Crypto

What is a crypto token, anyway?

may 25, 2021 | min read

In today’s world, the term cryptocurrency is already established in the minds of many people around the world. As the best example we can use Bitcoin, the first cryptocurrency ever made that was created and launched in 2009. In recent years, the term crypto token is more and more prevalent, but many people are still wondering what exactly a token is, how it differs from cryptocurrency and what kind of value can it bring into their lives.
Cryptocurrency is the asset of blockchain that can either be traded, used as a medium of exchange or and used for investment purposes as a store of value. All cryptocurrency operates on its own blockchain technology, meaning that each of these cryptocurrencies has its own way of handling and processing transactions. When you hear blockchain, think about a giant database that stores all the transactions of all the cryptocurrencies and is verified by computers all around the world. Blockchain simply means a system of recording information in a certain way, which makes it difficult or nearly impossible to change important information or cheat the system. It is basically a digital network system that is automatically distributed across all computers connected to that blockchain. Every block that exists in the chain contains a number of transactions and if a new transaction takes place on the blockchain, information about that transaction is added to every participant´s ledger.

On the other hand, there are many new cryptocurrency tokens. There are subtle differences between a cryptocurrency coin, such as Bitcoin and cryptocurrency token. Although a cryptocurrency token can also act as a form of payment, its primary purpose is to be used within an already existing blockchain. In many cases, these tokens are created to foster interaction between users and innovation between the network of users. Token holders can use tokens to make purchases or they can trade tokens, like the other securities, to make a profit. As with cryptocurrencies, there are also many types of cryptocurrency tokens, each type serving a different purpose.

Different types of tokens

Utility tokens

Are also referred to as user or app coins. When a company creates a utility token, it is basically creating a form of a digital coupon that can be redeemed in the future for discounted fees or a special access to a product or a service by the token provider.

Security tokens

Are assets that derive their value from an external asset that can be traded. They depict assets such as participation in real physical underlyings, earnings of a company or entitlement to interest payments or dividends. In the eyes of an investor, they represent the same as bonds, derivatives or equities. They are also subject to laws and regulations. Dividends in the form of additional coins are given to token holders each time the company makes a profit.

Reward tokens

Were initially conceived as a way to provide rewards for people who used a particular platform´s cryptocurrency.
Currency tokens are basically the same as a real currency and it is used and deployed for the same purpose, paying for goods or services. These tokens can also be traded for other cryptocurrency tokens and basic fiat currencies. They can also be sent from one owner to another using digital wallets.

Another example of a token is Wexo, a token working on Cardano Blockchain. It is an electronic platform that connects ordinary banking with the world of cryptocurrencies. Its main goal is to bring seamless usage of cryptocurrencies to every customer and enable him to work, send and pay with cryptocurrencies fast and easy. Find more information about Wexo and its advantages on: www.wexopay.com/token.