Digital Tokens :: The Bright Future Of the Financial Technology

Hello Steem Alliance Community

Introduction

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Digital tokens are also known as “cryptocurrencies” because they are a type of crypto asset. They act as a medium of exchange, albeit on limited platforms, as not all online businesses accept cryptocurrencies.

WHAT ARE DIGITAL TOKENS?

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While bitcoins and other cryptocurrencies are all referred to as ‘digital tokens’ in a generic sense (as in ‘a Bitcoin is a digital token’) a distinction seems and tracked within smart contracts on Ethereum’s blockchain.

A coupon might entitle you to a free drink. . It represents a specific amount of digital resources that you can own, delegate to another or redeem later.

How Do Digital Tokens Work ?

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Think of digital tokens as casino chips that you can use as an alternative to cash when playing games. Like casino chips, digital tokens are irregular but valuable as they have special value when converted to paper currency.

A digital token facilitates real-world transactions through decentralized technology—blockchain. Users can pay and hold money without going through third-party providers, so the deals they make are more direct. This transaction method is often preferred because it requires no intermediaries making it faster and more economical for both parties.

Why It Is Very Important ?

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The characteristics of different types of tokens vary widely, and generalizations are bound to lead to confusion. I hope to clarify the different types and characteristics of tokens by differentiating between blockchain-native tokens like BTC and ETH, asset-backed tokens like IOU, and utility tokens .

Ownership Of A Token

Ownership of any cryptoasset, whether it be a cryptocurrency or a token is held by the person who has the private key that corresponds to the address with which the token is associated. This private key allows that person — the owner — to create and sign transactions to issue a token and assign it to someone else. Cryptoassets are like bearer assets — if you have the private key, it’s yours .

With cryptoassets, transactions must have a valid digital signature. If you lose your private key, you cannot access your assets and you cannot reset it. If your private key is copied , a thief can make transactions on your behalf and you cannot stop them.

Cryptocurrencies are much less forgiving than banks in this regard. Even those who keep the ledger cannot alter the balance, as they cannot provide the required digital signature.

Some say that with Bitcoin, you are your own bank. You do not instruct an institution to make payments on your behalf: you are responsible for making payments yourself. Classification of new tokens are emerging almost every day. They have different properties.

Although separation is difficult, I currently consider tokens to fall into three categories:

Native blockchain tokens :

Which which are necessary for the underlying blockchain to work or are incentives. Native tokens are usually incentives for block-producers to do their job.

Asset-backed tokens :

Which represent title or ownership of some real-world asset held in trust by a custodian.
Utility tokens : Which represent a claim on a service provided by the token issuer.

Currency tokens :

Currency tokens are native blockchain assets that are meant to be used as money. Networks classified as currencies typically do not have many ‘features’ other than those needed to define and transfer the native blockchain asset.

Platform tokens :

Platform tokens are essential for using general-purpose decentralized networks that support a wide variety of potential applications.

Conclusion

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Digital tokens are something I believe everyone must acquire. The digital world is accelerating in terms of evolution. New digital tokens are evolving and are beneficial for our personal use . It provides oneself the independency to regulate and invest their own money .

Thankyou

India, 05.05.2024
@moyeon