What is Crypto – Token?

in #blockchain3 years ago

In general, when you hear the term “cryptocurrency tokens” or simply “tokens”, they are referring to tokens such as Bitcoin that are built on top of a blockchain and represent a digital asset which you own and can transfer to someone else.

There are various ways to create tokens on top of a blockchain. For example, the simplest tokens to understand are intrinsic tokens like Bitcoin, which is directly built on top of the Bitcoin blockchain. Or you can choose to fork the Bitcoin blockchain and build tokens on top. Or you can build an entirely new blockchain technology and build a token on top of that — which is what Ethereum did. The token on top of Ethereum’s blockchain is “Ether”. You can even build tokens on top of Ethereum’s blockchain itself. Perhaps confusing since “Ether” is the intrinsic token built on top of the Ethereum blockchain. It is also possible to build other tokens besides the intrinsic token on the Ethereum Blockchain.
There’s a helpful analogy here with traditional currencies — you can think of tokens as the currency itself (e.g. USD, EUR, etc.) and the blockchain protocol as the monetary policy.

The main takeaway here is that every token is based on some underlying blockchain — whether it’s Bitcoin’s blockchain, Ethereum’s blockchain, or some other forked/new blockchain.

Regardless of the cryptocurrency in question, tokens are valuable because the blockchain provides a backbone for asset manipulation that is immutable, decentralized, and impossible to counterfeit.

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