Tokens: Digital Assets in the Blockchain Ecosystem

Token is a digital unit that allows access and use of a large cryptoeconomic system.

What is token?

Tokens should not be confused with cryptocurrencies or altcoins. Tokens and altcoins are types of cryptocurrencies. Tokens are a type of cryptocurrency that is used as a specific asset or represents a specific use on a blockchain. In some cases, they are created in initial coin offerings (ICOs) – or other methods of fundraising, including initial DEX offerings (IDOs).

The purpose of tokens can vary. The two most common types are security tokens and utility tokens.

Security tokens act in the same way as stocks. Their value is determined by the external asset being traded. Utility tokens provide users with access to products or services provided by the platform. The difference between security tokens and utility tokens is their degree of regulation. Utility tokens cannot be subject to the same regulation as security tokens. A company’s failure to comply with regulations can often lead to severe penalties for the company issuing the security tokens.A blockchain startup can issue tokens to provide its customers with certain privileges and access to certain products and services in the future.

Although not all ICOs have been successful, some optimists argue that ICOs can replace traditional initial public offerings. As a result of such a move, the popularity of cryptocurrency tokens may increase even more.
Related terms