Token is a term that is often confused with the general description of cryptocurrency. Although they are closely related, they are not part of the same concept.
Tokens are gaining momentum because their possibilities are broad. Currently, several interesting projects are being developed through tokens and, therefore, it is important to stay informed about their functions.
WHAT ARE TOKENS?
To better understand what a token is, it is necessary to go to the root of the term. Token means “token” in English. It is a label or identification sign to point to an object of real value (such as casino chips, which are an identification of real money). This is a name that carries over into the world of digital exchange as a unit of value that is dropped by a
Although it has similarities to cryptocurrencies they are not these types of units of exchange as their scope is broader. Although they work from Ethereum’s blockchain technology and have a value, they are not currencies.
In principle, they differ from these because they have several levels of value and whoever creates the token decides what they are. Within the blockchain, tokens have the utility of generating smart contracts, paying for a service, yielding the power of data or optimizing a system.
So, a token is a virtual object that has certain properties established by its creator. An example of this are the NFT (Non Fungible Token) that are exchanged through play to earn games.
HOW TOKENS WORK
Tokens work in a similar way to cryptocurrency exchanges. Both use the blockchain as a verification system. But, tokens do not have a network of their own like any cryptocurrency. Therefore, tokens adhere to an already existing network which is usually Ethereum.
Tokens have a value only within an infrastructure that they borrow. It is a sort of covenant or contract within a platform to perform a specific function. Because of this characteristic they are not an exchange currency. A token has no value by itself, it requires something else to represent its value. That which represents its value can be a smart contract.
In a practical example, suppose company X wants to build a house costing USD 15 million for a contract it made with the city to earn USD 30. Since it does not have all the money to build it, it issues 5 million tokens at one dollar each. The condition is that when the work is finished each participant will get 10% more than what they paid. The creator of the contract then destroys the tokens.
CURIOSITIES OF THE TOKENS
The use of tokens is currently prominent. Here are some cases that have made practice of this invention.
There are tools for using tokens. Among them we can find an XMR to BTC converter. This helps you forecast the values of a cryptocurrency. Exchange sites like Changelly can help you with that.
In Argentina they launched tokens backed by soybeans. This is explained in a curious article from Investing.com. A firm known as EDP AGRO exchanged the tokens with Biofilm in exchange for inoculants, seeds and bio-stimulants for planting.
In Spain, fan tokens were issued by the Royal Spanish Football Federation (RFEF) and sold out on the day of their release. With them fans could make purchases, enjoy exclusive benefits and digital exchanges.
A graphic designer who gave himself the nickname Beeple sold 5 thousand images of his creation under the non-fungible token format. The collection closed at 69 million dollars. Among his designs were memes, photographs and interesting realizations.
NFTs are common in the gamer world. By means of an NFT anyone can buy cryptocurrencies or sell different elements of the game. Among them are skins, tools, potions, indispensable items. CS: GO skins are valued at 2 million dollars.
The first NFTs were CryptoKitties. In this game, participants exchanged and even crossed virtual kittens. Each of the kittens was an NFT. Then the cats were sold for thousands of dollars.
CONCLUSION
Tokens are increasingly chosen because contracts can be established through a nearly foolproof system such as the blokchain. Contract terms can be guaranteed to be totally clean, open and transparent.