A token is a cryptocurrency built on top of an existing blockchain…

by Arthur · November 3, 2022

With the development of crypto, many new terms have appeared. Coins, tokens, NFTs, altcoins, stablecoins and more. The untrained person may be confused by the terms. And many still believe that tokens and coins are identical.

We tell you about defining tokens and why they should not be called coins.

Table of Contents

What is a token?

A token is a crypto-asset that provides privileges and bonuses within a specific project. On the selected project, a token can be used to pay for facilities or things. In addition, tokens give individuals access to certain types of exclusive products or even ownership of the control of the company.

It all depends on the project issuing the token.

In addition, the token can be traded or sold after the price goes up, which also allows you to make money.

To make an analogy with the real world, a token can be compared to a subway ticket. You buy a subway ticket and can ride any route, but only within the subway of the city where you bought it. You can get off and sell that ticket too. A token in the crypto world works in much the same way.

The difference between token and coin

A coin is a means of payment. You can buy items, trade one coin for another coin, but you can’t get any bonuses or privileges.

But the main difference between a token and a coin is the method of its creation. While a coin, such as bitcoin, is built on its own blockchain, a token is built on an existing platform.

The most famous blockchain for issuing tokens is Ethereum. This network has its own ETH coin. But any user can create his own crypto token on the platform, which works inside Ethereum, where all information will be registered.

The most popular examples of tokens is:

Uniswap
DAI
Chain link
Pancake Swap
SushiSwap
Solana
Phantom

Token types

Tokens differ from each other in the functionality they offer.

Asset/security symbols. Investment symbols. They give the right to own shares, receive dividends and influence the development of the project. The distinctive features of such assets are government regulation and customer identification. Therefore, supporters of decentralized cryptocurrencies, such tokens, may not be suitable.

Utility tokens. Provide access to a project’s product or service. Also provide an opportunity to profit from the difference in the token price when buying and selling, if the project develops.

NFT tokens. Non-fungible tokens used to prove ownership of an object. For example, music, photos, images, GIFs, etc. Essentially, tokenization is possible for anything. NFTs are growing in popularity, big companies are entering the market, and more and more stars are creating their own NFTs.

The biggest advantage of tokens are the great opportunities for investment and profit. You don’t need a bank account to transact with them, all you need is access to the Internet. Buying tokens can be a promising investment. After all, after listing and printing, the price of tokens can be understood dozens of times.

Last updated: 3 November 2022