It's common to see the term "cryptocurrency" used interchangeably with "token," but these are distinct concepts. Take the Ethereum blockchain: ETH is the native cryptocurrency of the network, while stablecoins like USDT (Tether USD), SAND (The Sandbox), or UNI (Uniswap) are tokens built atop the blockchain. Let’s dive deeper into what tokens truly represent.
A blockchain token is a digital asset that exists on a blockchain and can be transferred between addresses. Tokens often represent digital assets like financial instruments, physical/digital goods, or voting rights. Unlike cryptocurrencies such as Bitcoin—designed as digital money—tokens serve specific purposes and derive intrinsic value from the assets they represent.
Tokens gained prominence on the Ethereum blockchain. You might already use Ethereum tokens like DAI, USDT, or USDC. For example, USDT is pegged to 1 USD, and transferring it requires paying network fees in the native crypto (e.g., ~0.10 ETH per transaction).
Key takeaway: Tokens are implemented via smart contracts, which track transfers between addresses. To transfer tokens, a holder signs a transaction instructing the smart contract to debit their balance and credit the recipient’s.
For instance, USDT on Ethereum is managed by a smart contract (0xdAC17F…), created by Bitfinex in 2016, with over 60 billion USDT tokens circulating.
What Are Tokens Used For?
Tokens have multiple applications depending on their type:
- Access services/platforms: Tokens can grant access to paid content (e.g., streaming platforms).
- Invest: Tokens fund projects via ICOs/STOs, offering potential profit if their value rises.
- Reward users: Used in loyalty/referral programs.
- Trade: Tokens are exchanged on trading platforms like stocks.
- Represent ownership: Tokens can signify ownership of digital assets (e.g., NFTs, domain names).
Creating tokens avoids the need to build a new blockchain—hosting them on existing blockchains (e.g., Ethereum, Binance Chain) is faster and more secure. You can even create a token in 10 minutes!
Types of Tokens
The crypto market features diverse token categories:
1. Stablecoins (Backed Tokens)
Designed to maintain stable value against fiat currencies or commodities (e.g., gold).
Examples: USDT, USDC, EUROC, FRAX.
2. Security Tokens
Represent securities like stocks/bonds and comply with strict regulations (e.g., MiFID II).
Examples: BCAP, SWM.
3. Utility Tokens
Provide access to specific services/products. Use cases span Web3 tech:
- Decentralized storage (FIL, STORJ).
- IoT solutions (HNT for shared Wi-Fi).
Examples: LINK, GRT, REP.
4. NFTs (Non-Fungible Tokens)
Represent unique digital assets (art, collectibles).
Examples: CryptoPunks, CryptoKitties.
5. Exchange Tokens
Issued by trading platforms (e.g., Binance) to boost liquidity.
Examples: BNB, OKB, CRO.
6. Governance Tokens
Enable voting on protocol changes/funding allocations.
Examples: UNI, AAVE, MKR.
7. Fan Tokens
Offer exclusive perks for sports fans (e.g., voting on team decisions).
Examples: PSG, CITY.
How to Buy Tokens
Step-by-Step Guide Using OKX:
- Sign Up: Register with email/phone.
- Verify Identity: Submit ID (takes <1 hour).
- Deposit Funds: Use SEPA bank transfer or card.
- Search Token: E.g., "USDT Ethereum."
- Purchase: Enter amount and confirm.
Storing Tokens Securely
Options:
- Software Wallets: MetaMask, Trust Wallet.
- Hardware Wallets: Ledger, Trezor.
- Exchange Wallets: OKX (for convenience).
Pro Tip: Always back up your private keys and enable 2FA.
Conclusion
Ethereum’s dominance led to token standards (e.g., ERC-20, ERC-721) to streamline functionality. These rules enhance security, governance, and efficiency. As tokens evolve, they’ll continue reshaping digital ownership and finance.
FAQ
What Is a Token?
A digital asset on a blockchain representing value or utility.
How Do I Buy Tokens?
Use exchanges like OKX—deposit funds, search, and purchase.
Token vs. Cryptocurrency?
Tokens serve specific uses; cryptocurrencies are native monetary units (e.g., ETH).
How to Create a Token?
Deploy a smart contract on blockchains like Ethereum in minutes.
Secure Storage?
Use hardware wallets or trusted software wallets with 2FA.