Concepts / Token
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A token ‘stands in’ for something. It’s representative of something. In computer science it’s representative of a fact, a representation that can be transmitted from one computing resource to another.
In the context of Web3, tokens represent something of value, monetary or otherwise. Cryptocurrency is a form of token.
Having said that, it’s quite typical for token to be taken to refer to a digital asset that is created ‘on top of’ an existing ledger rather than cryptocurrency per se, which is native to the ledger in question.
There are different types of applications of tokens. For example:
- decentralized finance — the token is a form of money
- stablecoins — the token is designed to maintain value parity with a specified fiat currency
- non-fungible tokens (NFTs) — the token represents ownership of some unique informational or physical asset
- governance — where rights such as voting or access to certain resources are contingent on holding a specific token.
The nascent field of token engineering is developing design principles to assist in the design of cryptoeconomic systems. Token engineering aims to increase the likelihood, all other things considered, that the corresponding ecosystem will be robust and grow in value in line with its goals.
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