What are cryptocurrency tokens?

Modified date: 06/07/2021
What are cryptocurrency tokens

With the advent of blockchain, the world has changed. Cryptocurrencies have made it possible to quickly and anonymously carry out transactions, invest and earn. But the possibilities of blockchain are not limited to the emission and exchange of cryptocurrencies. Any financial transactions can be carried out using the blockchain and tokens created on its basis.

A token is a unit of ownership of an asset or the right to receive a service. By analogy, tokens are promotions, movie tickets, discount coupons, promissory notes, etc. Technically, tokens are also a record in a Blockchain. They have all the benefits of blockchain, but they are not cryptocurrencies. Usually, the Ethereum blockchain is used to issue tokens with support for smart contracts according to the ERC-20 standard, but Waves, NEM, NXT, EOS networks can also be used.

Differences between tokens and cryptocurrencies.

Cryptocurrency transactions are always issued and verified in a decentralized manner. And its cost depends only on supply and demand in the market. It means that Cryptocurrencies cannot be issued and controlled by one organization.

Tokens can be issued centrally. Any startup can issue tokens for its own purposes. At the same time, the token cost depends not only on demand but also on the financial indicators of the organization that issued it. The profitability, development, and innovation of a startup will fluence the value of its tokens.

Token types:

ICO tokens. These are digital stocks. Startups emit it to attract investment. Investors buy these tokens, and if the startup is successful, the value of the tokens will increase significantly. Each token gives the investor the right to own the share of the startup but does not give the right to manage it.

Credit tokens. The organization gets money for tokens and then pays them back with interest for the use of borrowed funds. Thus, the token buyer lends money to the issuer and later gets money back with interest.

Utility tokens allow the owner to receive benefits: discounts in stores, in taxis, in-game currencies for leveling characters and buying virtual accessories, and getting premium statuses on social networks.

Asset-backed tokens allow you to purchase real goods and services. They can be backed with any property, real estate, precious metals, fuel, and the time of a specialist's work.

There are also unique NFT tokens (Non-fungible tokens) that are not fungible. Their only function is to confirm ownership of digital art, game items, and other property.

When a company issues tokens, it is called asset tokenization. The issuing company bears all responsibility for securing, circulation, and redemption of tokens. You can purchase tokens directly from those who issued them and store them on special wallets, similar to cryptocurrency wallets.

Blockchain technology never ceases to amaze. It opens up new income opportunities. Tokens are an excellent investment tool, and Zion Finance is already using them in its financial activities. We invite investors to join us and receive a stable high income.