How to Build a Token with ERC-20

In the world of blockchain development, understanding how to build a token with ERC-20 is akin to mastering the art of minting your own currency—only this time, it’s digital, programmable, and globally accessible. The ERC-20 token standard, created on the Ethereum blockchain, offers a reliable framework that ensures interoperability, ease of use, and widespread adoption across wallets, exchanges, and decentralized applications. This article dives deep into the technicalities and processes involved in building an ERC-20 token, using real code examples, developer analogies, and detailed explanations.

Understanding ERC-20: The Blueprint for Fungible Tokens

Before diving into development, it’s crucial to grasp what ERC-20 actually is. ERC stands for “Ethereum Request for Comments,” and 20 is the unique identifier for this standard. It defines a common list of rules for all Ethereum tokens to follow, enabling seamless interaction across the Ethereum ecosystem. Imagine ERC-20 as the “USB standard” for tokens: just as USB ensures that a mouse, keyboard, or flash drive will work with any compliant port, ERC-20 ensures your token will function on any Ethereum-compatible wallet or app.

The ERC-20 specification includes functions like totalSupply, balanceOf, transfer, approve, transferFrom, and allowance. These methods govern how tokens are created, distributed, transferred, and managed, forming the foundational contract logic that every token adheres to.

Setting Up the Development Environment

To begin, you’ll need a few tools: a code editor like Visual Studio Code, the Node.js runtime, and a package manager like npm. You’ll also use Hardhat, a development environment for Ethereum that provides local blockchain simulation and testing tools.

Install Hardhat in a new directory:

mkdir my-token
cd my-token
npm init -y
npm install --save-dev hardhat
npx hardhat
Code language: Bash (bash)

Choose “Create a basic sample project” when prompted. This sets up the scaffolding for your Solidity smart contract and testing infrastructure.

Writing the ERC-20 Token Contract in Solidity

Now let’s create the actual token contract. Solidity, Ethereum’s contract-oriented language, allows us to define our token’s behavior.

Here’s a simplified version of an ERC-20 contract:

// SPDX-License-Identifier: MIT
pragma solidity ^0.8.20;

import "@openzeppelin/contracts/token/ERC20/ERC20.sol";

contract MyToken is ERC20 {
    constructor(uint256 initialSupply) ERC20("MyToken", "MTK") {
        _mint(msg.sender, initialSupply);
    }
}
Code language: JavaScript (javascript)

This contract does several things:

• It imports ERC-20 logic from OpenZeppelin, a secure library of audited contracts.
• It sets the name and symbol of the token.
• It mints an initial supply of tokens to the creator’s address.

Think of ERC20 as a class in object-oriented programming—it gives your token all the basic methods and properties, so you don’t have to write them from scratch. The _mint function is like printing money into your wallet, where initialSupply is the number of tokens (in wei, the smallest denomination).

Compiling and Testing Your Token

Use Hardhat to compile the contract:

npx hardhat compile
Code language: Bash (bash)

You can test it with JavaScript using the Hardhat test environment. Here’s a basic test script to check the token’s supply and name:

const { expect } = require("chai");

describe("MyToken", function () {
  it("Should deploy and mint tokens", async function () {
    const [owner] = await ethers.getSigners();
    const Token = await ethers.getContractFactory("MyToken");
    const token = await Token.deploy(1000);

    expect(await token.name()).to.equal("MyToken");
    expect(await token.symbol()).to.equal("MTK");
    expect(await token.totalSupply()).to.equal(1000);
    expect(await token.balanceOf(owner.address)).to.equal(1000);
  });
});
Code language: JavaScript (javascript)

This is your quality assurance checkpoint—much like running unit tests in software development, these tests verify your token behaves correctly under various conditions.

Deploying the Token to a Live Network

Once tested, it’s time to push your token onto the Ethereum blockchain. First, choose your network: Ethereum mainnet for real use, or a testnet like Sepolia or Goerli for trial runs. You’ll need Ether (ETH) in your wallet to pay for gas fees—consider these the fuel required to deploy and run contracts.

Add your network configuration in hardhat.config.js:

require("@nomicfoundation/hardhat-toolbox");

module.exports = {
  solidity: "0.8.20",
  networks: {
    sepolia: {
      url: "https://sepolia.infura.io/v3/YOUR_INFURA_KEY",
      accounts: ["0xYOUR_PRIVATE_KEY"]
    }
  }
};
Code language: JavaScript (javascript)

Deploy with a simple script:

async function main() {
  const Token = await ethers.getContractFactory("MyToken");
  const token = await Token.deploy(1000000);
  console.log("Token deployed to:", token.address);
}

main().catch((error) => {
  console.error(error);
  process.exitCode = 1;
});
Code language: JavaScript (javascript)

Run the deployment script:

npx hardhat run scripts/deploy.js --network sepolia
Code language: Bash (bash)

The address output is where your token now lives on the blockchain, accessible by any Ethereum-compatible wallet.

Verifying and Interacting with Your Token

After deployment, you can verify your contract on Etherscan to improve transparency and make it readable by others. Hardhat provides a plugin for this:

npm install --save-dev @nomicfoundation/hardhat-verify
Code language: Bash (bash)

Then run:

npx hardhat verify --network sepolia DEPLOYED_CONTRACT_ADDRESS INITIAL_SUPPLY
Code language: Bash (bash)

Users can now import your token into wallets like MetaMask by entering the contract address, and they’ll see their token balance and transaction history.

To interact with your token programmatically or through a frontend DApp, use libraries like ethers.js or web3.js. You can call transfer(), approve(), and transferFrom() to build DeFi tools, NFT marketplaces, or gamified experiences.

Conclusion: Building a Token as a Gateway to Web3 Innovation

Learning how to build a token with ERC-20 not only equips you with the ability to create digital currencies but also opens the door to decentralized innovation. From launching your own crypto project to enabling value in Web3 apps, ERC-20 tokens act as the monetary foundation of blockchain systems.

Just like minting coins in the physical world involves metallurgy, minting ERC-20 tokens involves Solidity, smart contracts, and deployment infrastructure. With tools like OpenZeppelin, Hardhat, and Ethereum testnets, creating and launching a token has never been more accessible. The challenge now lies in building meaningful applications on top of it—and that’s where your creativity and technical prowess take center stage.