A token is a kind of cryptocurrency constructed upon living infrastructure like the Ethereum or Solana blockchains.
By distinction, a coin is said to be a native to its blockchain, and for instance, ETH is the native cryptocurrency of the popularly known Ethereum blockchain.
This article does not cover the best cryptocurrency like Bitcoin and Litecoin as they are not tokens but are cryptocurrency coins.
Although cryptocurrency coins have dominated market capitalization, most cryptocurrencies tokens are present in the market.
Crypto tokens can be used for an expansive range of additional purposes, such as utility, governance, rewards, and proving ownership of assets. Let us examine some of the most standard use cases.
Different Types of crypto tokens
A categorization system has emerged to describe the distinct types of cryptocurrencies and help individuals navigate the terrain. A thorough understanding of crypto starts with a study of the most known token types:
They are a medium of exchange and are primarily known as coins. The key purpose of these tokens is to act as a store of value and as a unit of account. For instance, coins like Bitcoin, Ethereum, Tether, etc., are known as Payment Tokens.
It can also be noted that the payment tokens also gain or lose their value depending upon demand and supply in the market. An increase in demand and a reduction in supply directs to a rise in the token’s value.
Security tokens direct to traditional securities for example stocks and shares. These tokens are digital, liquid agreements for a proportion of any asset that already has some value, like a property. On the contrary, in Insecurity tokens, the holder has privilege rights that are preserved on the blockchain ledger.
A Non-Fungible Token (also known as NFT) is also a special digital asset or a crypto token. There is no standard value since it conveys ownership of a specific asset in the real world. For example, it can represent possession of any video, audio, art, and more. Though these tokens use the same blockchain technology that powers cryptocurrencies, they are distinct when compared with a currency.
Using Utility Token, the holder can access a blockchain-based product or service.
For example, Users can use transactional tokens Ether to access applications or make any kind of expenses for smart contracts to be performed on the Ethereum blockchain. Likewise, users can use GAS coins to access the NEO network.
Benefits of Crypto Token
Cryptocurrency tokens are one of the paramount inventions in the present world and can be found on different crypto exchanges in India. While many countries accept cryptocurrency as a payment option in times today, crypto tokens will supply the world with frictionless markets.
Here is a quick look at the benefits of Cryptocurrency Tokens: –
- Tokens represent or create a specific asset on the blockchain. With the help of tokenized assets, people can easily trade any of their assets in the world without any arbitrator. It creates a frictionless market and removes many barriers from the system.
- With the support of tokens, integrations can be done in a decentralized manner. We also do not require to set any criteria or create trustworthy channels.
- Tokens play a significant role in making payments more convenient and safer.
- Tokens hold value and can also be exchanged, significantly designating physical assets.
- From investment to holding value and trading, tokens are advantageous in every sector and unravel the problem of holding multiple assets.
Tokens might be the fate of payments and investments, and it can be termed as secure, reliable, as well as one of the best and most efficient ways of trading.