DEPARTMENT OF INFORMATION TECHNOLOGY

Semester B.E. Semester VIII– Information Technology

Subject Blockchain & DLT

Subject Professor In-charge Dilip Motwani

Student Name Satyam Mishra

Roll Number 20101A0021

Grade and Subject Teacher’s Signature

Assignment No. 05

Q.1) Explain different types of crypto currencies.

There are two main categories of cryptocurrencies:

• Coins: These are cryptocurrencies that have their own independent blockchain, the
technology that underlies cryptocurrencies. Bitcoin (BTC) is the most famous example of a
coin. It's the first cryptocurrency ever created and remains the most valuable.
• Tokens: Tokens are digital assets that are built on top of existing blockchains, like Ethereum
(ETH), another major cryptocurrency. Tokens can be used for a variety of purposes, such as
representing ownership of a company or asset, or providing access to a particular service.

Here are some of the most popular cryptocurrencies and what they are known for:

• Bitcoin (BTC): The first and most well-known cryptocurrency. It's seen as "digital gold" by
some, and is a popular investment.
• Ethereum (ETH): The second largest cryptocurrency by market cap, Ethereum is a platform
that allows developers to build decentralized applications (dApps) and smart contracts.
• Tether (USDT) and USD Coin (USDC): These are sogenannten "stablecoins" that are pegged
to the value of the US dollar. This means their value should be relatively stable compared to
other cryptocurrencies.
• Binance Coin (BNB): The native coin of the Binance cryptocurrency exchange, BNB can be
used to pay for trading fees and other services on the Binance platform.
• Cardano (ADA) and Solana (SOL): Newer cryptocurrencies that are seen as potential
competitors to Ethereum. They offer faster transaction times and lower fees.

Q. 2) Explain the steps to create ERC20 tokens.

Creating ERC20 tokens involves writing code for a smart contract and deploying it on the Ethereum
blockchain. Here's a general breakdown of the steps:
 1. Set Up Development Environment:

• You'll need a code editor, a compiler for the Solidity programming language (used for smart
contracts), and a way to interact with the Ethereum blockchain. Some popular options
include Remix IDE (https://remix.ethereum.org/) or tools provided by blockchain platforms
like Alchemy (https://www.alchemy.com/ethereum).

2. Write ERC20 Token Smart Contract:

• The core of your token lies in the smart contract code. You can either write it from scratch,
which requires knowledge of Solidity, or use pre-built templates from platforms like
OpenZeppelin (https://www.openzeppelin.com/). The contract will define functions for
actions like transferring tokens, approving allowances, and managing the total token supply.

3. Write Deployment Script (Optional):

• This script helps automate the deployment process on the blockchain. It can be helpful for
interacting with the blockchain and setting up initial parameters for your token.

4. Deploy Your ERC20 Token:

• Once your code is ready, you'll need to deploy it to the Ethereum blockchain. This involves
sending a transaction that includes the smart contract code and requires fees paid in ETH
(Ethereum's native token). You can deploy to the Ethereum mainnet (expensive for testing)
or a testnet like Rinkeby or Goerli (recommended for initial testing).

5. Interact with Your Token (Optional):

• After deployment, you can interact with your token using a crypto wallet like MetaMask.
You'll need the contract address to find your token within the wallet and be able to transfer or
manage your tokens.

Additional Tips:

• Consider security audits for your smart contract code before deployment, especially if
dealing with real funds.
• There are services that offer facilitated token creation, but they might come with additional
fees.
• Remember, deploying to the mainnet incurs fees, so test thoroughly on a testnet first.

Q. 3) Discuss working principal of NFT.

NFTs (Non-Fungible Tokens) rely on blockchain technology, similar to cryptocurrencies, but with a
key difference: fungibility.
 • Fungibility: Fungible items are interchangeable. A dollar bill is fungible - any dollar bill has
the same value as another. The same goes for Bitcoin - one Bitcoin is the same as another
Bitcoin.
• Non-Fungibility: NFTs are non-fungible. Each NFT is unique and irreplaceable. It
represents ownership of a digital asset, like artwork, music, or even a collectible tweet.

Here's how NFTs work on a blockchain:

1. Tokenization: A digital asset (image, video, etc.) is linked to a smart contract, a piece of
code on the blockchain that defines the NFT's properties and behavior.
2. Blockchain Record: The smart contract is deployed on a blockchain, creating a permanent
and transparent record of the NFT's existence. This record includes details like ownership
history and any unique properties.
3. Ownership and Transfer: The NFT acts as a digital certificate of ownership. Whoever
holds the NFT in their crypto wallet is considered the owner. Ownership can be transferred
between wallets through transactions on the blockchain.

Here's what blockchain provides for NFTs:

• Security: The blockchain ensures the authenticity and immutability of the NFT. Once
recorded, the ownership history cannot be tampered with.
• Transparency: Anyone can view the ownership history and details of an NFT on a public
blockchain.
• Scarcity: The smart contract can limit the number of NFTs created, ensuring scarcity and
potentially increasing value.

Use Cases of NFTs:

• Digital Art and Collectibles: NFTs are being used to sell and trade digital artwork, creating
a new market for digital creators.
• In-Game Items: NFTs can represent ownership of unique items within video games,
allowing players to buy, sell, and trade them.
• Event Tickets: NFTs can be used for ticketing events, offering benefits like exclusive
content or merch for NFT holders.
• The Future: The potential applications of NFTs are still being explored, with possibilities in
areas like identity management, fractional ownership of real-world assets, and supply chain
tracking.

It's important to note that the NFT market is still evolving, and there are risks involved, like scams
and the volatility of the market. However, NFTs offer a unique way to represent ownership and
value in the digital world.

Q. 4) Discuss STO tokens in detail.

STO tokens, or Security Token Offerings, represent a new wave of fundraising and investment
opportunities that leverage blockchain technology. Here's a deep dive into how they work:
Understanding STOs:

• Security Tokens: Unlike ICOs (Initial Coin Offerings) that often deal with utility tokens
granting access to a service or platform, STOs involve security tokens. These tokens
represent ownership or rights in an underlying asset, similar to traditional securities like
stocks or bonds.
• Regulated Offerings: A key aspect of STOs is their compliance with securities regulations.
Issuers of STOs must go through a legal process similar to an Initial Public Offering (IPO),
ensuring investor protection and adherence to regulations set by financial authorities.

Benefits of STOs:

• Increased Liquidity: By tokenizing real-world assets like real estate or art, STOs enable
fractional ownership. This allows for a broader investor base and increased liquidity for the
underlying asset.
• Transparency and Security: Blockchain technology provides a secure and transparent
record of ownership and transactions for STO tokens. This reduces the risk of fraud and
improves auditability compared to traditional methods.
• Efficiency and Lower Costs: STOs can potentially streamline the fundraising process,
reducing administrative costs associated with traditional offerings. Additionally, fractional
ownership allows for smaller investment amounts, making these opportunities more
accessible.

How STOs Work:

1. Asset Selection: A company or entity identifies an asset to be tokenized, which could be real
estate, shares in a company, or even a piece of intellectual property.
2. Security Token Creation: Security tokens are created on a blockchain platform that
complies with regulations. The smart contract behind the token defines the rights and
obligations associated with it, such as dividend payouts or voting rights.
3. Legal Compliance: The STO offering must comply with relevant securities regulations. This
typically involves filings with financial authorities, investor KYC/AML checks, and creating
a legal prospectus outlining the details of the offering.
4. STO Platform and Marketing: The STO is conducted through a dedicated platform that
facilitates investing in the security tokens. Marketing efforts target qualified investors who
meet regulatory requirements.
5. Investment and Secondary Market: Investors purchase tokens during the STO with
cryptocurrency or traditional fiat currency. Once the offering is complete, the tokens can
potentially be traded on secondary markets designed for security tokens.

Things to Consider with STOs:

• Regulatory Landscape: The STO market is still evolving, and regulations vary by
jurisdiction. It's crucial for issuers to stay up-to-date on relevant regulations.
• Investor Suitability: Due to the legal complexities, STOs are often targeted towards
accredited investors, those meeting certain income or net worth thresholds.
• Technological Challenges: The technology behind STOs is still under development, and
there can be complexities associated with integrating with traditional financial systems.
Overall, STOs represent a promising innovation in fundraising and investing. They offer
benefits like increased transparency, security, and fractional ownership. However, it's
important to understand the regulatory landscape, potential risks, and the evolving nature of
this technology.

Q. 5) Explain the steps to create ERC21 tokens.

ERC-721 tokens, unlike ERC-20 tokens, represent unique digital assets. Here's a breakdown
of the steps involved in creating ERC-721 tokens:

1. Planning and Design:

o Define Use Case: Clearly outline what your NFT represents (digital art,
collectibles, etc.) and its purpose.
o Token Design: Plan the properties and functionalities of your NFT. Will it have
varying levels of rarity? Will it grant special access?
2. Development Environment Setup:
o Coding Skills: Creating ERC-721 tokens involves writing smart contracts,
typically in Solidity.
o Development Tools: You'll need a code editor, a Solidity compiler, and a way to
interact with the Ethereum blockchain. Remix IDE (https://remix.ethereum.org/)
or tools from blockchain platforms like Alchemy
(https://www.alchemy.com/ethereum) are popular options.
3. Smart Contract Development:
o ERC-721 Standard: Your smart contract needs to implement the ERC-721
standard functions. These functions govern how NFTs are minted (created),
transferred, and tracked ownership.
o Additional Features (Optional): You can add functionalities beyond the standard,
such as setting token limits or allowing burning (destroying) NFTs.
4. Token Metadata (Optional):
o NFT Details: While not part of the core ERC-721 standard, you can create
metadata files containing details like the NFT's name, description, and image.
These files are often stored in a decentralized storage system like IPFS ([invalid
URL removed]).
5. Deployment:
o Testnet vs Mainnet: It's highly recommended to deploy your contract first on a
testnet like Rinkeby or Goerli to test functionality and identify any bugs before
deploying to the Ethereum mainnet (which incurs fees).
o Transaction and Fees: Deploying the smart contract to the blockchain involves a
transaction that requires gas fees paid in ETH.
6. Minting and Distribution:
o Minting Process: The process of creating your ERC-721 tokens is called minting.
This is typically done through a function within your smart contract.
o Distribution Strategy: Determine how you'll distribute your NFTs. Will you sell
them in an auction? Give them away for free?
Additional Tips:

• Security Audits: Consider security audits for your smart contract code to minimize
vulnerabilities before deployment.
• Start with Tutorials: There are many online tutorials with code examples to guide you
through the ERC-721 token creation process.
• Community Building: For NFTs with utility or representing memberships, consider
building a community around your project.

Remember, creating ERC-721 tokens involves coding and understanding blockchain

technology. It's a good idea to do thorough research and have some programming experience
before diving in.