Cryptocurrency and blockchain technology have brought a new revolution. It creates a new investment trend in the market. To start making money from digital currencies and Token coins, investors need to master their nature and characteristics. If you are interested in Tokens but don’t have much information about this concept, let’s join Learn Crypto Trading to learn about what tokens are and the necessary knowledge to invest effectively, safely, and profitably.
What are tokens? How is the Token origin formed?
Cryptocurrency is a risky but beautiful investment channel thanks to its high profit potential. Therefore, it becomes a fertile land for investors. To understand and profit in the virtual currency world, you first need to learn about what tokens are. At the same time, there are many different related terms in the content below:
What are tokens?
A token is a type of electronic product that is issued quite commonly. It operates on the Blockchain platform of existing projects without owning their Blockchain. Crypto tokens can be used as a payment method within that project’s ecosystem. However, Tokens are different from coins in that Token holders have the right to participate in the system’s network.
The Ethereum blockchain is currently the most popular platform using Tokens. Tokens on Ethereum generally follow the ERC-20 standard. In addition, some other platforms such as NEO and Tron. It is also possible to generate Tokens with the corresponding token NEP-5.
Token Classification Characteristics
Tokens are used in many fields and have developed many types to meet market needs. Based on physical characteristics, we have two popular types of Tokens:
- Hard Token: A compact Token-generating device like a USB. It can be carried anywhere. Hard Tokens are used to access devices and digital assets, confirming transactions.
- Soft Token: This is a type of software used to issue Token codes installed on users’ phones and computers. When certain transactions arise, this software will automatically generate the corresponding Token code.
Based on the purpose and application of the Token, we can classify it into two types:
- Utility Token: This is a type of Token used to serve projects. Acts as a digital signature, enhancing security for transactions on digital platforms.
- Security Token: A type of Token specifically for stock markets. It exists in the form of electronic shares. Investors who own security Tokens will enjoy dividends corresponding to the shares they hold in the project. In addition, investors also have the right to participate in elections and voting in that project.
See more: Token investment: Increase and optimize profits
Crypto Token Formation Process
What is the origin of What are tokens? A new token can be created quite simply and does not take much time. However, those who are new to Token development will encounter many difficulties if they do not understand carefully. Tokens are created on the blockchains of each separate cryptocurrency. Token developers need to pay fees in the currency of that original blockchain.
For example, if a Token is developed on the Ethereum blockchain, you need to use Ether (ETH) to pay the fee to create it.
Currently, most Tokens exist and are used on DApps. These are also known as decentralized applications.
Instructions for using Tokens on the Blockchain platform
A popular way to get Token coins is through cryptocurrency exchanges. These are quite large-scale platforms. Nod facilitates trading for many different currencies and Tokens. They allow you to trade between cryptocurrencies and regular currencies, manage most different wallets, check the value of each cryptocurrency, as well as facilitate the deposit process and receive money.
In addition, some Tokens are issued through other applications. For example, some mobile applications offer cryptocurrency tokens to people who actively use their services. This often facilitates other transactions between users and in-app purchases.
Sometimes, the Token represents something else you paid for. An example of this is “Security Tokens”. These are assets that represent your ownership of a portion of the company. Security tokens can replace stocks and certificates, and the official document shows how many shares a Token holder owns in the company.
Should Traders Invest in Tokens?
In addition to serving as a type of digital signature representing the individual, organization, or business performing transactions, Token is also a type of electronic currency. So, what are tokens advantages of tokens? Should you invest or not?
Currently, Token coin is a highly profitable field and attracts many investors. However, investing in Token coins is quite new and risky. Because the market still has many unstable points and extremely high risks. The liquidity of Token coins is also not high. This further increases the risk level when investing in this cryptocurrency.
Financial experts recommend that newcomers to the cryptocurrency market should choose to invest in coins instead of Token coins, which are still quite new. Only truly professional investors who have thoroughly researched this type of cryptocurrency. Only traders with a lot of experience in the market can safely invest in Token coins.
See more: Open an HTX exchange – Increase personal income
What is the difference between Coins and What are tokens?
- Tokens operate based on other Blockchains: This is a huge difference compared to coins. For Tokens, many projects do not need to create a new blockchain. It helps save costs and takes advantage of existing blockchains. For example, Polkadot, Ethereum, EOS, etc. However, to synchronize with Token standards in the blockchain ecosystem, some projects design original coins similar to Tokens to enhance convenience when exchanging with Other Tokens. Such as Terra and Solana, as well as the Blast airdrop.
- Tokens operate based on available supplies: Most Tokens are created with a fixed total supply. Available from the start of release to the market. For example, ChainLink has an initial supply of 1 million Tokens, fully owned by the project owner. In contrast, coins often have an initial supply of zero. It is created gradually over time.
- Tokens have many different standards: Each coin has its blockchain. There is no need for a common standard because it is unique within that blockchain. In contrast, Token has many standards to meet the different needs of projects. A few prominent standards are ERC-223, ERC-20, and ERC-721 on the Ethereum blockchain platform. Tokens need to meet these common standards to easily run smart contracts and transactions.
Conclude
Above is basic information about “ What are tokens ?” that Learn Crypto Trading provides to help readers better understand this digital product. Token is a fairly new cryptocurrency on the market. Hopefully, investors will have a clearer view of Token and Token coin products to make appropriate decisions. Don’t forget to follow our website to wait for the next interesting information!
Frequently asked questions
What is the outstanding difference between coins and What are tokens?
Token coins are usually not independent cryptocurrencies like Bitcoin or Ethereum. It is usually built on an existing blockchain. Meanwhile, coins are independent cryptocurrencies that operate on their own blockchain.
What are tokens the same as Bitcoin?
Token coin and Bitcoin are two different cryptocurrencies. Bitcoin is an independent cryptocurrency. While Token coins are often built on an existing blockchain.
What are token coins used for?
Token coins can be used as a means of payment. But they can also be used in specific applications and services. Like DeFi (decentralized finance), NFTs (immutable versions), and other blockchain ecosystems.
