What are crypto tokens?

Have you ever wondered why there are so many cryptocurrencies and how do they appear? It can be confusing at first, but we have created this article to shed the light on.

When a new cryptocurrency project is created, its developers would need investments to carry it out. One of the most popular ways to attract investors to fund their ICOs is to give out tokens in return. They represent a stake of coins or assets that are equal to the invested amount of fiat currency or other altcoins. In the end when a project is complete, a coin swap takes place converting those tokens to the new cryptocurrency that was invested in.

Difference between tokens and coins

While both coins and tokens can be considered cryptocurrency, they are quite different from each other. Coins are means of payment and in a way considered money. You can use them to pay for services or products. They hold a monetary value inside of the block chain and are usually mineable. Tokens on the other hand can be stakes, assets or utilities. They can have a value to them based on what they represent but are not used as a means of payment. They reside on top of the blockchain and are usually based on the Ethereum network.

Types of cryptocurrency tokens

As mentioned, tokens are not always backed with currency. They can have numerous other functions depending on their type and intent for development. We would like to mention that most tokens are based on the Ethereum blockchain and are called ERC20 tokens. There is a hefty number of them available for purchase and trade. That’s why we have compiled a small list of what we consider the best and most profitable crypto tokens:

Utility Token - this type of token doesn’t have the traits of a classic cryptocurrency. An ICO might present a product that will cost a certain number of tokens. After you purchase the tokens during the ICO, they will be available almost immediately to be spent on that product. Why not just buy the tokens before the ICO you ask? Well during a new product offer, the tokens would be much cheaper as a way to stimulate investments.
Binance Coin – This token was created by the exchange platform Binance. It’s one of the most popular and also one of the fastest growing crypto tokens. It was priced at just 0.1553$ per piece at release and currently it is at 9.73$, which is an increase of over 6200%. One of the main features this token has is that Binance is burning them. What this means is that the platform keeps 20% of the transaction fees and periodically “burns” or destroys them. This is to stimulate the value of the remaining tokens.
OmiseGO - It was created by the founders of one of the most famous e-wallet in Thailand, Omise. Its ICO was backed with more than 25 million USD and a main advisor for OmiseGO is Vitalik Buterin, creator of the Ethereum blockchain. It categorizes itself as a blockchain gateway that acts as a bank, exchange and being asset backed. The idea is to help people that don’t have access to banking services and seamlessly connect them to services like VISA or Paypal.
Augur(REP) - Augur is the first de-centralized prediction market platform where users stake currency and speculate on the outcome of an event in the future. All users use a token created for the Augur platform, called Reputation (REP). With a current market cap of over 205 million USD, it is creating an amazing opportunity for making a profit.
Zilliqa - The new competitor to the Ethereum blockchain, it is developed to adopt the sharding technology to provide speeds of transactions unachieved until now. The whole idea is to create a much faster network than Ethereum by running many small sidechains also known as shards to confirm transactions. Zilliqa works with smart contracts and dApps as well. The current market cap for the token is over 339 million USD.
Basic Attention Token (BAT) - The goal of this token is to revolutionize advertisements. The developers have noticed that in the current age users are bombarded with advertisements, trackers and even aggressive malware that benefit no one. BAT uses the blockchain technology along with an open source browser called Brave to block malware and tracking software while keeping the user's information safe. By gathering information about a user’s attention on the blockchain all three parties will be benefiting. Publishers will receive more revenue while advertisers will have a better target group of people that would be interested in that content. On the other side, users will receive less adds and the ones that they see will be of interest. The current market cap of BAT is almost 217 million USD.
Golem – The Golem network is a revolutionary platform where you can rent out or buy computational power. It is very handy when a user on the network is running a very resource intensive action like Artificial Intelligence or Natural Language Processing and needs extra recourses. Like with Uber, you can offer your computer power to that user to use for that task and make some money in the shape of Golem Tokens (GNT). Users can set their own GNT rates for their computational power and choose when it will be available, but since the Golem network acts as a marketplace, prices will find a balance with time.
Aeternity – Currently one of the most forward-thinking projects, it focuses on drastically improving the speed and scalability of smart contracts. The Aeternity network moves smart contracts off-chain in private channels only between the parties involved in the contract. It also has a decentralized oracle machine used to gather information from outside sources for the smart contracts. Aeternity is constantly growing and at a current market cap of over 260 million USD it is a great investment.
IOST – Also known as Internet of Services token, it is one of the most unique tokens out there. The aim of this token is to address the issue with scalability of the blockchain. It uses a Proof of Believability consensus method. It resembles Proof of Stake, but instead of the voting power being calculated on the basis of coins owned, it is based on previous history and reputation of the user. This way wealthy users will not be able to just buy out most of the voting power. The current market cap for IOST is over 123 million USD and steadily gaining ground.
Security Token – Also known as Equity Token, acts as stock after the end of an ICO. They are similar to old fashioned buying of stocks in order to control a certain percent of a company, but with an advantage. Security tokens are much easier to buy. During some ICOs the price of tokens can be very low, presenting the possibility of making a huge future profit with a small investment. All this means is that they become a subject to global regulations making them not so different from stocks.
0x(ZRX) - 0x is a platform for fast transactions between tokens. It has its own token called ZRX with a market cap of over 385 million USD. All token holders have a vote in all decisions for the future improvement of 0x platform, which resides on the Ethereum network. The transactions are carried out off the chain for increased speed and privacy. The 0x source code is open to the public and there are already a few other crypto projects using it like Augur.
Currency Token - well, these are actually the coins like Bitcoin or Ethereum. Their purpose is to be able to trade and pay online in a decentralized manner.
Reward Token – the whole idea behind this token is to reward users that use the blockchain and its tokens. While being a good idea, currently they don’t hold any real value.
The Asset token – these tokens represent real world assets making it easier to buy and own parts of them. The process is called tokenization and one example would be the tokenization of gold. Although a great idea, it is not very popular at the current moment.
Tether – It is currently the number one token based on its market cap of 2.7 billion USD. The idea behind Tether is to bring stability in a volatile market by creating 1 coin per 1 USD. This makes using fiat currencies in exchanges that don’t have support for them, but support cryptocurrencies, possible. Tether also offers an alternative for liquidity to exchanges that don’t deal with fiat currencies. Of course, a door to centralization also opens, which is the opposite of what cryptocurrencies are trying to achieve.
Bytom – As a blockchain protocol aimed at assets, Bytom tries to make tokenization and trading of assets easier as well as put them in a cohesive system. The protocol will allow you to trade any asset on chain with adequate interoperability between them. Trading assets on the block chain also provides better security and accurate information regarding ownership. Otherwise you have to trust a 3rd party to keep track of which assets are yours and which are not. The immutability of the public ledger brings stability and creates a trust-less environment. With a current market cap of just over 206 million USD, you can see that it is a popular token and a great future investment.

ERC-20 Tokens

So why are these tokens so popular currently? In order for us to answer that questions we need to first look at what ERC-20 is.

ERC-20 is a protocol on the Ethereum network that sets standards for the behavior and rules of the tokens. This gave future developers the ability to accurately predict how new tokens will function while creating an ICO. Also known as the ERC-20 Standard, it paved the way for future improvements of tokens and start for many ICOs, making ERC tokens the most popular in the world.

Because all tokens on the Ethereum network follow the same standards, they are easily accepted throughout many exchanges, supported by almost all Ethereum wallets and users can use the tokens to carry out transactions seamlessly.

For what are ERC-20 tokens used?

As mentioned earlier tokens can have value when representing some kind of asset, thus they can be used in a variety of ways. There are new ones constantly. Here are some of the most notable ones:

In-Dapp Currency – Dapps are essentially applications that are decentralized and operate on the blockchain. Many of them use their own tokens as a way for users to interact between each other or with the system.
Voting Rights – Many new projects allow their investors to have voting rights and vote on the future development of the project using their tokens. It is something like stake holding.
Tokenization of Assets – Many assets like fine art and precious metals are quite tedious and time consuming to trade. In order to evade some of the hassle involved, they can be tokenized to allow easy and fast trading.

Conclusion

To summarize, tokens are not coin, but can still hold value depending on the asset that they represent. They are very easy to create and easily supported by exchanges and wallets alike. Developers constantly use the tokens as a platform to bring innovation to the blockchain and the way users interact with the network. Having that in mind we are recommending to always be aware of scams and fake money-grabbing schemes. Investing in an ICO and receiving tokens in return could prove very profitable in case that token becomes popular.