What is a token?
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Token is just another synonym for “cryptocurrency” or “cryptoasset” in technical terms. However, depending on the context, it has taken on a couple of more specific meanings. The first step is to define all cryptocurrencies that aren’t Bitcoin or Ethereum (even though they are technically also tokens). The second is to characterize digital assets that, like many decentralized finance (or DeFi) tokens, sit on top of another cryptocurrency’s blockchain. Tokens can serve a wide range of purposes, from facilitating decentralized exchanges to selling rare things in video games. They can, however, all be exchanged or owned in the same way as any other cryptocurrency.
The term “token” is frequently used in the cryptocurrency world. In fact, because all cryptoassets are technically tokens, you might hear Bitcoin referred to as a “crypto token” or something like. However, the word has come to have two distinct meanings that are so widespread that you’re likely to come across them.
A “token” is a term used to describe any cryptocurrency other than Bitcoin and Ethereum (even though they are also technically tokens). Because Bitcoin and Ethereum are the two most popular cryptocurrencies, it’s helpful to have a term to describe the rest. (You might also hear the term “altcoin,” which has a similar connotation.)
The alternative, more particular use of “token” is to designate cryptoassets that run on top of another cryptocurrency’s blockchain. If you’re interested in decentralized finance, you’ll come across this term (or DeFi). DeFi coins like as Chainlink and Aave run on top of, or leverage, an existing blockchain, most often Ethereum’s.
Tokens in this category assist decentralized programs in performing tasks ranging from automating interest rates to selling virtual real estate. They can, however, be owned or sold in the same way as any other cryptocurrency.