What is a Token and its types
The world of digital currencies started with bitcoin, but over time other coins entered the market. Currencies such as Ethereum, for example, have been able to take over part of the digital currency market. With the development of cryptocurrencies in recent years, the term “Token” has also emerged in this area, so we decided to provide you with information about tokens and their types. Before introducing Token, it is better to get more familiar with the concept of currency code.
What is a cryptocurrency?
Virtual currency operators often confuse cryptocurrency, Altcoin, and Token; In general, it can be that Altcoin and Token are a subset of currency cryptocurrencies. Currency code is a standard currency to send or receive financial payments on blockchain. Bitcoin is now the most popular currency code on the market.
Altcoins are cryptocurrencies other than Bitcoin that were after the widespread success of this currency. The term altcoin actually refers to all post-bitcoin currencies that were under the slogan “Bitcoin Troubleshooting”. For example, currencies such as Litecoin, Bitcoin Cash and Dogecoin are prominent examples of Altcoins. Although each of the Altcoins has achieved some success in this area. None of them has reached the popularity of Bitcoin.
An encrypted token also represents a tradable asset or stock that is designed on a blockchain and sold during the initial coin offering (ICO) process. In the following, we will provide more information about encrypted tokens.
What is a token?
Tokens, also known as cryptocurrencies, are digital currencies that are embedded in their blockchain environment and represent an asset or stock. Tokens are often used to raise funds for crowdfunding campaigns. But they can also be used as a substitute for other things.
For example, a customer can receive a certain amount of Token as a reward, depending on their loyalty to a business, or if a person watches video for 10 hours in a video sharing blockchain, they will receive a certain amount of Token. . Tokens are sometimes equivalent to a certain amount of digital currencies. For example a token encrypted in a particular blockchain may be equal to 15 bitcoins, in which case the tokens can be traded or transferred between members of that blockchain.
Basically, cryptocurrencies and altcoins use their own blockchain as a digital currency and are used as an intermediary in digital payments. On the other hand, a blockchain may be used to develop and run decentralized applications (Dapps) and smart contracts, so tokens will be responsible for facilitating transactions within it.
Encrypted tokens will usually be released during a standard initial coin distribution (ICO) process; This is actually done for collective investment to strengthen the project. These encrypted assets are often created using standard templates (such as the Ethereum currency network) as trading units in the blockchain, which will ultimately allow users to generate tokens.
Such blockchains work on issues such as smart contracts or decentralized applications; In other words, smart contracts and decentralized applications use programmed code to process and manage various transactions on the blockchain.
Types of tokens
1- Utility Tokens
Application tokens are designed to be used for specific purposes and are usually used in a particular application or platform. One of the most common ways to use a Token is to use it to pay for your purchase on the platform. For example, you can pay for the health services of the Medipedia platform using MEP tokens.
Application tokens are issued by a company to provide a mechanism for users to pay for their new products and services; The products and services mentioned are often developed by blockchain technology. Keep in mind that buying a company’s Tokens in the Coin Initialization (ICO) process will benefit you as the tokens in this process are generally offered at a much lower price than the market rate.
2- Security / Equity Tokens
Stock tokens function like traditional securities and are given to buyers just like a company’s stock after the initial public offering of coins. In fact, by buying a company’s or project’s stock tokens, you will also receive dividends. The difference with application tokens is that stock trading rules and restrictions impose restrictions on securities.
In general, valuable tokens can also be obtained outside the platform on which they were developed. The value of stock tokens, like stock stocks, will be affected by the performance of the project or company concerned, but keep in mind that this will not be the case for application tokens.
3- Reward Tokens
Bonus tokens are a trademark of a blockchain app and are often a free bonus. An example is the MPR token, which is a award to members of the Medipedia platform depending on the amount of content feedback. Of course, it is important to note that prize tokens will usually not be as valuable as real tokens.
4- Assets Tokens
Tokens that are real estate such as gold, real estate or securities are asset tokens. These tokens represent the value of a real asset and are for buying and sell that asset; This actually promotes the physical asset business on online platforms.
5- Currency Tokens
Currency tokens function like digital currencies and can be a payment method in purchases. Bitcoin, for example, is a digital currency that can be for buying and sell online or offline. In addition, currency tokens are for exchanging other digital currencies or Fiat currencies, or deposited in other users’ wallets.
