What Is Token?
Also known as: Crypto Token, Digital Token, Tokens
In short
A token is a digital unit created with smart contracts on an existing blockchain that represents an asset, a right or an access privilege; unlike coins, which have their own blockchain, it uses another network's infrastructure.
Tokens are generally created according to specific standards. On Ethereum, the ERC-20 standard is used for fungible tokens, ERC-721 for NFTs and ERC-1155 for structures that support both together; BEP-20 on BNB Chain and TRC-20 on Tron serve similar functions. Thanks to standards, a token can be used in wallets, exchanges and applications that support it without additional adaptation.
There are different types of tokens according to their function: utility tokens that provide access to a protocol's services, governance tokens that grant voting rights, stablecoins pegged to an asset such as the dollar, tokens representing real world assets and NFTs representing unique assets. For example, USDC and UNI on Ethereum are each ERC-20 tokens; the network fee for transferring these tokens is paid in ETH, Ethereum's coin.
Because creating a token is technically easy, there are many worthless or scam tokens on the market. Trading without examining a token's supply, distribution and the authorities in its contract, for example the ability to mint new tokens or freeze transfers, carries significant risks.
Last updated: · This content is for information purposes only and is not investment advice.
