What is a token?

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What is a token?

The understanding of a token has become essential in recent years with the democratization of Blockchain technology. to an increasingly wide audience. So what is a token? Are there several kinds of tokens? How to use them? Explanations!

To understand the definition of a token, you must first understand that it is a digital asset, therefore dematerialized. Thus, when we speak of a token to express a token, it is not a physical token but a digital token that is issued and that can be exchanged on a blockchain. The blockchain is a mode of storage and transmission of data. It is characterized by blocks linked to each other whose modification requires the assent of all or part of the participants in the network. To understand the concept of the token implies to understand the Blockchain.

What characterizes the definition of a token?

The definition of token previously expressed allows to have a first idea of what these tokens are. Several properties are associated with tokens:

  • Be created by any Internet user and personalized by the creator
  • Can be transferred online or exchanged without duplication
  • To have a history in an immutable register
  • Guarantee the security of exchanges
  • Be saleable and purchasable at any time on dedicated platforms

To go further in the definition of the token, we can also mention the concept of tokenization. It is the creation of the digital representation of an asset on a blockchain. This is to allow the exchange of it in an instantaneous and secure way.

What are the types of tokens?

There are several types of tokens such as :

  • Utility tokens that allow access to a product or service and are not legally considered as assets
  • The tokens values that allow to invest in a blockchain project, a company can therefore offer this type of token to investors, but they will have no weight in the strategic decisions of the latter
  • Securities tokens which are comparable to the financial securities of a company, if they are still in the conceptual stage they should be able to represent shares of a company in the future while being transposed into the blockchain

When are tokens used?

Now that the definition of the token was explained, it is advisable to approach the various cases of uses of the token. The latter is indeed useful in various contexts. In particular, tokens are used in the context of ICOs. These are fundraising operations implemented by companies. They issue and sell tokens in large quantities to investors in order to develop the financing of their project. Several counterparties can be offered in exchange for the purchase of tokens.

We can also mention the NFTs which allow the purchase of digitized works of art in an ultra secure way thanks to blockchain technology. This is an opportunity for those who wish to make a more or less important and/or relevant investment, as well as in the field of art, the stock market or real estate.