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How To Create a Token on Hedera Using Hedera Consensus Service

The Hedera Consensus Service, more often referred to as HCS, is a token service that provides consumers with the benefits of low prices, anonymity, and the freedom to build new applications. Additionally, HCS creates an immutable and verifiable record of conversations. This log acts as a layer of trust for any permissioned network on which it is deployed, and authorized users may see it. Individuals or organizations may produce tokens, and once issued, they can be exchanged on private ledgers utilizing the fair global ordering of transactions for any application.

Reading this article, you will, without a doubt, have a significantly improved comprehension of how to generate tokens by utilizing the Hedera consensus service provided by Hedera Hashgraph Development Company.

What is Tokenization?

Tokenization transforms a significant piece of data, such as an account number, into a string of characters with no significance and is referred to as a token. If the integrity of a token's security is breached, the information that the token represents is rendered worthless. Tokens are pointers to the underlying data, but you can't draw any conclusions about the values of the underlying data by looking at the tokens themselves. A database referred to as a token vault is utilized in the process known as tokenization. This database keeps a record of the connection that has been established between the token and the sensitive item. After that point, the original data saved in the vault will be safeguarded.

Without the need to create smart contracts, the Hedera token service makes it possible to set up, mint, and straightforwardly manage fungible and non-fungible tokens. This is made possible because it supports these features in tokens, Tokens that can be extensively customized at low cost and with powerful and dependable governance.

The Hedera Consensus Service

The Hedera Consensus Service is a tokenization service that enables developers to create unique network members, deployment patterns, use cases, and data privacy settings. HCS is a mix of Hedera Mirror nodes and State Proofs that merges the private and public DLT markets by providing associated benefits. HCS is a decentralized ledger technology (DLT) developed by Hedera. It enables developers to harness publicly dispersed networks to sequence transactions in a way that is immutable, low-cost, and rapid, all while guaranteeing fairness. In addition, it provides distributed assurance in the operation of code without requiring smart contracts to be implemented. Put another way, it enables developers to add their native services to the public ledger that Hedera manages and keeps up to date.

Explaining Tokenization on Hedera

The Hedera network is available to the general public. Still, its mainnet is permissioned, which means that access to it is restricted to only those members of the Hedera council. When users submit a transaction to a node or multiple nodes, it will be processed concurrently regardless of how many nodes it was sent to. This holds regardless of whether the transaction was delivered to one or several nodes. If the transaction is correct syntactically and semantically, and if the user has enough balance, the node will broadcast it using a gossip mechanism. Nodes only do this when the user has enough balance.

The hashgraph algorithm used as the conclusion receives backing from the consensus procedure. Once the network reaches a consensus on a transaction, the approach does not wait for an increasing number of block confirmations as it is not probabilistic and does not wait for blocks to be added to the chain. On the network, the entire process of agreeing can be finished in as little as three or four seconds. Compared to other blockchain systems, one of the most notable characteristics is the surprising finality that may be reached in three to four seconds.

In contrast to nodes on the mainnet, the Hedera node does not keep a record of prior transactions. This is the key difference between the two types of nodes. This is the essential characteristic of the Hedera node. Consequently, when the transaction is sent to Hedera, it is processed by the nodes, and the state on the node is modified as a direct result of the processing of the transaction.

Creating New Tokens

Before producing tokens, you must have a testnet account to submit your account number, operator ID, and private key. Supposing you do not have a testnet account, you will be unable to create tokens. After configuring the file, it is time to go on to the next step, the token generation procedure.

To start a new token, use the given command in the picture below. Then the token will be produced using the Hedera consensus TopicID as the starting point. Everyone interested in utilizing this token will be required to establish a connection with this TopicID.

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The Token Message Standard

The message to HCS during the tokenization process includes instructions for transferring tokens across accounts in a ledger. These instructions are included in the message. The Token Message Standard was developed to facilitate the construction of a token that uses HCS.

Application logic may be used to construct the token contract, which can then be used to codify the responsibilities and behaviors of the token.

The accounts ledger is held on permissioned nodes, which also perform the logic and send the token to the users on their accounts. These permissioned nodes also keep the ledger. The transaction sequencing performed by HCS ensures that nodes stay in sync speedy and risk-free.

Token Contract

HCS is responsible for delivering communications to the application logic, referred to as the Token Contract. These messages are sent by utilizing the mirror nodes as a transmission method. The nodes are configured to simply listen to a given TopicID, against which any messages important to the token are submitted. The message sent from HCS is validated by the token contract, which examines it to ensure that it satisfies the requirements specified in the token description for the roles and behaviors expected of tokens.

Once the validation process has been completed, it will modify the state of the permissioned network node to align with the transaction's specifics. Additionally, depending on the use case's requirements, it is feasible to incorporate more complex logic, such as automated event triggers, references to external oracles, or atomic swaps. The transition in state ultimately results in the production of a notification, which indicates that the transaction was properly finished and that its data was correctly saved.

Token Node

You will want the following components to properly install token nodes on your network:


The needs of the decentralized token network will dictate the onboarding process. These criteria may include key sharing for data encryption, KYC checks on token node operators, and the locations of token node nodes. The deployment of a copy of the most recent version of the token contract is a precondition that is required for the token node to function properly. In addition, it is necessary to sign up for a subscription to the TopicID of the newly established HCS token network.


The token contract includes code describing the roles tokens are intended to play and how they should behave in various contexts. These roles and behaviors are defined by the context in which tokens are used. This is accomplished by automating the execution of logic on each node in a consistent way. This guarantees that the state of each node is changed consistently whenever a message is ordered through HCS.


Token nodes are responsible for launching an API server. Users have access to information about their token network accounts by utilizing this server's standardized user interface, which is provided by the server. Confirming the transaction record, retrieving the current balance of an account, and even acquiring information on the keys associated with each role in the token contract are all capabilities of the API server.


The HCS gives token nodes authority to store data on their internal databases by granting such permission. It makes it feasible for nodes to utilize logic contained within token contracts to ensure their local state regarding the most recent message that HCS requested is up-to-date. This makes it possible for nodes to leverage logic provided within token contracts.

Ordering of Transactions

Transaction ordering ensures that any instructions about the transfer of tokens or any other network activity are up to date. This applies to any activities on the network. Token nodes' ability to keep their consistency and continue to enable decentralized exchange is contingent on the order in which transactions occur across the network.

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The Mirror Node

On HCS, besides the reference implementation, numerous applications use mirror nodes to automatically receive messages upon arrival to consensus. This allows the messages to be received more quickly. A token node will need to subscribe to the TopicID that has been correctly defined for the token network for it to be able to receive HCS messages from the mirror node. This will guarantee that the token node can do so. The token node can request the same data from the operator of any mirror node and check that the results are identical to those of the mainnet.

The Message

Every transaction on the permissioned network is contained in a message containing the signature information for the trading tokens party. To authenticate each message, a distinct group of keys must be used to sign them, which must be done in line with the operation being carried out. Whenever a message from a participant in the token network is sent to the Hedera mainnet, it is accompanied by a TopicID that has been appended to it. After the message has been delivered to the mainnet consensus node, the information is disseminated throughout the mainnet nodes to conclude.

The Fees

Transaction fees associated with the supply of the Hedera Consensus Service are the responsibility of the users of the Hedera Consensus Service. Every activity will result in a separate charge being racked up. Thanks to the token network, users now have more options about how they may pay the Hedera fees. Setting up a single account responsible for paying for all the transaction expenses is feasible. In addition, token nodes are allowed to create their own Hedera accounts, which gives them the ability to pay the fees necessary to offer assistance to their end users. These approaches make it feasible for end users to utilize the system without knowing the encryption.


Hedera consensus service is important when blockchain experts create unique deployment patterns, use cases, network numbers, and data privacy settings. With the help of the consensus, the service reaches an agreement on the general functionality and validity of transactions on the network. Our blockchain consultants have a mastery of all Hedera frameworks including the consensus service which is super relevant for businesses and organizations.

The Hedera Consensus Service is a token service appropriate for use cases that demand a higher level of control and secrecy over the operation of token nodes and token contract logic. This token service is the one that caters to these use cases the most effective. Several different use cases are offered by Hedera hashgraph development company to facilitate a broad range of possible applications for tokenization.

If the Hedera Consensus Service has caught your interest and you want to incorporate it into the project that you are currently working on, then we are here to offer our assistance. We are delighted to discuss your technical needs in further detail if you would like to set up a meeting with us to do so.

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