Tokens are one of the most essential creations of blockchain technology and cryptocurrencies, enclosing unique features and opening doors for applications that we have yet to discover.

Ehe concept of token is perhaps one of the concepts most commonly seen in the literature of the cryptocurrencies. This is because these elements explain many of the facets of the intrinsic nature of cryptocurrencies, while at the same time detailing their enormous possibilities. A simple and approximate definition of what is a token would:

Tokens are coin-like objects but these lack legal tender. This is due to the fact that the tokens are issued by a private entity for a specific use and in their elaboration, use is usually made of low-value materials.

These tell us two things about tokens: their creation is born in the midst of private need and they have little value. However, the value of tokens can be very high within the community that makes use of them, where everyone agrees with their use. This is precisely what happens in cryptocurrencies, where tokens like the Bitcoin they are widely accepted and represent high value. In fact, the launch and presentation of the tokens has become very popular, as it is an elemental piece of the Initial Coin Offering (ICO).

But beyond that, tokens have the possibility to change the world as we know it. Its properties allow us to exploit a series of unimaginable possibilities and hence the importance of knowing every aspect of this little-known concept.

Origin of the Tokens

Historically tokens were tokens, pseudocurrencies, or vouchers that were used as replacements for fiat money. These had a certain value within a certain ecosystem in which everyone agreed on their use and exchange. Some examples of tokens today are casino chips. Another good example was the coins that were given to miners in the late XNUMXth century and early XNUMXth century. This practice was very common in the United States since it allowed miners to buy items in the company store.

However, those old tokens were easily falsifiable and controlled by an entity that he could cast as many as he wanted. This means that these first tokens were not very transparent and fair. Virtually token technology remained unchanged until the arrival of blockchain technology. This is because a token based on blockchain technology inherits some of the characteristics of cryptocurrencies. Among these are traceability, security and the impossibility of counterfeiting.

This opened the possibility of creating tokens that were highly secure and reliable, allowing private companies and individuals to generate them for different uses. Currently, the generation of cryptographic tokens or blockchain tokens is in full expansion, all thanks to the security and flexibility they provide.

Cryptographic tokens

A peculiarity of these cryptographic tokens is that they are all based on the blockchain of a third party. The first cryptographic tokens were developed on the Bitcoin blockchain and were called Colored Coins. Being one of the best known creation platforms Counterparty.

But today there are many blockchains that allow you to create tokens. For example Waves, TRON, NEM, Omni… but without any doubt Ethereum It is the platform par excellence. This because it allows to develop a Smart Contract to create a token quickly and easily. Ethereum is perhaps the most prolific blockchain because of the number of tokens that are on it. It has more than 180 thousand ERC-20 tokens different, and more than 1300 ERC-721 tokens.

This situation was driven by the creation of the ERC-20 and ERC-721 standards. Both allow the rapid creation of tokens on the Ethereum blockchain by associating smarts contracts for it.

How much do you know, cryptonuta?

Can crypto tokens exist without the need for the blockchain?

FALSE!

A cryptographic token has its existence exclusively on a blockchain, since without this technology it would be impossible to fulfill the necessary properties of security, traceability and transparency.

Cryptographic token types

Within the general category "token", we can find 3 subtypes based on its properties and uses:

  1. Security Token. These are cryptographic tokens similar to any other known token but linked to traditional security and its characteristics.
  2. Utility Token. Utility tokens are application tokens or user tokens. They allow future access to the products or services offered by a company. Therefore, utility tokens are not created to be an investment.
  3. Equity Token. Equity tokens are a very special type of token closely related to security tokens. These function as a traditional stock asset. They represent the ownership of some third party asset or company. Furthermore, its value is associated with the success or failure of that property.

The three types of tokens mentioned above allow users to use a series of financing tools tailored to their needs. In fact, thanks to such flexibility and its high integration with blockchain technology, some projects choose to launch tokens for their financing and then change them to their own blockchain. This would be the case of Ethereum, NEM o TRON.

Of course you have to be very careful. The ease of token launching has also meant the emergence of many tokens without any value or with the sole objective of scamming. Like cryptocurrencies, crypto tokens can be traded on exchange houses. So its price can go up or down depending on supply and demand. Which is of course influenced by the expectations and real evolution of the project to which the token is linked.

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