What is a Cryptocurrency Token? What Are Different Types of Crypto Tokens
A cryptocurrency token is a digital asset, usually based on the Ethereum network. Tokens serve as both the transaction medium and recording storage of each specific cryptocurrency (such as Ether). The tokens can be bought and sold by anyone that has some coins for those tokens to be used.
These coins or tokens are usually used as an investment or trading strategy, with some currencies being used as the internal currency of an application or project on top of Ethereum. Tokens are usually built to serve some purpose, but they can also be bought and traded without having any purpose other than speculation.
There Are Multiple Types of Tokens:
Security token: A security is a fungible, negotiable financial instrument that holds some type of monetary value. It represents an ownership position in a publicly traded corporation (via stock), a creditor relationship with a governmental body or a corporation (represented by owning that entity’s bond), or rights to ownership as represented by a warrant.
Utility Token: This is a type of token that only has the function of exchanging the cryptocurrency for some product or service.
Worker Proposal: Worker proposal tokens can be used to gain access to funding from an organization. They are often issued by businesses, such as Dash and Steem, to their users. They give token holders the ability to vote on what they want the organization to do.
Reward Tokens: These are tokens that are meant as rewards for completing certain tasks or participating in some project or service.
Collectible Tokens: These types of tokens will only retain some value if they are rare. A way you can obtain this type of token is by purchasing them during an ICO or presale.
Tokenized Assets: These tokens represent tradable assets (e.g., stock in a company, equity, bonds). They are different than security tokens because it is much harder to claim ownership to tokenized securities than it would be for traditional securities.
Decentralized Autonomous Organization (DAO) Tokens: These are used to fund the DAO’s activities.