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What Is A Token?

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A token is used to make security decisions and to store tamper-proof information about some system entity. While a token is generally used to represent only security information, it is capable of holding additional free-form data that can be attached while the token is being created.

Crypto tokens, which are also called crypto assets, are special kinds of virtual currency tokens that reside on their own blockchains and represent an asset or utility. Most often, they are used to fundraise for crowd sales, but they can also be used as a substitute for other things.

And so if a coin (otherwise known as a cryptocurrency or native token), has its own blockchain, a token is the opposite: it runs on another blockchain.

The best known example of this is the ERC20 token, which is any token that uses the Ethereum blockchain.

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