What Are Crypto Exchange Tokens?

The exchange of tokens and coins has always played a vital role in the execution of the trade. These coins and tokens hold a value that can be used to exchange goods and services during the trade. Traditionally, in the manual trading system, the coins and tokens were made of cheap metals. Each token or coin had a specific denomination that could be used for buying or selling the goods in the markets. These tokens and coins are also called currencies or money.

Nowadays with the development of a digitized market where the trade/barter is accomplished virtually, currencies are also exchanged virtually. These virtual currencies are known as cryptocurrencies. To execute this virtual trading system there was the need for some kind of denomination that held a value, which led to the introduction of digitized coins and tokens in the virtual market.

“Crypto-Exchange Tokens are digital currencies having a denomination which can be exchanged as a valuable asset against the goods and services provided online”.

How do Crypto-Exchange Tokens Work?

These Crypto-Exchange tokens reside on their blockchains which work according to the encrypted algorithms. They act as the transaction units in the digitized market and ensure a secure online transaction denominated in the form of virtual tokens. The exchange of these tokens is entered into the digitized ledgers to keep a track record of the amount exchanged. These blockchains work on various decentralized applications and smart contracts. These Smart Contracts are the contracts or the agreements among the participants which are stored in the form of a program or set of codes. They are executed automatically once the pre-defined conditions are met.

Why are crypto-tokens used?

Crypto-Tokens are used to enumerate the value of the share of an investor’s stake in the digital market. By comparing the quantity/value of a token, we can track the online economic activities of the token-holder.

Difference between Crypto-Coins and Tokens

Coins are the assets to their native blockchain i.e., they reside on the same platform on which the blockchain is created like bitcoin on the bitcoin blockchain and ether on the Ethereum blockchain. On the other hand, Tokens are assets foreign to the blockchain they live on. Example Uniswap or UNI Tokens and Chainlink or LINK tokens.

Types of Cryptocurrency Exchange Tokens

• Utility tokens — Utility tokens are traded to serve a particular task/purpose. For example filecoin token is used to store a file, CVC token is used to verify a user’s identity.
• Security Tokens — These tokens are shared by financial regulators, often a third party or promoter which issues a contract or scheme of the transaction, to protect the user’s investment. For example- Sia Funds, Bcap.

These are further classified as-

(a). Equity Tokens — In this token the investor or token-holder is given partial or marginalized ownership.

(b). Asset-backed Tokens — These are tradable tokens where tokens are traded instead of the token itself.

• Payment Tokens — As the name suggests, these tokens are meant to pay for the goods and services offered by various platforms. Example: Monero, bitcoin Ethereum.
• Exchange Tokens — These are particularly use5/d for accomplishing exchange between the tokens. Example: BNB token, Gemini USD, FTX Coin.
• Non-Fungible Tokens — These tokens provide unique ownership to the trader. These tokens cannot be exchanged with another token. Example: Logan Paul’s video clips, Twitter Founder Jack Dorsey’s first tweets NFT.
• DeFi Tokens — These are the decentralized financial applications that work on the decentralized blockchain or the distributed ledger accessible globally, however authority of transaction remains with the individual user, enabling the user to have complete control over his/her transaction. Example: Chainlink, Polkadot, Uniswap.
• Stablecoins — These are the tokens that have stable or predictable values. They are backed by stable currencies like Fiat. Example: TerraUSD, SteemDollars.
• Privacy Tokens — These tokens are used for various privacy applications. Example: Zcash, Dash, Monero.

Final Thoughts

The knowledge about various Crypto-exchange tokens enables the user to trade easily across a variety of Digitized platforms according to the requirement, without which the traders are often subjected to online financial loss. Therefore, before you step forward in the digitized market you must know about all the available tokens, as these tokens carry a value and these tokens are the entities that are traded in return for the desired goods and services.