In the cryptocurrency world, the term “token” is one of the most used expressions. This brings up questions about what is it and what it refers to.
Therefore, Cryptolydian reviews the definition of cryptocurrency tokens and the difference from tokens outside the world of crypto.
What is a token?
In the dictionary, “token” as a noun is something serving to represent or indicate some fact, event, feeling, etc.. It is also a characteristic indication or mark of something, as an evidence or proof.
Generally speaking, we can define a token as an object or symbol that represents something else, whether physical or virtual.
In the world of computers, there are number of types of tokens. A security token is a device. Mostly used for smart cards, it provide users with a different PIN every time he uses a specific system or object. This device is currently available for specific bank users.
Also, there are programming tokens as the basic component of source code. Characters are one of five classes of tokens that describe their functions in accordance with the rules of the programming language, according to whatIs.com?
Cointelegraph defined crypt tokens as entities with a value specified by the eminent. If it is a fashion startup, one token can equal one dress. A yearly licence of a software could also serve as a token in the case of a hi-tech startup. You can pretty much “tokenize” everything.
A token is an encrypted string that relates back to data. Tokenization is simply a type of encryption, according to Cryptocurrency Facts.
Meanwhile, Investopedia said that crypto tokens are special kinds of virtual currency tokens that reside on their own blockchains and represent an asset or utility. Most often, people use them to fundraise for crowd sales or as a substitute for other things as well.
To clarify, token as a term in cryptocurrency can be used for different meanings according to the context. It can be used to describe any digital assets. For example, Bitcoin is a cryptocurrency token. The term might also refer to the value of the cryptocurrency. For example, someone can own a specific amount of Bitcoin or Ether tokens.
Moreover, it can signify the encryption process as the creation, transfer, and storage of cryptocurrencies using strings of numbers and letters called tokens. Cryptocurrency facts clarified that in cryptocurrency transactions, tokens are created and sent through the internet when transactions are created, existing as entries on a given coin’s blockchain/ledger.
It can also refer to digital assets built on another cryptocurrency’s platform. The term here means the coins that exist on a platform other than its existing one. For example, the native token on the Ethereum platform is Ether, while 0x is an ERC-20 token created from the 0x ICO. Both Ether and 0x are cryptocurrencies on the Ethereum network, but one might refer to 0x as “a token” to differentiate it from the native cryptocurrency on the platform/network/blockchain.
Crypto tokens do not just represent assets, but can be a utility too. Utility tokens are not like traditional investments. Instead, they grant holders access to a company’s future product or service. Depending on the design, utility tokens could very well be exempt from the regulation aimed at securities, Coin Rivet stated.