What is a token?
Technically, “token” is a “cryptoasset.” The first is to describe all cryptocurrencies besides Bitcoin, Ethereum and Cardano (even though they are technically also tokens). Describe certain digital assets that run on top of another cryptocurrencies’ blockchain, as many decentralized finance (or DeFi) tokens do. Tokens have a huge range of potential functions, from helping make decentralized exchanges possible to selling rare items in video games. But they can all be traded or held like any other cryptocurrency.
Is a word that you hear a lot in cryptocurrency. In fact, you might hear Bitcoin described as a “crypto token” or something similar, because — technically — all cryptoassets can also be described as tokens.
Why are tokens important?
Given that you’ll come across the word a lot while researching cryptocurrencies, it’s useful to understand some common connotations. But besides the big-picture definitions in the section above, there are also some categories of cryptoassets that actually have “token” in their name. Here are a few examples of those:
Non-Fungible Tokens (NFTs) NFTs represent ownership rights to a unique digital or real-world asset. They can be used to make it more difficult for digital creations to be copied and shared. They’ve also been used to issue a limited number of digital artworks or sell unique virtual assets like rare items in a video game.