Francisco Landino, the Commercial Project Manager at Cardano’s (ADA) parent company Input Output Global (IOG), said in a press release that the much-awaited Cardano ERC-20 converter is ready to be released.
ERC20 convertor will be a very critical component in competing against the number one smart contract platform, Ethereum. Landino expects the convertor to move significant numbers of Ethereum developers to jump ship and join the Cardano network.
Why ECR20 token converter?
Ethereum is currently the world’s most-used blockchain network, processing billions of dollars worth of transactions each week and millions of smart contract interactions each day. The popularity of the ethereum blockchain is primarily because of the programmable smart contracts that give an opportunity to develop decentralized applications. DeFi and DApps are developed using smart contracts on the ethereum blockchain.
Well-designed ERC20 tokens address many needs, and the more useful they become, the more demand grows and so their value grows accordingly. That is why these tokens are widely used and are so well supported by wallets and exchanges.
According to DeFi Pulse, a tracking website, a total value of over ‘$75 billion is now locked up’ in DeFi. A year ago, the total was just $700 million. Most of this value is in the form of crypto assets based on the ERC20 token standard on the ethereum blockchain network.
However, ethereum proof-of-work infrastructure is challenged with ever-rising gas fees (reached over $200 for some assets last week), slow transaction (15 transactions per second), and limited usability when it comes to development and innovation. This has caused the swapping and usage of ERC20 tokens, or the assets issued on the Ethereum network as per compatible standards, to be both slow and expensive.
45% of platforms built on Ethereum name scalability and high gas costs among the top three problems constraining mass DeFi adoption.Cointelegraph’s DeFi Adoption 2020 survey report
There are a few layer-2 scaling platforms that have come in recent years to solve these challenges. One of them is Polygon (previously Matic Network) that has been overly successful in doing it by providing an off-chain solution to the ethereum blockchain.
However, to use a side chain network, you have to build your decentralised applications on side-chain standards that will eventually interact with the main ethereum network. Cardano on the other hand is taking a completely different approach and providing a converter that will allow issuing organizations and their users to handle ERC20 token migration to Cardano in just a few clicks.
Cardano ERC20 token converter
The ERC20 tokens, after being converted, would run on Cardano’s Ouroboros proof-of-stake consensus mechanism—which relies on a network of stakers and validators who maintain the network and process transactions. Compared with Ethereum’s proof-of-work protocol, Ouroboros needs far less energy to process network transactions. Because of this, Ouroboros is not only eco-friendly but also needs far lower fees to process transactions.
Users would be able to ‘convert’ Ethereum tokens, move them across, and use those ‘converted’ tokens as a special native token on Cardano that has the same value and works just like an ERC20 token. And Cardano does not require smart contract execution costs also because the ledger supports native token functionality with its built-in accounting model. This means that the tracking, transfer, and ownership of different types of assets are handled by the ledger instead of smart contracts.
How does the Cardano ERC20 token converter work?
The ERC20 converter will see its first usage for SingularityNET, with the converted token called “AGIX.” An initial testnet will allow users to assess the process of migration while working with AGIX tokens both in Cardano and Ethereum ‘Kovan’ testnets.
When users log into their ERC-20 converter account, they will see SingularityNET tokens listed and available for migration, and, by clicking on a token ‒ details such as token balance. They will just need to select the token, indicate the amount they would like to convert, and then migrate them by specifying a Cardano address. When tokens migrate to the address, it will be possible to use them for payments and transactions from the Daedalus wallet. All the activities will be visible both within Etherscan and the Cardano Explorer.