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So I created my first token on the Ethereum network and I'm curious how does it get a fiat value.

For example they are being used as a test service on a website but how does coincap or coinmarketcap put a value to them? Is it only when it gets on a big exchange like poloniex or bittrex that a fiat value gets pinged with the ETH Token?

I'm curious because were going to do a $0.01 / token value until the total supply sells out. But how would coinmarketcap or coincap know what they're worth.

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You could ask the question: How does anything (your token included) get a value? The answer is simple: by other people actually paying a price (Ether, USD, CHF or chickens) for it. Look at Bitcoin, how did it get a value? By somebody offering two pizzas in exchange for 10'000 BTC. What does that mean in practice for you? If your buddy is willing to pay 0.1 Ether for one of your tokens then your token has a value of 0.1 ETH / token. Say you issued 100'000'000 tokens in total then your total coin market capitalisation is 10'000'000 Ether. But as you correctly might have guessed you cannot yet dump it onto the market and buy a mid-sized island for yourself. There is no liquidity in your token market because your buddy that just bought 1 token for 0.1 Ether is likely not going to buy the rest off you. So you could do a big marketing outreach, get listed on a few exchanges and eventually coinmarketcap might also list you. Then follow instructions from the previous link to buy a few tokens off yourself at high prices - a 'pump' move which initiates the scammy pump-and-dump scheme.

Now, scam example aside - how could you technically give your token an issuing value? Instead of just pre-issueing all tokens to yourself, you could come up with a minimal issuing function that implements:

  1. an issuing price
  2. a cap

This is the code to add to your token:

uint public cap = 10000000;

uint public priceTokensPerWei = 1e17;

function issueTokens() payable {

  uint tokensToIssue = msg.value * priceTokensPerWei; // enforcing price

  assert(cap >= tokensToIssue); // enforcing cap

  // now actually issue the tokens (these variables have to be part of your token definition)
  balance[msg.sender] += tokensToIssue;
  supply += tokensToIssue;
}

Eight lines of code to turn your token into an ICO with fixed value and cap - yay! ;) Feel free to steal a complete minimal example from Validity Labs: https://github.com/validitylabs/demoICO/blob/master/contracts/Token.sol

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Created first ETH token on test-net how does a monetary value get decided?

If it's on the testnet, then it won't be worth anything. Testnets are for testing, and should be seen as only temporary. They can be shut down without notice (as has happened in the past).

For example they are being used as a test service on a website but how does coincap or coinmarketcap put a value to them?

There are 2 main ways.

  • The crowdsale (ICO).
  • The market.

When you initially offer your token to the community, you can sell it at a set price, like the $0.01 / token you mention above. Your market cap can then be determined from this.

But how would coinmarketcap or coincap know what they're worth.

At least for the ICO, as long as they know how many you have sold, and what you sold them for, they can work out your market cap. Note that you don't need to sell all your tokens. You could sell 1% of them at $0.01, but the other 99% that you still hold would still contribute to the market cap total.

Once the token is on the market, you have no control over its value (unless you peg it to something, but that's a different question). It's in a market, and it will be worth whatever supply and demand, and speculation, say it's worth. If people don't want your token, it will be worth nothing.

  • I think this is correct except for the bit about tokens on the testnet not being worth anything. I've seen a bunch of posts where people are trying to do some testing on the test net and can't mine any test ether and can't get the faucets to work. I think they'd be quite happy to pay a cent (or even buy a pizza!) for someone who can help them out. – lungj Jul 13 '17 at 14:10
  • Ok, that's a fair point :-) In a world where people are able to get their hands on test ether, it shouldn't be worth anything. But I suppose if there's a current shortage then supply and demand will take over... :-) – Richard Horrocks Jul 13 '17 at 14:28

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