’s accounting ledger without the need for additional smart contracts. The ledger itself has built-in functionality to track the ownership and transfer of multiple types of assets. The advantages of Cardano over Ethereum are that there is no smart contract execution cost, and whereas the creation and transfer of ERC20 tokens requires manual intervention to standard contract types, Cardano has built-in logic to eliminate errors and vulnerabilities.

Both ADAs and tokens have value, are used for payments and behave as transaction units, but the difference is that ADAs are used for fees and rewards, while native tokens can be custom created.