Tokens in cryptocurrency. What are they for?
The terms, which most people are talking about nowadays, are “cryprocurrency”, “ICO”, “blockchain” and “tokens”. And if the first three concepts are more or less clear, the last one raises a number of questions: what are tokens used for? What are tokens in cryptocurrency? How can one create them?
Login Casino will try to answer all of these questions.
What is an authorization token?
Token is a special digital key that provides secure identification in order to open the safety deposit box or to enter any other object whose data must be available only for one user. It’s a kind of a digital password, which stands out for its dynamism. It changes systematically and generates new combinations of numbers, which are known to a particular user while going through an identification process.
Difference between tokens and cryptocurrency
Token is a form of a digital asset, which is located above blockchain, while cryptocurrency is a digital currency protected by cryptography. In other words, both tokens and coins constitute cryptocurrency.
For instance, bitcoin and ethereum tokens are the inner currency of these networks, with the help of which the transaction can be made, since it’s impossible to be carried out via any usual conventional currency, such as rubles or dollars.
It should be noted that tokens make the cryptocurrency system independent from any regulatory authorities. It can be issued exclusively by the network of the particular cryptocurrency.
Types of tokens
There are several main types of tokens:
- Equity tokens. These are shares of some company.
- Utility tokens. This could include tokens that are valuable only within a particular business model.
- Asset-backed tokens. These are digital liabilities connected with real goods and services.
The role tokens play in ICO
Tokens are connected with ICO concept. Let’s take a look at a specific example of ICO tokens exchange.
A team creates an innovative project of a specific direction. Funding is definitely needed in order to bring it into life. So, investments are attracted via ICO – initial token/coin offering. In return, investors are offered sort of “bonuses” on different conditions, which they will receive after the start-up is realized. In this case tokens will ensure preservation of investor’s right to receive these “bonuses” as well as the project organizer’s compliance with the terms and conditions. Token identifies the owner and provides him/her with access to the start-up products and services. After all the ICO stages are completed, and the project is successfully developing, tokens can become the means of payment, ensure the investor’s right to get a particular stake in the project or be a method of remuneration.
Many people are wondering – how to withdraw the token after ICO and exchange it for fiat currency? This becomes possible on one condition. The majority of cryptocurrencies are inextricably linked to the price of bitcoin, that is why first the tokens must be exchanged for bitcoins and then – for the real money.
How to sell or buy a token on an exchange
Nowadays the most popular way to get tokens is to buy them via special exchange platforms, token exchanges or directly from the sales person. The process is similar to that of cryptocurrency acquisition. However, one must be cautious and risk-aware of the situation before making a purchase. In order not to come off the loser, one has to assess the current situation on the market as well as trace the tendency of the cryptocurrency rate volatility.
How to store tokens
There are special digital wallets to store tokens, in which keys processing and storage takes place as well as the transaction formation and signing. This digital wallet represents a special application, which as a rule is a part of the tokenization platform.
Source: Login Casino