Blockchain is a distributed public ledger that allows users to store and transmit information in an encrypted and secure form. One of the cornerstones of the technology is a blockchain token. It is a unit of value that represents certain functions within a blockchain. Let’s explore the role of tokens in a blockchain, their types, and examples of use.
Role of tokens in blockchain
Tokens are essential to the operation of blockchain platforms. They are used for the following purposes:
- Representing value: tokens can represent some value by acting as a means of payment, representing shares, or other assets. For example, in the Ethereum network, there is the ERC-20 standard. Such tokens are digital versions of certain assets, including crypto and blockchain project tokens.
- System management: tokens are used to manage various aspects of the blockchain system. For example, on the EOS blockchain, coin holders can vote to choose block producers and decide on protocol updates.
- Providing rewards and incentives: users are rewarded with tokens for completing certain tasks or achieving certain results. For example, on the Steem blockchain, content creators and curators are rewarded with tokens. Blockchain game tokens often play the role of an in-game currency.
Types and use of tokens
There are several main types of tokens, each with their own unique features and purpose. These include:
- Utility tokens are used to gain access to services and functions within a blockchain system. For example, Binance Coin (BNB) tokens are used to pay for transactions on the Binance exchange.
- Security tokens represent securities, such as stocks or bonds, in a digital form. As an investment contract, they allow holders to earn returns on their assets and contribute to project management. For example, Polymath tokens (POLY) are used to create, issue, and trade security tokens on the blockchain.
- Stablecoins are tokens that are pegged to a specific asset, such as fiat currency or gold, and aim to achieve stable price valuation. For example, the value of the Tether token (USDT) is pegged to the US dollar. The token is traded on crypto exchanges.
Examples of use
- Basic Attention Token (BAT) is used to reward users for viewing ads and supporting content creators in the Brave browser.
- Golem (GNT) is used on the Golem blockchain platform to pay for the computational resources provided by users.
- Augur (REP) is used on the Augur prediction market platform for creating wagers on the outcome of events.
Conclusion
Tokens play an important role on blockchain platforms by representing value, managing the system, and incentivizing users. Various types of tokens, such as utility tokens, security tokens, and stablecoins, have their own specific features and applications. Successful projects, such as Basic Attention Token, Golem, and Augur, show just how important tokens are for blockchain technology and how many various functions they perform.
