Crypto Terms: Letter T

What is Token?

Token - a digital asset built on the blockchain of another cryptocurrency that can be utilized in the crypto ecosystem.
1 minute

Let's find out Token meaning, definition in crypto, what is Token, and all other detailed facts.

A token is a crypto asset that can be utilized on blockchain ecosystems for economic, governance, or other purposes. Tokens are not synonymous with cryptocurrencies. While cryptocurrencies operate in their own blockchains, tokens are built on blockchains of other cryptocurrencies.

Tokens can be developed via fundraisers such as initial coin offerings (ICOs). They are usually programmed to possess some kind of utility. While there are numerous ways to utilize a token, some of the most popular token types include utility, governance, security, and non-fungible tokens.

  • Utility tokens provide the users with access to products and services within the crypto ecosystem;
  • Security tokens function as quasi-shares and have their value tied to tradable external assets;
  • Governance tokens are used by decentralized autonomous organizations (DAOs) to make decisions regarding the functionality of the blockchain;
  • Non-fungible tokens (NFTs) are unique assets that are often attached to a visual or audiovisual file.

Each type of token can have different degrees of regulation, depending on its use. Regulations that apply to security tokens may not be relevant to NFTs and vice versa.

Tokens are often distributed by blockchain startups as a way to attract investors and create a sense of exclusivity. Token holders may have certain privileges, like the ability to contribute to blockchain governance or early access to new products.