Affidaty Blog
  • History
  • Press & Partnerships
  • Educational
  • Events
  • ItalianoItaliano
  • History
  • Press & Partnerships
  • Educational
  • Events
No Result
View All Result
Affidaty Blog
Home Edu

Elements of Blockchain: Digital token. What it is and what it is used for.

Giovanni CapacciolibyGiovanni Capaccioli
July 23, 2019
in Edu, Senza categoria
Reading Time: 6min read
Share on LinkedInShare on FacebookShare on Twitter

Index

  • Intro.
  • Digital tokens and cryptocurrencies in the blockchain domain.
  • The “assignment” as a critical element.
  • Token types. 
  • Token role during an ICO.
  • How do tokens apply in real life?
  • In summary.

Intro.

Often the digital token concept is misunderstood with the cryptocurrency one. 

However, these instruments are to be considered separately. Understanding their role can be harder than one thinks, but I will guide you with some examples of digital tokens and coins. 

Think about the phone card that we used years ago to make calls from phone booths. These were plastic sheets to which was assigned a value, a function, to be used to make phone calls using the “machinery”, the phone booth. 

Think about chips in a casino. To use the game systems in a casinò, the latter makes fake coins available (you can’t use them in a supermarket as with Euros). One will use (purpose) them inside the (machinery) casino. 

Digital tokens and cryptocurrencies in the blockchain domain.

In the blockchain ecosystem, there are both Digital Tokens and cryptocurrencies  (coins). While cryptocurrencies are easy to understand, since these have the same use in the blockchain domain as the Euro in real life, Tokens seem harder to understand, but only in appearance.

In a casinò, for example, Euros can be used to play instead of chips, right? 

It would be more comfortable and direct. However, this isn’t the case. Casinos use chips because these have a function, which differs from the Euro one. 

The same goes for Tokens. Each one of them is created to follow its rule set of various kind. The most known and used token is the one from Ethereum, currently called ERC20.

The Smart Contracts are then added to the tokens, so that the basic token can easily “manage” other sets of additional rules. We can therefore have many apparently similar tokens because they are based on the same “mother” token, but different because they are joined by a further set of rules (smart contracts) in relation to the use of destination: the same highway on which many cars travel.

The “assignment” as a critical element.

The crucial element to understand the token is the “assignment”: every token is created to perform different assignments. ERC20 is Ethereum standard upon which many other cryptocurrency systems were created: Eidoo, Bancor, TenX, Dragonchain, Envion and many more. 

A new Ethereum token standard is recently taking shape: ERC721, on which systems have been built that have quickly become famous, such as the CryptoKitties or the DADA Collectible and many others.

However, if the cryptocurrency is the coin, what assignments do the token carry out?

Token types. 

Briefly, there are three kinds of digital tokens: 

  1. Those in which the assignment is the same as the one of a coin: this is Bitcoin case.
  2. Then there are the tokens that provide the owner one or more rights that he/she can use towards who generated the token itself, for example:
    – Right to receive payments in the future;
    – Property right of an Asset, as participation shares;
    – Right to receive a determined work performance.
  3. Finally, there are the so-called “mixed” ones: like tokens used to vote. 

Token role during an ICO.

Now that we defined the types of digital token, let’s think about the most popular method in the blockchain world to collect money in a way similar to crowdfunding: ICOs. 

When a new blockchain is born (or to put it better, a new cryptocurrency supported by a new, or existing blockchain), frequently an ICO (Initial Coin Offering) is launched. 

ICOs are nothing but a token release, which the company will sell to users, usually in exchange for Bitcoin, Ether or other known and used cryptocurrencies. The proceeds from the token sale will be used by the firm that promoted the ICO to finance itself. The users that bought tokens will have future rights towards the company, based on the kind of token sold-bought. 

That’s what tokens are in this case: a future right for the buyer. For example, it may be a right to exchange later the tokens that he/she bought for coins, or a cryptocurrency amount.

How do tokens apply in real life?

Coming back to the phone cards above-mentioned. When we buy it, we acquire the right to use credits contained in it to make calls in a phone booth. 

The same goes for the chips in the casino. When we buy it, we acquire the right to use the corresponding value inside the casino. 

Also, the telephonic traffic of a cellphone may be considered as a token: one acquires the right to use the traffic credit inside the network of the provider. 

In summary.

Some examples of digital Tokens. 

Ethereum blockchain has led the way both in the Smart Contracts and digital Tokens fields. As stated before, many other blockchain systems are built using Ethereum proprietary token, ERC20, by sheer convenience and efficiency. 

  • the coin is the currency, namely the cryptocurrency; 
  • the Smart Contract is similar to a digital contract, the agreement between the part, enforced by the mathematic rules of the blockchain;
  • the token is the medium by which one of the three kinds of rights above-mentioned is being enforced. 
Previous Post

Inside blockchain. The transaction: how and by what it is composed.

Next Post

The birth of Affidaty: a story to tell

Giovanni Capaccioli

Giovanni Capaccioli

Related Posts

Boy working on the computer
Edu

This is progress … the rest is marketing.

November 15, 2019
Regulatory framework and fields of application.
Edu

Regulatory framework and fields of application.

October 17, 2019
DLT, Blockchain: types and limits.
Edu

DLT, Blockchain: types and limits.

October 16, 2019
Next Post

The birth of Affidaty: a story to tell

Una variante della classica Proof of Work: Ethereum.

A different version of the classic Proof of Work: Ethereum

Blockchain: la Proof of Stake (PoS)

Blockchain: the Proof of Stake (PoS)

Instagram

  • In questo #natale così diverso, che sia la #tecnologia ad unirci.  Festeggiamo lontani, ma mai distanti!  Tanti auguri dal Team di Affidaty!
  • [Blockchain & Voto Digitale]  #affidatyblog
Il #voto digitale in #blockchain è realtà da tempo. Adesso però è davvero alla portata di tutti e sono migliaia gli utenti che già lo stanno utilizzando!  Leggi l’articolo sul Blog: affidaty/blog
  • [Nanotecnologia e Blockchain]
#AffidatyBlog  Come le #nanotecnologie possono accrescere il valore della #blockchain? Ne parliamo con la Dottoressa Sabrina Zuccallà, presidente di #4ward360, intervistata sul nostro Blog!
  • [Affidaty media partner #tedx Grosseto]  La #maremma capitale delle idee per il futuro sostenibile del pianeta  Grosseto sarà il fulcro di idee e progetti per i temi fondamentali del nostro tempo, come il #cambiamentoclimatico , #economia , #immigrazione , #politicasocioeducativa.
  • [#blog - Prof. Romualdo Mazzocco]  #criptovalute - così è, se vi pare!  www.affidaty.io/blog
  • [#blog - Avv. Olivia Bosaz]  Integrazione tra #blockchain ed il “nuovo mondo legale”  www.affidaty.io/blog
  • New Blog!
New Layout!
New Guest Writers!
More Temathics!
Same Affidaty Style!  Affidaty.io/blog  #tech #technology #blogger #bloggerlife #blockchaintechnology
  • Oggi dal sindaco di Grosseto @antonfrancesco per parlare di innovazione e tecnologia Blockchain legate allo sviluppo della Circular Economy.
  • Thanks to the municipality of Grosseto for the appreciated acknowledgment. Affidaty will continue to invest in the Grosseto office, today the company’s main technical hub

Categories

  • Edu
  • Press & Partnerships – Eng
  • Senza categoria

Topics

Blockchain Ethash Ethereum Ledger PoA PoS Proof of Authority Proof of Stake Proof of Work Smart Contracts Traceability Transaction Trinci

LinkedIn Page

Facebook Page

Search into the blog

No Result
View All Result

About

Affidaty S.p.A. blog studies and shares issues related to the Blockchain world and how this technology can change everyday life. Be part of our blog community to follow our updates and the latest trends in a rapidly expanding and changing world such as that of Blockchain and cryptocurrencies.

Director

  • Giovanni Capaccioli
    Giovanni Capaccioli

CMO @ Affidaty S.p.A.

  • Riccardo Setti
    Riccardo Setti
Affidaty Blog

Affidaty S.p.A, © Copyright 2020 - P.IVA IT 06641600488 - All rights reserved. Designed by Affidaty ICT Department

Navigate Site

  • History
  • Press & Partnerships
  • Educational
  • Events

Follow Us

No Result
View All Result
  • ItalianoItaliano
  • History
  • Press & Partnerships
  • Educational
  • Events

Affidaty S.p.A, © Copyright 2020 - P.IVA IT 06641600488 - All rights reserved. Designed by Affidaty ICT Department

Welcome Back!

Login to your account below

Forgotten Password?

Create New Account!

Fill the forms below to register

All fields are required. Log In

Retrieve your password

Please enter your username or email address to reset your password.

Log In

Add New Playlist