Crypto Tokens: The Future of Cryptocurrency?
By Jeff Parker on The Capital
The approval of blockchain technology and the growing popularity of cryptocurrencies fuel investors’ interest in crypto assets, or tokens. These digital financial instruments (electronic tokens or “money substitutes”) are used for lending, sale of securities, and monetization.
Let’s try to figure out what tokens are and how they are used.
Built-In Tokens
This type of token represents data about the crypto asset in the blockchain chain. In fact, these are the coins themselves :
Bitcoins in the Bitcoin system ;
Ripples in the Ripple network;
NEXT on the NEXT crypto platform (NXT);
ethers on crypto platform ether (Ethereum).
Tokens stimulate users. They are received, bought, or sold. They are not secured by any assets or liabilities. Such tokens are usually called cryptocurrency.
Functions of the built-in tokens:
Bonus for miners
Investment tool
Means of payment
Secure Tokens
Secured tokens have become an alternative to ordinary stocks, bills, bonds, and certificates. An asset is usually associated with such a crypto asset. It is established by a company or a group of persons who make an issue.
Secured tokens are divided into 3 subspecies:
Stock Tokens
In essence, these are electronic stocks that have become a new tool for investing. Such a crypto asset confirms: the holder owns a stake in the company. Stock tokens are usually issued during an ICO. Their sale gives the organizers money to launch the network and startups. By investing in a crypto asset, “digital” shareholders receive a voting right when solving key issues of the company and dividends (their form may be different).
For example, Digix DGD token holders on the broadcast platform are paid a portion of the transaction fees on the Digix Network Gold network. They have the right to vote. On the Sia network, Siafund token holders are guaranteed the payment of 3.9% of revenues for storing information. Tags shareholders receive 50% of quarterly earnings.
Certificate Tokens
This subtype confirms: the token is secured by a tangible asset (usually bank metal). When selling a token certificate, the same gold is not moved anywhere, they simply make changes to the crypto asset (information about the owner). To fulfill the conditions of the token certificate, it is sent to the issuer. In return, the holder receives the asset itself.
For example, DGX is produced by DIGIXGLOBAL PTE LTD. It is equated to 1 gram of gold, which lies in the Singapore vault. The holder is entitled to exchange the crypto asset for “yellow” metal.
Credit Tokens
A credit token confirms the loan that was issued to the issuer. The latter takes money from the client in exchange for the release of a crypto asset, which guarantees their return with interest.
The Jil tokens, for example, is the issuer of the credit tokens equivalent to the dollar. Their holders can get the same amount of tokens in exchange for USD, i.e 1 Jil Token for 1 USD. Some crypto assets make it possible to combine all 3 main functions of tokens with security. Jil Tokens is a unique combination of stock token, certificate token, and credit token. It adds the highly sought after liquidity to the world of cryptocurrency. The J1 tokens is a game-changer for merchants, users and for the crypto industry as a whole.
Summarizing the Importance of tokens
To create a fully functioning economy powered by tokens, a lot of details need to come into place. Think of token just like money in the economy. It is a good idea to meaningfully engage each ecosystem participant to earn and spend tokens.
That, however, can already be done by fiat or existing cryptocurrencies. How you uniquely regulate the money supply in your “digital cooperative” may create additional incentives that current blockchains are not tailored for.
