What are tokens?

The universe of blockchain technology is expanding every day, and the concepts linked to it are constantly evolving. This is the case of Tokens, a term that was initially used to describe a cryptocurrency or cryptoactive. Gradually «Token» is a concept that has branched out in many directions and levels. Currently there are many types of tokens, and its applications and features have an equally diverse context.

All tokens have in common that they are assets executed from a blockchain. Its functionalities range from helping to run decentralized exchanges, to trading assets such as those integrated into the NFT p2e games.

It is still common that when hearing «token» the immediate and most appropriate relationship is with a cryptocurrency. However, “token” currently has two valid options.

Cryptocurrencies like bitcoin and ethereum and all existing altcoins are by definition tokens; the first category of them.

The other application of “token” is used to define the cryptoactives executed on the blockchain of another cryptocurrency. It is common to hear about them from DeFi or Decentralized FINances. In other words, while cryptocurrencies like Bitcoin have their own blockchain, DeFi tokens like Chainlink and other altcoins run on top of blockchains like Ethereum or Binance Smart Chain, as is the case with the cryptocurrency NatCoin.

Existing blockchain tokens help other decentralized applications fulfill all kinds of functions, such as automating the sale of virtual real estate, NFTs or trading other cryptocurrencies.

Tokens are the basis for understanding more about the breadth of the digital universe and its expansion.

What is the importance of tokens?

The applications of tokens are diverse and increasingly specialized, there are tokens that are used to grant a right within a private network, to pay or transfer data, or as an incentive for additional services to certain users.

A token can be used in any way a user decides or be designed to fulfill specific functions under certain conditions. In other words, its operation is so extensive that its developer can decide for what utility they have created each one.

Despite its complexity, the “tokenization” is still in its initial phase of development, among other reasons due to the lack of international standards and the technologization of a large percentage of users worldwide slows down your progress. However, tokens are digital assets with great potential, and the challenges of technologyization both in government agencies, private organizations and in the users themselves, will gradually be overcome.

Especially because eventually the digital economy will have mass adoption, leaving behind those intermediaries or elements that cannot compete with it.