A token is a digital unit or a type of cryptocurrency that is designed to have a specific utility in the crypto market.
Understanding the term
A token or crypto-token definition is easy to comprehend if you consider it as a virtual currency used as a denomination of the main cryptocurrency. Tokens and their utility reside on the main blockchain, which is why they are tradable digital assets. Investors interested in a particular blockchain-based project may choose to buy its token as an investment or for other economic purposes. The difference between a token and a coin is that the former is usually built on a different blockchain, such as Ethereum, but the latter belongs to its original blockchain.
The general idea behind crypto tokens is that every cryptocurrency is a crypto token except for Bitcoin and Ethereum, as they were developed as primary blockchains when cryptocurrency was an unexplored concept. But the most commonly used connotation of tokens is a type of store of value in terms of crypto that operates on top of another cryptocurrency’s blockchain, as mentioned above. There are four major types of tokens in the market: reward, currency, utility, security, and asset tokens.
Tokens and coins cannot be used interchangeably, but both of these units are subsets of cryptocurrencies. Tokens have a wide range of potential uses.