Token, tokenization, coiny, altcoiny, coins, tokens ...? Who would know about all this?
What is a token?
In economics, a "token" is a numismatic item other than coins and banknotes. These are all kinds of tokens found in casinos, as well as vouchers, gift cards and tickets. Tokens can also be found in board games, where they act as currency or points.
In crypto field, the access token is a key - a cryptographic proof of the right to enter - a type of authorization password on the network. Tokenization has been used here to ensure data security, which has a lot to do with the use of tokens in blockchain technology.
Sometimes after refreshing a website that requires logging in, we may see the message "token has expired". In this sense, a token is a session identifier. Devices for generating one-time codes are also called a token - an older, physical equivalent of Google Authenticator, used, for example, to secure online bank accounts.
The word "token" certainly has even more meanings. For example, a discrete number of characters in a Petri net is also called a "token" (Peterson, 1981). However, let's focus on the importance of cryptocurrencies and blockchain technology .
Tokens and cryptocurrencies
Just like bitcoin or litecoin is a virtual coin, digital money, a token is a virtual token . Its issuance is related to the tokenization process .
The token can act as money . They can be used to pay for , usually a strictly defined , type of service . Most often, tokens are associated with a project , company or person. For example, a company's tokens can be paid for its services through its applications and platform. They replace traditional cash. They allow for fast, decentralized settlements based on smart contracts, using blockchain technology.
The token can also be used as a cryptographic confirmation of ownership, e.g. of shares in some companies. We call such tokens Security Tokens and they are a type of security.
Tokens are often issued as part of an ICO . A blockchain startup issues digital tokens and then sells them as bricks to finance its project.
Tokens can mean the products to be able to keep track of them, eg. In the supply chain, or to assign ownership.
Token a coin - difference
The difference between a token and a cryptocurrency is of little importance for an ordinary user and in practice they do not differ in any way. Basically, cryptocurrency has its own blockchain created for this kryptowaluty. It is the base coin for this blockchain. Meanwhile, a token is a token that uses the blockchain of a given cryptocurrency . Most often, fees for token transfers are charged in this cryptocurrency.
For example, the ethereum network allows you to generate your own tokens . The tokens use the ethereum blockchain (e.g. OmiseGO). They are only tokens that are used for payment or have some functions in applications (dApps) built on the basis of the ethereum network.
Many projects have created a token for the ICO . After the funds are raised, the token is available on exchanges, and the team works on the implementation of the project, which often involves creating their own blockchain. After this goal is achieved, the token based on a foreign blockchain is converted into a coin (coin) of the appropriate blockchain.
Types of tokens
You can create tokens on multiple platforms (e.g. ethereum, EOS, NEO). Each has its own standard.
The most popular platform on which most tokens are based is ethereum. As soon as Ethereum 2.0 drops, gas fees should go down because of PoS is used instead of PoW how it is in ETH v1
New standards are dynamically developed, corresponding to the need for tokenization of securities, real estate, or the marking of unique items (eg ERC-721 ).
lots of new things coming along in 2021, better be prepped!
Reference
Catalini, C., 2017. How Blockchain Technology Will Impact the Digital Economy. Oxford Business Law Blog.
Catalini, C., Gans, J.S. (2018). Initial coin offerings and the value of crypto tokens (No. w24418). National Bureau of Economic Research.
Conley, J.P. 2017. Blockchain and the economics of crypto-tokens and initial coin offerings (No. 17-00008). Vanderbilt University Department of Economics.
Peterson, J.L., 1981. Petri Net Theory and the Modeling of Systems. Prentice Hall PTR, Upper Saddle River, NJ, USA.
Reynolds, P.L., Witte, J. (red.), 2007. To have and to hold: Marrying and its documentation in western christendom, 400-1600. Cambridge University Press. https://doi.org/10.1017/CBO9780511511769