What are Different Types of Crypto Tokens?
While the basic understanding of a crypto token is that it acts as a digital unit of cryptocurrency that corresponds to fungible and tradeable assets, there is more to it. A crypto token can have multiple uses on the blockchain. In this article, we discuss some of its types.
Platform tokens are an essential part of any blockchain. They allow users to access various applications constructed using the blockchain infrastructure.
The uses of platform tokens include gaming, advertising, and marketing. Moreover, platform tokens are also utilized for trading digital collectibles such as CryptoKitties.
Security tokens are the digital version of traditional bonds and securities issued in an economy. Therefore, they act as a financial instrument for on-chain projects. They are considered an alternative for crowdsourced fundraising and other fundraising methods.
Security tokens can also be utilized for off-chain investments in real estate, equipment, and businesses. In scenarios such as these, security tokens represent the asset value directly.
As the blockchain network is expanding with each passing day, there is an imminent need for an efficient decision-making process. Governance token holders can influence and decide the protocols of an app or the blockchain itself.
All token holders have a say in how things would be conducted in the future through a voting-based system. Thus, it ensures effective system management.
Utility tokens are a way of accessing integrated services in a blockchain protocol. They essentially bridge the gap between the platform and users — making the user experience smoother and better.
Non-Fungible Tokens are used for obtaining the ownership of real-world or digital art. It acts as a medium of exchange and reduces the chances of someone copying the creation.
Although the tokens mentioned above have their unique purposes, overlaps are possible. A single token can sometimes perform multiple functions and serve different communities.