The question of what is a token is one of the questions that internet users who do not have a command of the crypto money market wonder. On the other hand, it can create confusion for people who are already interested in this market in the past.
The reason for this is that the word token has started to be used in different meanings over time. When you come to the end of the article, you will have learned what this word, which you may have heard as a crypto token, means and what it will do for you.
What is Token?
Token technically has the same meaning as a crypto asset, but over time it has been used in different meanings. The token is primarily used to refer to digital assets that do not have their own blockchain but use a private blockchain.
The token enables decentralized exchanges and helps you perform almost any transaction in video games, from selling items of immense importance to gamers.
Token, which is one of the words used when it comes to crypto money, is also used in crypto token or similar ways because technically all crypto assets can also be defined as tokens.
Of course, this word has acquired new meanings that are becoming more and more widespread. If you think you are in the crypto money market, you must have encountered them before.
In another sense, token is used to refer to all cryptocurrencies except Bitcoin and Ethereum. These too are technically tokens, but since Ethereum and Bitcoin are by far the two largest cryptocurrencies, it seems like a better idea to use a new word to describe other cryptocurrencies.
Another word used in the same sense as the token used in this sense is altcoin. In the article where we answered the question of what is an altcoin , we stated that it is a word used to describe all cryptocurrencies other than Bitcoin.
Another common meaning of token is crypto assets that use the blockchain of another cryptocurrency. Cryptocurrency like Bitcoin has its own private blockchain. Tokens that do not have their own private blockchain use these private blockchains.
Used in the second sense, tokens make it possible to perform decentralized transactions. In general, it is indistinguishable from a regular cryptocurrency. It can be stored or traded like any cryptocurrency.
What Does Token Do?
The token can be stored for investment purposes or used for purchasing. Unlike cryptocurrencies, tokens are used to make larger sales to a specific audience. For example, a virtual tender can be made for a team to support its fans.
A person who owns a token can participate in the virtual auction with the tokens he has stored and support his team in this way.
What are the Token Types?
- Utility Token
- NFT (Non-Fungible Token)
- Equity Token
- DeFi Token
Prominent Token variants include Utility, NFT, Equity and DeFi. Let’s take a closer look at each of the above tokens below.
What is Utility Token?
A utility token is a token that allows you to access a product or service offered by the provider. By purchasing a token, a person can gain access to a product or service and start using it.
What is NFT?
As we mentioned in the article in which we answered the question of what is NFT, NFT means non-tradable token. It is a document that demonstrates that you own a one-of-a-kind item on the blockchain. Artwork, photos, videos, GIFs, tweets, music and much more can be sold as NFT.
What is Equity Token?
It is indistinguishable from traditional stocks. The only difference is that it happens digitally. Apart from that, they are almost the same in terms of format and operation.
What is DeFi Token?
It refers to financial applications built on a decentralized blockchain. Decentralization ensures that they are distributed. While financial money control belongs to the user, it also makes it possible to transact globally.
What is Fan Token?
A fan token is usually a token that offers various possibilities to supporters of a club. A fan token can become widespread very quickly, especially thanks to the fan community. Galatasaray Fan Token, Fenerbahçe Token and FC Barcelona Fan Token can be given as examples.
What is the Difference Between Cryptocurrency and Token?
Token is a digital asset. Cryptocurrency is digital money. While cryptocurrencies have their own private blockchain, Tokens are based on an already existing blockchain. Token’s usage area is narrower. Unlike tokens, cryptocurrencies are kind of virtual currencies and there is relatively much more you can do with them.