Lets say I have token 'HX' and HX is a asset backed ERC20 token. How are transactions validated for HX? Mining would mint additional HX tokens but that would dilute ownership, right? More tokens and same amount of assets = dilution. Also, if tokens are burned for transaction validation then ownership of underlying asset would be fixed. I'm confused by the topic and struggling to ask a clear question. I guess I'm wondering generally about how an asset backed token network would be able to operate with a fixed amount of underlying assets without dilution/inflation of ownership. Any answers or resources will be appreciated.
1 Answer
I can clarify a couple points for you that could help clear up some of your confusion.
- ERC 20 tokens are generally not mined. There is only one case that I know of where this isn't true which is the recent 0xBTC project which more information can be found about here. Instead tokens are minted for their creation then transferred allow around.
- ERC 20 tokens are not burned for transactions. To validate the transaction of an ERC 20 token, a small amount of ETH, called gas, pays for the transaction to be validated. There are also proposals that allow this gas to be paid for with the ERC 20 token itself including the ERC 865 proposed protocol.
Hope this helps!
