What is a Token in Cryptocurrency?
In the realm of cryptocurrency, the term "token" denotes a digital asset that resides on an existing blockchain. Unlike coins like Bitcoin, which operate on their own blockchain, tokens are built on an existing blockchain infrastructure, such as Ethereum.
Types of Tokens
Tokens can be categorized into several types:
- Utility Tokens: Designed to provide access to a product or service within the blockchain ecosystem.
- Security Tokens: Represent ownership rights and are often subject to regulatory scrutiny.
- Stablecoins: Pegged to a stable asset, like fiat currency, to mitigate volatility.
Functionality
Tokens serve various purposes, such as facilitating transactions, granting voting rights within a network, or providing staking opportunities.
Conclusion
In summary, tokens play a crucial role in the cryptocurrency landscape by enabling a wide array of functions beyond simple transactions, contributing to the overall utility and functionality of blockchain ecosystems.