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Understanding Cryptographic Tokens

Cryptographic tokens are programmable digital assets managed by smart contracts on blockchains, differing from coins which are native currencies. Utility tokens grant access to services, while security tokens represent ownership and are regulated. ERC tokens follow standards for compatibility within the Ethereum ecosystem, essential for decentralized applications.

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11 views2 pages

Understanding Cryptographic Tokens

Cryptographic tokens are programmable digital assets managed by smart contracts on blockchains, differing from coins which are native currencies. Utility tokens grant access to services, while security tokens represent ownership and are regulated. ERC tokens follow standards for compatibility within the Ethereum ecosystem, essential for decentralized applications.

Uploaded by

divyasreeenagappagari
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Cryptographic Tokens – Summary Notes

1. Introduction
• Cryptographic Token: A programmable digital asset created and managed by a smart contract
on a blockchain.

• Smart contract controls creation, ownership, and transfer of tokens.

• Tokens operate on existing blockchain networks like Ethereum.

2. Coins vs Tokens
• Coin: Native currency of a blockchain (e.g., Bitcoin, Ether).

• Token: Digital asset created using a smart contract on an existing blockchain (e.g., USDT,
GNT, LINK).

• Coins are built-in, Tokens depend on the blockchain platform.

3. Utility Tokens
• Utility Tokens provide users access to products or services within a blockchain ecosystem.

• They are not for investment purposes but to use specific features or applications.

• Example: Golem Network Token (GNT) – allows users to access computing resources in the
Golem ecosystem.

4. Security Tokens
• Represent ownership or investment in a company or asset.

• Linked to company profits or asset valuation and are legally regulated.

• Failure to comply with regulations can lead to penalties or project shutdown.

• Examples: Siacoin Token, Blockstack STX Token.

5. ERC Tokens
• ERC (Ethereum Request for Comments) defines standards for Ethereum-based tokens.

• Helps tokens to be compatible with different DApps and wallets.

• Common standards: ERC-20 (fungible), ERC-721 (non-fungible/NFTs), ERC-1155 (mixed).

6. Summary
• Coins are native to a blockchain; tokens are created using smart contracts.

• Utility Tokens → access services, Security Tokens → ownership/investment, ERC Tokens →


Ethereum standards.
• Tokens are essential for decentralized applications and blockchain ecosystems.

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