What are crypto tokens in blockchain?

1 Answer(s)

A token is an encrypted cryptocurrency. In the cryptocurrency community, BTC (Bitcoin) and ETH (Ethereum) are all recognized as the leading tokens. Due to the population of ICO in the past, there are more and more tokens issued in the market, and now there are thousands of different kinds of tokens, such as waves token, golem token,wicc,etc.,


Tokens can be divided into equity tokens, application tokens, and debt tokens depending on their type.


1.Appication Tokens

Application tokens are the real core part of the blockchain. The blockchain will not work Without them. They are often a part of an incentive program that motivates people to help the system validate transactions and create blocks. Both BTC and ETH belong to the application tokens, and the application token generally adopts the POW mechanism.


2.Equity Tokens

Equity token, similar to a company’s shares. Equity tokens do not decrease as users use the application. Instead, the holder of the equity token will also receive a dividend from the application. Therefore, equity tokens are similar to holding shares in this blockchain application. Because the holder of the equity token is the owner of this application.


Therefore, holders of equity tokens also have voting rights for transactions in this application to determine the future development of this application. Equity tokens generally use a POS mechanism.


3.Debt Tokens

The emergence of debt tokens is mainly used to solve the problem of insufficient liquidity in blockchain applications. It is similar to providing a short-term loan for an application. While for the holder of the debt token, it is similar to a kind of saving behavior, because generally a certain interest return can be obtained.


What is the role of tokens in the blockchain?

The blockchain project is actually an open source program; It requires the drive of commercial interests to let it develop for a long time. Specifically, each project and each token is based on an underlying blockchain; whether it is a Bitcoin blockchain, an Ethereum blockchain, or a fork or new blockchain based on these networks, they have different price incentive models or economic models to ensure that participants are able to comply with relevant rules.


Let’s take ethereum as an example, when the project is released, the founding team will clearly have a part of ethereum token. If they want to add value to the project, they must constantly improve and optimize the relevant technology; and each user who using the blockchain network service will need to pay a certain fee to the Ethereum miners to encourage them to continue to participate in the maintenance of the entire network.


The basis for the effective formation of the token system is the value consensus of the participants; the element of digital currency formation is the value consensus between people, and the basis of tokens is the value consensus of the participants.


Answered on July 6, 2018.
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