What is a token
A token is a programmable digital asset secured by cryptography and recorded on a distributed ledger known as a blockchain. Tokens represent value and can serve various functions, including acting as digital currency, providing utility within specific platforms, or representing real-world assets such as commodities, real estate, or artwork.
Unlike cryptocurrencies like Bitcoin (BTC) or Ethereum (ETH), which are native coins with their own independent blockchains, most tokens are created and managed on existing blockchain platforms. Ethereum, for example, supports tokens adhering to the widely-used ERC-20 standard, enabling seamless integration and compatibility across decentralized applications (DApps) and exchanges.
Types of Tokens and Examples
Utility Tokens: Provide access or utility within a blockchain ecosystem. Example: Basic Attention Token (BAT), used within the Brave browser ecosystem.
Security Tokens: Represent ownership or rights in real-world assets like equity, real estate, or precious metals. Example: Blockchain Capital (BCAP), a security token representing shares in a venture capital fund.
Stablecoins: Tokens pegged to traditional assets like fiat currencies to minimize volatility. Example: Tether (USDT), pegged to the US dollar.
Non-Fungible Tokens (NFTs): Unique digital tokens representing ownership of specific digital or physical items. Example: CryptoPunks or Bored Ape Yacht Club digital collectibles.
By leveraging blockchain technology, tokens enable secure, transparent, and efficient digital transactions, reshaping industries from finance and gaming to art and real estate.