Tokens are the backbone of the crypto ecosystem, powering everything from DeFi applications to governance systems, gaming economies, and NFT platforms.
Tokens vs. Coins: What’s the Difference?
Coins, like Bitcoin or Ethereum, operate on their own blockchains, serving as native currencies. Tokens are built on top of existing blockchains like Ethereum or BNB Chain and leverage smart contracts to function. For example, USDT, UNI, and AAVE are tokens built on Ethereum.
Types of Crypto Tokens
There are various types of tokens: - Utility Tokens: Provide access to specific products or services within a platform, like BAT for Brave browser ads. - Governance Tokens: Grant holders the right to vote on protocol changes, like UNI, COMP. - Security Tokens: Represent ownership in real-world assets and may be subject to regulatory oversight. - Stablecoins: Pegged to fiat currencies for price stability, like USDT, USDC. - NFTs: Unique, indivisible tokens used for digital art and collectibles or game items.
How Tokens Are Created and Used
Tokens are deployed via smart contracts and managed through token standards like ERC-20, BEP-20, or ERC-721 for NFTs. They’re used for a wide range of purposes: staking, governance, yield farming, transaction fees, and reward mechanisms.
Tokens are the digital representation of value, access, and governance across blockchain ecosystems. Understanding their types and purposes is crucial for any user navigating the Web3 landscape.
