Understanding the Types of Crypto Tokens and Their Benefits
Many people confuse themselves between cryptocurrencies and crypto tokens. But these two terms are very different from each other. They may seem complex but are easier to understand. With the increased adoption of blockchain, the use of cryptocurrencies and crypto tokens is also expanding. Both are a part of cryptocurrency development. A cryptocurrency token refers to a category of cryptocurrency representing a digital class asset or specific use. It exists on another cryptocurrency’s blockchain. Tokens present programmable assets or access rights. The organizations manage these tokens through underlying ledgers. Since cryptographic tokens are a collection of rules, they are encoded in a smart contract, known as a token contract. Each token resides in a blockchain address. Any person with the private key pair belonging to the address can access the respective token. A company issues tokens when they launch an Initial Coin Offering (ICO), similar to the Initial Public Offering (IPO). The major difference between ICO and IPO is that in an IPO the stockholder receives shares in return for the investment. In an ICO, the user gets a token in exchange for the investment. Users can easily redeem these tokens to access the product or service of the organization.