Basic Idea about Tokens

Tokens, generally speaking, are non-mineable digital units of value that exist as registry entries in block chains. Tokens are generally issued by companies using existing third-party block chains such as the Ethereum block chain. Tokens are not crypto currencies like Bit coin or ether, but transferable units of value issued on top of a block chain.

Basic Idea about Tokens

Crypto tokens are cryptocurrency tokens. Crypto currencies or virtual currencies are denominated into these tokens, which reside on their own block chains. There are different token classifications based on the various characteristics of the tokens.

The main classification uses functionality to divide tokens into utility tokens and security tokens. Utility tokens generally represent access to a service or can function as a medium of exchange within an ecosystem. An example of a utility token is BNB, which acts primarily as a discount token to pay for trading fees on the Binance exchange.

Security tokens, on the other hand, represent financial assets. For instance, a company could issue tokenized shares during an ICO, granting the holder ownership rights and dividends. From a legal standpoint, these would be identical to traditionally-distributed shares.

Another classification assesses features to distinguish between fungible and non-fungible tokens. Fungible tokens or assets are divisible and non-unique. For instance, fiat currencies like the dollar are fungible. Non-Fungible Tokens (NFTs) NFTs represent ownership rights to a unique digital or real-world asset. They can be used to make it more difficult for digital creations to be copied and shared (an issue anyone who has ever visited a Torrent site full of the latest movies and video games understands). They’ve also been used to issue a limited number of digital artworks or sell unique virtual assets like rare items in a video game.