Cryptocurrencies such as Bitcoin make use of an age-old concept called tokens. These items are usually exchanged for drinks, rides or food in fairs. In other applications, a token could allow you entry or show that you own a certain collectible item or product, among others.
A token in the world of cryptocurrency can mean other things, though. Here’s a short guide on understanding cryptocurrency tokens.
What is a Cryptocurrency Token?
A token is a representation of a value that’s set by an authority. In the world of Blockchain, a token is something that has value and is available for the community.
A developer or company creates a crypto token to distribute rewards or incentivize user interaction within a community or ecosystem. It operates independently (hence the term decentralized).
A token can be independent, such as Bitcoin for example or based on a Blockchain technology, such as with Ethereum.
Cryptocurrency Token Usage
Cryptocurrency tokens have a wide variety of usage and applications.
Perhaps the most popular use of a crypto token is one that we’re familiar with- Bitcoin. It’s arguably the most popular among all crypto coins in the market. It’s a digital asset that can be held for investment purposes, as well as a payment method that can be used to acquire goods and services in both offline and online fronts.
A token can be given as a reward, tied to a real life asset, e.g., company shares or real estate, used for security purposes and as a gateway to a service. You may think that tokens are versatile but we haven’t seen the full extent of what Blockchain technology and cryptocurrencies can do.
Tokens can be classified under utility and security, where utility grants access to a company or industry’s service or product, and security is tied to a physical or tangible asset.
In investment vehicles cryptocurrency investors will do well with crypto engines to boost profitability. Your capital will be in good hands when you take the time to understand how a token will be used and how it works.
Crypto Tokens Across Industries
Crypto tokens have already made their impact in the real world, with many industries harnessing the power of Blockchain technology.
Tokens are far more agile compared to traditional payment processing methods. You can send and receive tokens from anywhere in the world in real-time and without having to pay exorbitant fees.
Tokens are backed by Blockchain technology, which means they have a greater layer of security and immutability. It’s more difficult to hack and manipulate, which can be a boon to corporations, healthcare organizations and companies with a large base of customers.
Tokenization of real-world assets is possible. They can be integrated into existing infrastructures, apps and environments. Some believe that ICOs will replace IPOs, or initial public offerings as the primary share issuing process.
If this is the case, then token assets will have the democracy it needs to achieve a better launch rate. Investors will have little to no problem joining and contributing to the greater whole. Cost of entry will have been reduced, which is better for the economy.