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Favicons are the little icons that show next to bookmarks and in the address bar of most browsers which provides an identity to a site. Favicons are 16 pixels square ico files.Here is a simple, online favicon maker where you can draw an icon or upload an image to make a favicon. This favicon maker supports alpha transparency.

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If you prefer only text / letter instead of image you can prefer Antifavicon to generate favicon. You only required selecting color of text and background and just typing text for your favicon.