Tokens & Crypto

The definition of Token says that Technically, “token” is just another word for “cryptocurrency” or “crypto asset.” But increasingly it has taken on a couple of more specific meanings depending on context. Tokens have a huge range of potential functions, from helping make decentralized exchanges possible to selling rare items in video games. But they can all be traded or held like any other cryptocurrency.

However, the Crypto or Tokens have a distinctive classification or archetypes and it depends on the project or the dapp.

Token Archetypes

• Crypto-Currency (Currency): A token with the ambition to become a widespread digital form of currency.

• Equity Token (Earnings, Store of Wealth): A token that confers to its holder a right to equity-related earnings, such as profit-sharing, application rents, or platform fees.

• Funding Token (Store of Wealth, Funding): A token that is perceived as a long-term investment from the holder’s perspective, and as a financing vehicle for the project’s team and/or the community (bounties).

• Consensus Token (Validation, Reward, Store of Wealth): A token that is used as a reward to nodes (physical computer hardware that runs their respective platform’s blockchain software) that ensure data validation and consensus.

• Work Token (Work, Reward): A token that is used as a reward to users who complete certain actions or exhibit certain behavior.

• Voting Token (Voting, Right): A token that confers a voting right to its holder.

• Asset Token (Voting, Right, Asset, Ownership): A token that represents asset ownership.

• Payment Token (Payment): A token that is used as the internal payment method in the application.

At the simplest level, tokens are just code that lives on a blockchain. But unlike other forms of money, they’re digitally native, programmable, and secured by one’s crypto wallet and private key. Cryptocurrencies are just one type of token.

CONLEY, John P., et al. Blockchain and the economics of crypto-tokens and initial coin offerings. Vanderbilt University Department of economics working papers, 2017, no 17-00008.