What Are Crypto Tokens & How Crypto Tokens Work?

Crypto tokens are a new way to design open networks that arose from the cryptocurrency movement that began with the introduction of Bitcoin in 2008 and accelerated with the introduction of Ethereum in 2014. Crypto Tokens are created over an Initial Coin Offering (ICO).

Tokens are in fact a breakthrough in open network design that enables:

  1. the creation of open, decentralized networks that combine the best architectural properties of open and proprietary networks, and
  2. new ways to incentivize open network participants, including users, developers, investors, and service providers.

By enabling the development of new open networks, tokens could help reverse the centralization of the internet, thereby keeping it accessible, vibrant and fair, and resulting in greater innovation.

How do Crypto tokens work?

Each cryptocurrency token embodies a tradable good. This can be for example coins, points, certificates, in-game items, etc. This means that crypto tokens can be used to represent a share in a company or can be used as central committee voting rights.

They are often used to raise funds in a crowdsale. That is why many people refer to them as cryptocurrency assets or crypto assets and crypto equity.

The developers of a specific digital token can decide to publish their token on a cryptocurrency exchange. This way users are able to buy and sell the token the initial coin offering has finished.

Tokens created by the Ethereum Code can get frozen in case something happens – a hack or a government regulation. This means that no cryptocurrency tokens are movable until the unfreezing happens.

Conclusion:

Crypto tokens are currently niche and controversial. If present trends continue, they will soon be seen as a breakthrough in the design and development of open networks. This is possible by combining the societal benefits of open protocols with the financial and architectural benefits of proprietary networks. They are also an extremely promising development for those hoping to keep the internet accessible to entrepreneurs, developers, and other independent creators.

The following two tabs change content below.
I am a Blockchain Researcher, Developer & Consultant. Founded Allchains, Blockchain-as-a-Service Company. Earlier founded SaaS-based mobile application security company Wegilant (Appvigil). I am very passionate about new technologies like Blockchain, IOT, Application Security, AI etc. I am also the part of Forbes 30 Under 30 list of 2016 in Technology.