In language, the meaning of a token is a stand-in for something else. That is true in case of the cryptocurrency world as well.
Regarding cryptocurrency and computer security, the term token is normally referred to as a cryptographic sequence of letters and numbers that includes no real data but relates back to real data. In cryptocurrency over a facet of a transaction exists as tokenized data. A token may look something like this: 947153d332beaf39decy243h2je8883bfb84eda47abccccbc2d61436d8d1e81584d.
Lastly, the term token is normally used to describe a cryptocurrency token. Some examples would be BTC, ETH, LTC and hundreds more.
When no additional context is provided, one would normally assume the term token is used as a synonym for a cryptocurrency.
The brief answer as to why all the above and much more is accurate is because cryptocurrency tokens mostly exist as tokenized transaction data saved on block chains.
There are many different ways how the term token is employed in the cryptocurrency world.
Term token can be used in a couple of distinct ways in cryptocurrency.
In cryptocurrencies world, the word token is used as a general term to describe some digital asset. However, the token is not always meant to be used as money. One example would be collectible CryptoKitties that are not used as money.
The term token is used to refer to a unit of value. One can say: ”I have 3.6345 Bitcoin tokens in my digital wallet”. This points to the fact that cryptocurrencies, such as the U.S. dollars and Euros, are a value or money tokens and they represent value. It is important to understand that tokens by themselves do now have any value. They are just numbers and letters. In the example of a Euro 20 cents coin, the material would have some value nonetheless.
The term token refers to how the production, transfer, and storage of cryptocurrencies use sequences of letters and numbers called tokens.
In cryptocurrency trades, tokens are made and sent via the internet. When people trade them between them, they exist as entries on a given coin’s distributed database, also called blockchain.
Sometimes, when people talk about token,s, they are referring to digital assets that are built on a different cryptocurrency’s platform such as Ethereum’s ERC-20 tokens and ERC-721 tokens.
The two Ether and KIN are cryptocurrencies (tokens) on the Ethereum system, but one may consult with KIN as a token to differentiate it from cryptocurrencies that use their particular network.
Token may also be used to characterize utility tokens that are sequences of data that may be used for certain functions in specific systems. One example would be a token that allows the user to access a certain amount of cloud storage).
Token may also be used to characterize security tokens. Security tokens are sequences of letters and numbers used in computer security. Security tokens used in computer security should not be misunderstood with an Ethereum based ICO tokens that U.S. Securities and Exchange Commission (SEC) might be considered as financial securities.
To conclude this article we can summarize that tokens can represent value tokens (Bitcoin), security tokens (used by cryptography in computer security) or utility tokens (tokens having use value apart from the exchange value).
Most of the time, we are talking about a cryptographic series of numbers of letters along with the gap between value tokens, security tokens, and utility tokens are found in what the token is used for.
Semantically, regarding talking about cryptocurrency in general, the term token is normally
– used clarifies any cryptocurrency or a unit of value of a cryptocurrency
– used to explains ICO tokens, especially tokens on a community such as Ethereum’s.
Tokens in general and in cryptocurrency
In the start of this article, we focused on how tokens are applied to cryptocurrency, and now we will dive into discussed encryption a tiny bit, below we will concentrate on how tokenization is used in cryptocurrency.
The idea of the term token in general: Normally speaking, the term token describes something that is a stand-in for something else.
Tokenization is simply a sort of encryption (a kind used liberally in cryptocurrency technology).
Tokens in computer security
In computer security, a token is a kind of encrypted data where an algorithmically generated series of data acts as a stand-in for the original data.
This avoids the need for sending even an encrypted form of real data across the internet. The concept behind is that a token refers back to real data, but doesn’t contain real data. All online transactions are being secured in this way as well as Apple Pay as an example of the real-world payment system.
Tokens and currencies
A currency token is a term used to describe a value token or money token. It represents a sum of currency or value or money. This could be one dollar bill in a digital or paper form that represents 1 USD. It could be as well a Bitcoin which represents 1 BTC worth of value. Therefore, both dollars and cryptocurrencies are money tokens or value tokens or token money. In this way, they represent value and may be applied as money, but themselves are not inherently of value apart from their trade value.
What is a utility token?
Not every token is designed to be used as a currency, value or money. Tokens may also be utilized in other ways. As an example, Filecoin’s team’s issue to their users points that can be used to access a decentralized cloud storage system. In this case, tokens can work as coupons or tickets for X amount of certain goods or services. Being money is a utility, but in concept, not every utility must revolve around trade and value.
Rthereum ERC-20 tokens along with other similar tokens, terms token has another meaning. This is especially true in cryptocurrency. People often talk about tokens while referring to altcoins. Altcoins are all cryptocurrencies that are not Bitcoin. Bitcoin has a special place because it was first and it is most widespread cryptocurrency.
Altcoins exist on a different coin’s platform instead of the present on their own platform. Ethereum and NEO have tokens of this sort, as do other platforms. Most commonly, with the hottest of those platforms Ethereum as an example, the token would refer to ERC-20 tokens assembled on the Ethereum platform that aren’t the native token Ether.
To create tokens in cryptography are used one-way cryptographic hash functions. A hash function takes a certain amount of data and creates an encrypted predetermined length string of data. Generally speaking, cryptocurrency uses cryptographic hash functions because of several things, including the production of tokens.
Tokens and encryption in cryptocurrency
Regarding encryption in cryptocurrencies, a cryptocurrency token is tokenized data pointing to trades that were transmitted across the internet and saved (on a blockchain) without exposing any sensitive data.
The idea is that every token is unique and corresponds to important data used to create a transaction. An example of such sensitive data would be a private key. However, this token does not include the sensitive data so it can be shared openly online. This is called a hash of the transaction that and looks like a unique sequence of letters and numbers.
This allows people to verify ownership of Bitcoin on the public ledger called blockchain. This is a public record and can be seen by everyone.
The outcome is the blockchain is filled with tokens of this kind sitting next to public transaction data. A token (of this encrypted form ) identifies the transaction and can be made by the sender, and the remaining part of the transaction data is recorded together with it.