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La crypto token
La crypto token
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Understanding Crypto Tokens
Definition and Functionality
A crypto token is a digital asset that represents an interest or value, built on an existing blockchain. Unlike cryptocurrencies, which are the native assets of their respective blockchains (like Bitcoin or Ethereum), tokens are created on top of these blockchains and can serve various purposes, such as facilitating transactions, representing assets, or providing utility within a specific platform146.
Tokens are often associated with projects that utilize an initial coin offering (ICO) to raise funds. During an ICO, tokens are sold to investors, who can then use them for various functions within the project's ecosystem. This can include governance rights, access to services, or as a medium of exchange within decentralized applications (dApps)13.
Types of Crypto Tokens
There are several categories of crypto tokens, each serving different functions:
Utility Tokens: These provide users with access to a product or service within a blockchain ecosystem. For example, tokens used in decentralized finance (DeFi) applications often allow users to participate in governance or access specific features.
Security Tokens: These represent ownership in a real-world asset, such as stocks or real estate, and are subject to regulatory oversight.
Governance Tokens: These allow holders to participate in decision-making processes within a blockchain project, often influencing the direction of the project through voting mechanisms.
Non-Fungible Tokens (NFTs): These are unique tokens that represent ownership of a specific item or piece of content, such as digital art or collectibles