What are Digital Tokens?
Introduction of cryptocurrency has certainly brought some revolutionary solutions to the world of finance, but none has made a wave like the blockchain. Blockchain which is known as the operating platform for the cryptocurrency, has a functional unit known as “blocks” or “tokens”. These tokens have several integration such as fund transfer, asset holding etc.
Digital tokens can be compared as casino chips that you can trade for your fiat currency, only they do not have any real life existence. These tokens are only available on the virtual blockchain. The amount of token you own is the amount of digital resource you control. Tokens are represented by the private keys that you can store on your device and manage transactions.
There are two types of digital tokens to know about. They are, “intrinsic tokens” and “asset-backed tokens”. Intrinsic tokens are built on the blockchain platforms, such as the Bitcoin or Ethereum. These token transfer the value for every transaction made in the blockchain network. Intrinsic coins are produced through software programming, also known as ‘mining”. They are the basic part of a blockchain system which are used to validate blocks and prevent spams. “Value transfer” feature is just a byproduct of its characteristic. Asset backed tokens represent ownership of an underlying asset. User can transfer tokens for equivalent asset or the other way around. Every transaction is recorded in the blockchain to protect the ownership rights.
Digital token has opened the doors for many innovative applications. Asset transfer has the most potential with wide range of integration possibilities, such as stock exchanges, valuable metal services, and insurance companies. Digital token service can also prevent land ownership frauds and scam. Proper development of the technology can revolutionize our daily financial life.