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\nWhat is a token in simple words<\/h2>\n
You need to understand the main differences in the world of virtual assets. Cryptocurrency is a form of digital money, a unit of account of a decentralized payment system. It has no material basis, not even an electronic form. It is a number that denotes the number of settlement units of the system. Cryptographic encryption methods are used to secure transactions.<\/p>\n
Digital assets include another element. Token – a unit of account, has a direct relation to security, user identification. It is also a financial instrument. It is provided to an investor who decides to invest his funds in a project to exchange for fiat money or digital coins.<\/p>\n You can compare the unit of account with shares or tokens that have a circulation within the project. That is, it is a digital certificate that guarantees the obligations of the project owner to the holder of the asset.<\/p>\n An example is subway or amusement park tokens. They are bought for real currency, have value and circulation, but within their ecosystem (subway of a particular city, amusement complex).<\/p>\n The concept first appeared in England in the 17th century. Correctional institutions of the country suffered from a shortage of cash, they rarely reached the colonies. Each prison issued its own coins, which were used within its limits. Such money could be used to buy goods sold within the colony.<\/p>\n From the English language, token translates to “sign, token, symbol.” They act as discount cards, gift certificates. They provide the owner with a benefit – a discount on goods, additional time or distance. At the same time, you can not pay for goods with a coupon, you need the usual monetary unit of the country.<\/p>\n The digital world is organized similarly to the real world. The main differences between token and cryptocurrency:<\/p>\n There are centralized (run by a company) or decentralized (run by an algorithm). The price depends on the balance of supply and demand, is formed under the influence of rules, binding to another asset.<\/p>\n Coins are identified with cryptocurrency. Coins are one of the categories of digital assets:<\/p>\n Token is created in someone else’s blockchain – Ethereum, Solana, Polkadot, Polygon and other projects. It does not always act as a means of payment, its issuance occurs once at the start of the project.<\/p>\n Cryptoassets perform 2 main tasks. They act as:<\/p>\n Provides information security of the blockchain and is used to identify the owner. Token serves as a key to access information stored in the distributed network.<\/p>\n This is the primary purpose. In an initial coin offering (ICO), records in distributed registries act as a surety to an investor for financial assistance to the project. It is possible to pay out (only within the ecosystem) or receive profits (dividends).<\/p>\n In this context, the categories listed in the table are distinguished:<\/p>\n In the US, stock transactions are governed by 2 major laws:<\/p>\n According to the provisions of the statutes, only accredited investors can perform asset purchase transactions. They include persons whose total income is not less than $200 thousand per year or net capital more than $1 million. They can invest their money in any type of funds, invest in new projects.<\/p>\n To determine the relationship of assets to securities, the U.S. Supreme Court uses the Howey test, which was developed for this purpose. It is possible to pass the test if the conditions are simultaneously met:<\/p>\n The securities are subject to registration with the Securities and Exchange Commision (SEC).<\/p>\n Let’s summarize briefly what is the difference between cryptocurrency and token. Coins can be used to buy goods, pay for services or work. Cryptoassets have many other functions, which depend on the specific project, goals and objectives.<\/p>\n \ud83e\udd14 Do tokens only exist in the Ethereum blockchain?<\/p>\n<\/div>\n The ERC-20 standard is a popular but not the only option for creating cryptoassets. There are also ERC-721, BEP2, TRC-20, and others.<\/p>\n<\/div>\n<\/div>\n \u2753 What is ethereum?<\/p>\n<\/div>\n ETH is the Ethereum unit of exchange. It is a cryptocurrency and a platform for creating smart contracts based on its own blockchain.<\/p>\n<\/div>\n<\/div>\n \ud83e\udd37\u200d\u2642\ufe0f Altcoins are coins, cryptocurrency?<\/p>\n<\/div>\n Anything that came after Bitcoin is called alternative koins (altcoin).<\/p>\n<\/div>\n<\/div>\n \ud83d\ude44 How are tokens used?<\/p>\n<\/div>\n It depends on the purpose – credit, unique and others. They are used mainly to raise funds for new projects, serve as an analog of shares for investors.<\/p>\n<\/div>\n<\/div>\n \ud83d\udcc6 When did the concept of token appear in the crypto industry?<\/p>\n<\/div>\n The first tokenization was the IPO of the Mastercoin project in late 2013. Since then, the concept has been used in the context of cryptocurrency. Mastercoin is now an Omni digital asset creation platform.<\/p>\n<\/div>\n<\/div>\n<\/div>\n Is there a mistake in the text? Highlight it with your mouse and press Ctrl<\/span> + Enter<\/span><\/p>\n<\/div>\n![\"How](\"https:\/\/cryptoproguide.com\/wp-content\/uploads\/2024\/10\/d187d0b5d0bc-d182d0bed0bad0b5d0bd-d0bed182d0bbd0b8d187d0b0d0b5d182d181d18f-d0bed182-d0bad180d0b8d0bfd182d0bed0b2d0b0d0bbd18ed182d18b_671c32ea2d02d.jpeg\")
\nHistory of the term<\/h3>\n
How token differs from cryptocurrency<\/h2>\n
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Difference from coin<\/h3>\n
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Areas of application<\/h2>\n
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Digital key<\/h3>\n
Financial instrument<\/h3>\n
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\n \nVarieties<\/th>\n Description<\/th>\n<\/tr>\n<\/tbody>\n \n Currencies Coin<\/td>\n Used as a means of payment for intra-system settlements<\/td>\n<\/tr>\n \n Platforms Coin (service)<\/td>\n Enable the execution of smart contracts<\/td>\n<\/tr>\n \n Cryptocurrency Exchanges (exchange)<\/td>\n Allow holders to profit, participate in management, receive discounts and increased limits<\/td>\n<\/tr>\n \n DeFi (decentralized finance)<\/td>\n Lending protocols, decentralized exchanges, equity issuance and other projects<\/td>\n<\/tr>\n \n App Coins<\/td>\n Provide user application of the system<\/td>\n<\/tr>\n \n NFT<\/td>\n Smart contracts that are needed to confirm the user’s ownership of a digital object<\/td>\n<\/tr>\n \n Stable Coins<\/td>\n Stablecoins – other asset backed cryptocurrency, pegged to fiat money, gold<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n Howey Test<\/h4>\n
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Conclusion<\/h2>\n
Frequently Asked Questions<\/h2>\n