A token is a form of an asset or value in the blockchain. It can be a virtual currency, stocks, securities, works of art, real estate, and other examples of assets. Tokens are created based on an existing blockchain such as Ethereum. They can be used for various purposes, including platform access, ICO fundraising, and crowdfunding.
In simple words, tokens are records in the blockchain that confirm the rights to something—for example, ownership of an asset. Cryptocurrencies are included in this concept of tokens. Therefore, you are dealing with tokens if you regularly exchange USDC to MATIC, ETH to ADA, etc. Every digital coin is a token, but not every token is a digital coin.
Tokens can store both direct monetary value and be pegged to the price of real assets. These are called tokenized assets. At the same time, the purchase of such an asset does not mean the acquisition of a share, which means that the token simply reflects the current security price on the exchange. Continue reading the article and learn more about the types of tokens and how to store them securely.
Varieties of Tokens and Their Features
The most popular token categories include:
Different types of tokens in blockchain:
- Platform tokens: These are tokens that support decentralized applications (dapps) built on a specific blockchain platform, such as Ethereum, Solana, or Cardano. Platform tokens are often used to pay for network fees, incentivize network participants, or access platform-specific features. Examples of platform tokens are ETH, SOL, and ADA.
- Security tokens: These are tokens that represent legal ownership of a physical or digital asset, such as equity, debt, real estate, or art. Security tokens are subject to security regulations and often require compliance checks and verification processes. Security tokens can provide benefits such as increased liquidity, lower costs, and faster settlement. Examples of security tokens are tZERO, Polymath, and Harbor.
- Utility tokens: These are tokens that are integrated into an existing protocol and used to access the services of that protocol. Utility tokens are often designed to provide some functionality or benefit to the users, such as voting rights, governance power, discounts, rewards, or network access. Examples of utility tokens are BAT, MKR, and ENJ.
- Governance tokens: These are tokens that fuel blockchain-based voting systems and allow token holders to influence the direction and development of a protocol or platform. Governance tokens are often distributed to early adopters, contributors, or stakeholders of a project and enable decentralized decision-making and coordination. Examples of governance tokens are UNI, COMP, and YFI.
- Non-fungible tokens (NFTs): These are tokens where every token is unique and non-interchangeable. NFTs can represent anything that has some rarity or uniqueness, such as digital art, collectibles, gaming items, or identity. NFTs can provide benefits such as verifiable ownership, provenance, scarcity, and interoperability. Examples of NFTs are CryptoPunks, CryptoKitties, and NBA Top Shot.
Best Token Storage Options
Having swapped from one currency to another, say USD to BTC or vice-versa, AVAX to MATIC or vice-versa, and so on, the coins’ owner immediately thinks about the storage place. This is the right approach. Choosing the most secure and reliable methods is important so as not to become a victim of hacking or any other fraudulent activities.
There are several common ways to store tokens securely. The choice of the best will depend directly on your needs. Check out the available storage options below:
These programs store private keys and allow users to interact with the blockchain. They come in many forms, including online, offline, mobile, and hardware wallets.
Some examples of cryptocurrency wallets are:
- Ledger Nano X
- Trust Wallet
This crypto wallet type is specifically designed to store and manage NFT data. Such wallets offer a number of features and security measures that make them ideal for this purpose.
- Trust Wallet
- Coinbase Wallet
Some people prefer storing tokens on physical devices such as USB or hard drives. This option may be more secure than storing NFTs on an exchange or marketplace platform. However, it’s essential to make sure the physical storage device is properly encrypted and in a secure location.
Instead of using a USB or hard drive, Cloud storage solutions can also be used to store tokens. This option can be very convenient and can save you from losing your data while losing your physical storage, but it is vital to choose a reliable service provider. You should always pick a cloud storage option that offers a lifetime subscription.
Decentralized storage solutions are a particular type of cloud storage that uses a network/chain of computers to store data. This option provides enhanced security and backup.
Examples of decentralized storage solutions are:
So, this is all from us. Tokens are similar to digital currencies, thus special programs also apply to them. These solutions can help you safely store and retrieve your tokens anytime you need. Be sure to pick one that fits your needs and budget.