Digital Token Explained : 7 Things you Need to Know About Token

Digital tokens represent a specific amount of digital resources you can own, give to someone or even redeem later. These tokens are either intrinsic or created and they are assigned a certain utility. They function as a medium of exchange, available on various platforms.

Digital token

What Is a Digital Asset?

Digital assets are non-tangible assets that are made, traded and also stored in a digital format. This digital assets that are being traded include cryptocurrency and crypto tokens.

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What Is a Digital Token?

Digital tokens refers to a special kind of currency that is virtually owned. These tokens represent assets that are easily readable or utilities that reside on their own blockchain.

Types of Digital Tokens

Digital tokens are categorized into three major types. They are :

  • Currency tokens: Bitcoin is a type of currency token meant to pay for goods and services. Bitcoin was, in fact, created to replace fiat (paper) money.
  • Utility tokens: Utility tokens are more than a means of payment. Specifically, they give users the power to trade cryptocurrencies at lower fees since utility tokens provide them access to the developers’ platforms. An example of a utility token is Ethereum.

• Asset or investment tokens: By the name itself, these tokens refer to assets that can give investors a positive return on their investment. An example is The DAO, a blockchain company backed by a smart contract.

What Are The Difference Between Coin and Token?

Sometimes people refer to all digital assets as coin or token, while some people use the word “coin” to refer to a token and a “token” to refer to a coin. However, there are some differences of which both posses. Some of them are :

  • Digital coin are native to their blockchain while tokens have been built on top of another blockchain.
  • Digital coins are generally used as a normal life coin – which is used as money while token are used with decentralized application or dApps.
  • Digital coin are not reliant on a central issuing authority unlike digital token.
  • Digital coin are built on a blockchain while digital tokens are programmable and are run by software protocols which are composed of smart contract.

How Do Digital Tokens Work?

Digital tokens function like game chips, that are used as a symbol for cash while playing game and they have value when converted to paper money.

A digital token is used to facilitate real transactions through the use of a decentralized technology known as blockchain. Users can easily make payments and keep their funds without any need for a third party. The method of transaction is always preferable, since it is more faster and affordable for both process.

How Can i Get a Digital Token?

Those interested in getting a digital token can participate in an initial coin offering (ICO). From there, you can buy digital tokens from the organizing company following this process:

  • Register for an ICO via the company’s website.
  • Choose the digital token of your choice.
  • Move the digital tokens you purchased to your wallet.
  • Buy ICO tokens by sending your tokens to the company’s wallet address.
  • Receive your ICO digital tokens in your wallet.

But if you miss an ICO, you can still buy digital tokens once these are listed on coin exchanges.

Is Digital Token Safe For Usage?

Digital token are easily moved and transferable from one person to another, so there is need to be concerned about their safety and security.

Generally, digital token use is safe because all transactions are recorded on a blockchain which is tamper proof and the ledger gives the owner full transparency of the token through his wallet address. The digital record also strengthens the security level because the logs where the records are stored can not be altered.

Digital tokens have been around for a considerable period of time and people are becoming more familiar with it. They are slowly getting accepted through various means, as they are accepted to be a medium for purchasing a number of items.

It essentially has a potential under blockchain which powers digital currencies and is functional in some vital sectors of the world.

We hope this article will help to expose your knowledge about digital tokens and give a clear picture on how to get them. Kindly make your suggestions in the comment section.


About Author

Digital token
Marshal NosaCEO
I'm a professional digital marketer with over 7 years of experience in the field. I create well researched content related to finance, cryptocurrency, stocks, forex and metaverse related articles.

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