Blockchain
Token
A digital asset created on an existing blockchain (like Ethereum) rather than its own network. Tokens can represent utilities, governance rights, assets, or other functions.
Last updated: January 5, 2025
What is a Token?
A token is a digital asset created on top of an existing blockchain using smart contracts. Unlike coins (Bitcoin, Ethereum) that have their own blockchains, tokens exist on another chain’s infrastructure.
Token vs Coin
| Feature | Coin | Token |
|---|---|---|
| Own blockchain | Yes | No |
| Examples | BTC, ETH, SOL | UNI, LINK, USDC |
| Creation | Launch new chain | Smart contract |
| Pays network fees | Yes | Uses host chain’s coin |
Common Token Standards
ERC-20 (Ethereum)
- Most popular standard
- Fungible tokens
- Compatible with all ETH wallets
- Examples: USDT, LINK, UNI
ERC-721 (Ethereum)
- Non-fungible tokens (NFTs)
- Each token is unique
- Used for collectibles, art
- Examples: CryptoPunks, BAYC
ERC-1155 (Ethereum)
- Multi-token standard
- Both fungible and non-fungible
- More gas efficient
- Used in gaming
BEP-20 (BNB Chain)
- BNB Chain equivalent of ERC-20
- Lower fees than Ethereum
- Many crossover tokens
SPL (Solana)
- Solana token standard
- Very low fees
- High speed
Types of Tokens
Utility Tokens
- Access to services/products
- Examples: BNB (exchange discount), LINK (oracle payments)
- Value from utility, not ownership
Governance Tokens
- Voting rights in protocols
- Examples: UNI, AAVE, CRV
- Control protocol decisions
Security Tokens
- Represent ownership in assets
- Subject to securities law
- Examples: Tokenized stocks
Stablecoins
- Pegged to fiat currency
- Examples: USDT, USDC, DAI
- Used for trading, savings
Wrapped Tokens
- Represent assets from other chains
- Examples: WBTC (Bitcoin on Ethereum)
- Enable cross-chain functionality
Meme Tokens
- Community/culture driven
- Examples: SHIB, PEPE, DOGE
- Highly speculative
Token Creation
How Tokens are Made
- Write smart contract
- Define token parameters
- Deploy to blockchain
- Pay gas fees
- Token is live
Parameters Set
- Name and symbol
- Total supply
- Decimals
- Transfer functions
- Special features
Token Metrics to Analyze
Supply Metrics
- Total Supply: Max tokens ever
- Circulating Supply: Currently available
- Market Cap: Price × circulating supply
Distribution
- Team allocation (vesting schedule?)
- Investor allocation (unlocks?)
- Community allocation
- Treasury holdings
Tokenomics
- Inflation/deflation mechanism
- Burn mechanisms
- Staking rewards
- Utility within ecosystem
Buying Tokens
Where to Buy
Safety Checks
- Verify contract address
- Check token legitimacy
- Research project
- Start with small amount
Token Security
Risks
- Scam tokens (rug pulls)
- Smart contract bugs
- Unlimited mint functions
- Honeypots (can’t sell)
Protection
- Verify on official sources
- Check contract on explorer
- Use trusted DEX aggregators
- Research before buying
Popular Tokens by Use Case
DeFi
- UNI (Uniswap)
- AAVE (Aave)
- CRV (Curve)
Oracles
- LINK (Chainlink)
Stablecoins
- USDT (Tether)
- USDC (Circle)
- DAI (MakerDAO)
Layer 2
- ARB (Arbitrum)
- OP (Optimism)
Token vs Equity
Similarities
- Can represent value
- May have governance rights
- Tradeable
Differences
- Usually no legal ownership
- No dividends (typically)
- Different regulatory status
- Global, permissionless trading
Future of Tokens
Trends
- Real-world asset tokenization
- Regulated security tokens
- Better interoperability
- More utility-focused design
Ready to Start Trading?
Now that you understand token, explore the best exchanges to begin your crypto journey.