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The Token Factory module on Injective which allows users and contracts to create new native tokens and swap native tokens with CW20 tokens using the Mint + Burn model. This is an important feature to have on chain because representing assets from different sources to a native bank denom is crucial to allow users to access the rest of the on-chain modules like exchange, auction, insurance funds, etc. The token factory denoms are in the following format factory/{creator address}/{subdenom}. Combined with the CW20AdapterContract which acts as a creator, we allow CW20 assets to be natively represented on Injective as Token Factory denoms. The way it works is that CW20 assets are held by the CW20AdapterContract and minted as a factory denom for the injective address and when we want to redeem them back to CW20, they are burned from the bank module and unlocked from the CW20AdapterContract back to the owner address.

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Example on how to redeem a factory denom to CW20

import {
  MsgExecuteContractCompat,
  ExecArgCW20AdapterRedeemAndTransfer,
} from '@injectivelabs/sdk-ts'

const CW20_ADAPTER_CONTRACT = 'inj...'
const contractCw20Address = 'inj...'
const injectiveAddress = 'inj...'

const message = MsgExecuteContractCompat.fromJSON({
  sender: injectiveAddress,
  contractAddress: CW20_ADAPTER_CONTRACT,
  funds: {
    denom: `factory/${CW20_ADAPTER_CONTRACT}/${contractCw20Address}`,
    amount: actualAmount.toFixed(),
  },
  execArgs: ExecArgCW20AdapterRedeemAndTransfer.fromJSON({
    recipient: injectiveAddress,
  }),
})

// Then pack the message in a transaction, sign it and broadcast to the chain

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Example on how to convert CW20 to a factory denom

import {
  ExecArgCW20Send,
  MsgExecuteContractCompat,
} from '@injectivelabs/sdk-ts'

const CW20_ADAPTER_CONTRACT = 'inj...'
const contractCw20Address = 'inj...'
const injectiveAddress = 'inj...'
const amount = '1000000' // 1 USDT represented as on the chain as it has 6 decimals

const message = MsgExecuteContractCompat.fromJSON({
  contractAddress: contractCw20Address,
  sender: injectiveAddress,
  execArgs: ExecArgCW20Send.fromJSON({
    amount,
    contractAddress: CW20_ADAPTER_CONTRACT,
  }),
})

// Then pack the message in a transaction, sign it and broadcast to the chain