The creation of cryptocurrencies brought with it a series of terms, such as the word “Token” which means “unit of value”, which is issued by a private entity and is given the value that can be assigned within the community in which it is used, hence we have that Bitcoin and Ethereum are tokens, and the technology that allows the use of tokens is Blockchain.

Origin of the tokens

Token are tokens, pseudo-currencies or vouchers, which were used to replace fiat money. They were assigned a value according to the system in which they are used, prior agreement with the use and its exchange. An example of the Token are the chips that are used in the casinos, also the coins that were given to the miners (who could exchange them for products in the companies’ savings). However, these Tokens are easily falsifiable and controlled by some entity, which could issue any amount of Tokens at their will, which meant that they were not transparent and legal.

This remained the case until the Blockchain technology arrived, since this technology inherits some characteristics of cryptocurrencies, among which it refers to traceability, security, and most importantly: the impossibility of falsifying it. With this, the possibility of creating highly reliable and secure Tokens was born, thus allowing entrepreneurs and private users in general to generate them for different uses. Currently, the generation of cryptographic tokens or blockchain tokens are in full expansion, due to the security and flexibility they generate.

Types of Tokens

Regarding the Token typology, we find three subtypes of Tokens, based on their uses and properties:

  • Security Token: they are cryptographic tokens with similar function to any other Token with a link to the traditional security ones and their characteristics.
  • Token utility: also called application or user tokens, are those that allow future access of the products or services offered by a company, so, utility tokens are not created for investment.
  • Equity token: they are a special type of Token that are closely related to security tokens, they function as a traditional asset of shares, they represent the property of some third party asset or company, and their value is associated with failure or to the success of the property.

These three mentioned Tokens allow users to use them as a financing tool according to their needs. In fact and thanks to that flexibility and its close integration to Blockchain technology, some projects choose to launch Tokens for financing, and then they are changed to their own Blockchain, such as Ethereum NEM or TRON.

Who can create a token?

Any person or entity that has the knowledge of the operation of the tokens and has the capital to finance them, could create an account on a website for the creation of tokens and start creating their own tokens, however, it must be taken into account that to For these tokens to have real value, it is important that they are within blockchain technology and that several people make transactions with them.

What do you think about this topic? Did you know the types of cryptocurrency tokens?

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Image by dmitry dmidko via under a creative commons license.

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