Different types of crypto tokens you need to know about!

After its advent to be used in the blockchain ecosystem, crypto tokens have become one fascinating thing and new inventions are coming out every day. Developed by a Top token development company in Kolkata, crypto tokens are designed for P2P or peer-to-peer transactions and payments without the involvement of an intermediary or a third party.

What is a crypto token, and what value does it hold?

Simply known as tokens, a crypto token is created by different platforms that stays on the top of the blockchain. As depicted by a Security token development service provider, tokens are digital assets that survive on the blockchain. Some of the common examples of tokens can be Tether, which is a second-layer token that is used on multiple blockchains. Other tokens like the Uniswaps “UNI” token and Chainlinks “LINK” are based or works on Ethereum blockchain. Ethereum’s tokens are very much popular and most of the tokens are ERC20.

A crypto token comes with a value of its own, as it can be exchanged and can also be used to represent any traditional digital asset or a certain utility or service. Crypto tokens have the capability of representing actual assets, such as art work and real estate. However, some intangible assets like processing data or data storage can also be represented by a crypto token. Furthermore, crypto tokens are even used as a governance instrument for voting purposes on specific parameters like protocols, and tokenization is the process of creating crypto tokens that can serve the above functionalities.

What are the types of crypto tokens used in the blockchain ecosystem?

As described by the token developers, depending on the application and functionalities of different tokens being generated, they can be divided into different types as mentioned below –

•    Utility crypto tokens: Utility token development is the process of developing certain crypto tokens that are designed to be used for any particular purpose. These tokens are generally used within the application or platform for which they are entitled and to be used.  Utility tokens best serve the purpose of making payments for purchases within the platform only. A utility crypto token is generated by a company to provide its users with a payment mechanism and is mostly beneficial for ICO sales, as the tokens are offered at a lower price compared to market price.

•    Security crypto tokens: Developed using Security token development service, a security token resemble or work the same as traditional securities. These tokens are also termed as equity tokens, as they can depict a stock or share of the company offered to a buyer on ending of an ICO or initial coin offering. These tokens are a bit different when compared to utility tokens, it is due to the fact that they are limited by specific federal rules and regulations meant for stock trades.

•    Commodity crypto tokens: These tokens can be compared to commodities like gold or other standard assets and do have an independent value like that of an asset. The tokens are best used in commodity markets controlled by large banking bodies and stock market companies. A commodity token allows crypto investors to diversify real-world assets effortlessly.

•    Reward crypto tokens: Reward crypto tokens are one of its kind tokens that are only designed to serve as a reputation token to be applied for specific blockchain application. These tokens are best utilized to be given as rewards which will be total free of cost and could be used to give to a person as appreciatory item. The best example of a reward crypto token can be, MPR or Medipedia Point Rewards that is offered to the platform service providers based on performance reviews.

•    Currency crypto tokens: These are tokens work the same way as traditional or fiat currencies and is also used for same purpose, such as making payments for purchases. Bitcoin is one such example of a digital currency which is also used for buying and selling products and services. A currency token can be traded for other cryptocurrencies and traditional currencies through a digital wallet.

Crypto tokens are just the tip of the iceberg, as there are certain other types of cryptocurrencies utilizing blockchain technology. According to a Token development company, the crypto tokens are being used for a diverse list of purposes and serve the digital economy.