Tokens in Blockchain

An Overview of Cryptocurrency Token Types

• Cryptocurrency tokens are fungible digital assets that can be used as

mediums of exchange (traded) inside of the issuing blockchain
project’s ecosystem. They are best described by how they serve the
end user. Think of tokens as the foods that nourish blockchain-based
ecosystems. 

• Each token type provides unique features based on usage. However, a

token can fit into more than one category, so these groups are not
mutually exclusive.
Digital Token?
• It represents a specific amount of digital resources you can own, assign to another, or
redeem later.

• Digital tokens are created by software and assigned a certain utility. Examples of
intrinsic digital tokens are Bitcoin and Ether. The other type of digital token is asset-
backed, which is issued to represent a claim on a redeemable asset, such as legal
tender or precious metals.

• You may have encountered several people or businesses who offer to pay or accept
payments in the form of digital tokens. Digital tokens also go by the name
“cryptocurrencies” as they are a type of crypto asset.
What Can You Buy Using Digital Tokens?

• Following things we can buy using Digital Tokens:

• Domain names
• Hotel accommodation
• Electronic gadgets
• Jewelry
• Donations
 3 Types of Digital Tokens
• Currency tokens: Bitcoin is a type of currency token meant to pay for goods and
services. Bitcoin was, in fact, created to replace fiat (paper) money.

• Utility tokens: Utility tokens are more than a means of payment. Specifically, they give
users the power to trade cryptocurrencies at lower fees since utility tokens provide them
access to the developers’ platforms. An example of a utility token is Ethereum, although
it can also fall under the currency token category. Ethereum, an example of a utility
token, was intended for use on a single platform.

• Asset or investment tokens: By the name itself, these tokens refer to assets that can
give investors a positive return on their investment.
How Do Digital Tokens Work?
• Think of digital tokens as casino chips that you can use as substitutes for cash
when playing games. Like casino chips, digital tokens are unregulated but
valuable, as they have particular values when converted to paper money.

• A digital token facilitates real-world transactions via a decentralized

technology—blockchain. Users can make payments and keep money without
going through third-party providers, so the deals they enter into are more
direct. This transaction method is often preferred because it doesn’t require an
intermediary, making it faster and more affordable for both parties.
1. Platform Tokens
• Platform tokens utilize blockchain infrastructures to deliver decentralized applications (dapps)

for different uses. For example, while Dai is categorized as a stablecoin because it is soft-pegged

to the US Dollar and its pricing maintained through mechanisms built into smart contracts, it can

also be classified as a platform token because it is built on the widely used Ethereum blockchain.

• Platform tokens benefit from the blockchains they build upon, gaining enhanced security and the

ability to support transactional activity. Platform tokens run the gamut of use cases, from serving

gaming and digital collectibles (CryptoKitties!) platforms to global advertising and marketplace

industries. 
2. Security Tokens
• The term “security token” emerged as a result of rising regulatory concerns. Regulatory
authorities, such as the U.S. Securities and Exchange Commission, sought to specify
cryptocurrencies using terminology that didn’t wrestle with existing legal definitions. 

• Generally, a security is an instrument issued by a company, trust, government, or other

legal entity that memorializes an ownership interest and provides evidence of a debt, a
right to a share of earnings, a right in property distribution, or other similar legal
rights. Types of securities include, among others, bonds, debentures, notes, options,
shares, and warrants, and may be traded amongst investors or otherwise freely
transferable. 
 3. Transactional Tokens
• Transactional tokens are used to transact—they serve as units of account and are exchanged for
goods and services. These tokens often function like traditional currencies, but in some cases,
provide additional benefits. For example, with decentralized cryptocurrencies, such as Bitcoin and
Dai, it is possible for users to execute transactions without a traditional intermediary or central
authority, such as a bank or payment gateway. In addition to its function as a currency, Dai offers
transactional performance to other networks. For example, POA Network created xDai, a Dai-like
transactional token that lives on a sidechain, allowing for fast, inexpensive transactions. 

• Not all transactional tokens are currencies. Global supply chains and other industries utilize
transactional tokens to apply the immutable nature of the blockchain and the flexibility of smart
contracts to their operations.  
4. Utility Tokens
• Utility tokens are integrated into an existing protocol on the blockchain and used to access the
services of that protocol. They are not created for direct investment like security tokens but can be
used for payment of services within their specific ecosystems. The relationship between a platform
and a utility token is synergistic, as the platform provides security for the utility token while the
token provides the network activity necessary to strengthen the platform’s economy.  For
example, Dai is integrated into Axie Infinity, a digital-pet universe with a player-owned economy,
providing players with a stable in-game currency. Other projects, such as Cryptocup, leverage Dai
stability to provide a better experience for users. 
5. Governance Tokens

• As decentralized protocols continue to proliferate and evolve, the need

to refine the decision-making processes around them is critical. On-
chain governance allows all stakeholders to collaborate, debate, and
vote on how to manage a system. Governance tokens fuel blockchain-
based voting systems, as they are often used to signal support for
proposed changes and to vote on new proposals.
6. Native Tokens?

• Native tokens are a blockchain’s inherent digital currency. Every

independent blockchain has its own native crypto that is used to
reward miners and validators adding blocks to the blockchain and
as a payment method, including for transaction fees. These types
of tokens are also known as base tokens.
Native Tokens: Key points
• Native tokens are the foundational tokens of a cryptocurrency blockchain
designed to function directly with the blockchain.

• Native tokens are often used to represent the value of a crypto ecosystem.
For example, Ether symbolizes the value of the Ethereum ecosystem.

• Native tokens are used to pay via blockchains and for transaction fees and
as collateral by the blockchain validators using consensus mechanisms
such as proof of stake.
Examples of Native Tokens

• There are several native tokens with their respective blockchains.

Some examples are the Ethereum blockchain’s native token,
called Ether (ETH); the Binance Smart Chain, which has a native
token called Binance Coin (BNB); and Cardano’s native token, ADA. 
7. Asset-backed tokens ?
• Asset-backed tokens are blockchain-based units of value that are pegged to real-
world assets, such as company shares, real estate, diamonds, or commodities. They
represent a large subcategory of security tokens and allow users to hold ownership
rights over a physical and tangible asset in a digital form.

• Some relevant examples of asset-backed tokens are tokenized stocks. The former is
a token issued by diamDEXX, which is backed by physical diamonds. diamDEXX
built a trading ecosystem that allows professional and retail investors to purchase
real physical diamonds with DIAM coins, at manufacturer-discounted prices,
through the diamDEXX platform.
8.Crypto-Depository Receipts?

• A CryDR represents the value of a real-world asset. It allows anyone to tokenize

traditional asset classes and put them on a decentralized Blockchain, including
commodities, currencies, bonds, and other financial assets.

• A Crypto-Depository Receipt is basically the value of the underlying asset on the

Blockchain and is denominated in the unique cryptocurrency of that network. It’s
constructed with built-in regulatory, KYC and AML compliance. This means tokens
issued on the network are enclosed in real-world rules, ensuring adherence to regulation
at all times.
How does it work?
• It acts as a bridge between existing financial infrastructure and the evolving crypto market.

• Users can deposit traditional, as well as digital assets into the network’s DAO (Decentral Bank). In
return, the user receives a CryDR token that represents the value of the underlying asset held in the
decentralized network. A CryDR token is created for every asset held by the DAO.

• If users want to withdraw their stored assets, they simply return the CryDR and network token. The
underlying asset is returned through various payment and transfer methods, at which point the
token is destroyed.

• CryDRs can also be transferred to other entities or individuals, who can then reclaim the token for
the value in the network cryptocurrency, through the Decentral Bank.
10.Title token
• Title token is a record of ownership similar to the one made in a traditional estate registry. This concept is

designed as an alternative to security tokens and various financial crypto instruments. The title token is not

“backed” with real property; this is the record that directly certifies the property right — the same as paper title

deeds, or certificates of ownership, etc. It is a digital form of property record and the primary source of

knowledge about property rights, which means no paper form is needed.

• The title token can represent any legal rights: immovable property (land and buildings), movable (car, boats,

aircraft, etc.), corporate rights (shares), and various property rights and derivatives (mortgage, debts and

securities). Any legal right, and as you will see later, can be used to certify legal facts and events
A Contract Tokens in Blockchain

• A token contract is simply an Ethereum smart contract. "Sending

tokens" actually means "calling a method on a smart contract that
someone wrote and deployed". At the end of the day, a token contract
is not much more a mapping of addresses to balances, plus some
methods to add and subtract from those balances.
Conclusion
• The world of cryptocurrencies is vast and, most importantly, still evolving. To
summarize, here are the main token types:

• Platform tokens support dapps built on the blockchain. 

• Security tokens represent legal ownership of a physical or digital asset.
• Transactional tokens serve as units of account and are exchanged for goods and
services.
• Utility tokens are integrated into an existing protocol and used to access the
services of that protocol.
• Governance tokens fuel blockchain-based voting systems.