What is a token?
A token is a digital “proof” on a blockchain that can represent a certain value, function, or form of ownership.
When people ask what a token is, they usually mean a crypto token issued on an existing blockchain network,
which can be used for things like access to a service, voting rights within a project, or recording digital ownership.
In short
- A token is a digital asset on a blockchain, often built on top of an existing network.
- Tokens can serve different purposes: use within an app, governance, stablecoin applications, or digital ownership.
- The difference from coins is usually in role and infrastructure: coins belong to their own network, tokens usually run on an existing one.
- Tokens are created using token standards such as ERC-20 and distributed through presales, ICOs, or airdrops.
- BRC-20 tokens are a type of token in the Bitcoin ecosystem that work differently from many well-known token standards.
- When buying tokens, pay attention to risk, liquidity, fees, storage, and the reliability of the project team and information.
What is a token?
Token explained in crypto
Within cryptocurrencies, the meaning of a token goes beyond “just a coin”.
A token is usually a digital item on a blockchain that represents something, such as:
- a right to use a service or platform
- a role within an ecosystem (for example paying transaction fees inside an app)
- voting rights (participating in decision-making)
- a form of digital ownership (such as a unique digital collectible)
An important aspect is that tokens are often issued on an existing network.
Instead of building a completely new blockchain from scratch, projects can launch faster
and benefit from existing infrastructure, wallets, and exchanges.
A token is therefore not automatically “good” or “bad”.
It is mainly a technical and economic building block used by projects to enable functionality within their ecosystem.
Why are tokens important?
How tokens are used in practice
- Access and usage within a platform
Tokens can unlock discounts, premium features, content access, or community participation.
- Rewards and incentives
Tokens are often used to reward users for activity, such as providing liquidity or contributing to a network, especially in DeFi.
- Voting rights and community governance
Governance tokens allow holders to vote on proposals like fee changes, new features, or budget allocation.
- Stablecoin applications
Stablecoins aim to track a stable value and are commonly used for trading, transfers, and as an intermediate step.
- Digital ownership and collectibles
Tokens can represent unique assets such as NFTs, including art, memberships, or in-game items.
What types of crypto tokens exist?
Utility tokens
Utility tokens usually provide access to a product or service within an ecosystem.
Their value is often linked to usage and demand but can also be influenced by market sentiment.
Governance tokens
Governance tokens are designed for participation and decision-making.
Voting mechanisms vary per project, so always check how governance is structured.
Stablecoins
Stablecoins aim to maintain a stable value and are commonly used as a medium of exchange
or to temporarily store value without converting back to fiat.
NFTs and fan tokens
NFTs represent unique digital items.
Fan tokens are linked to communities, sports clubs, or brands and can provide specific benefits or voting rights.
The difference between crypto tokens and crypto coins
Coins
Coins usually belong to their own blockchain network and are used as the base asset
for transaction fees or network security.
Tokens
Tokens typically run on top of an existing network and rely on its infrastructure.
How are crypto tokens created and issued?
Token standards (e.g. ERC-20)
- total supply
- transfers between wallets
- balances and allowances
Distribution via presale / ICO / airdrop
- Presale: early sale, often with lock-ups or vesting conditions.
- ICO: public sale to fund development.
- Airdrop: free token distribution to users.
What are BRC-20 tokens?
BRC-20 tokens are a type of token within the Bitcoin ecosystem based on inscriptions
rather than traditional smart contracts.
- No classic smart contract model
- Can impact network congestion and fees
- Different tooling and wallet support
How do you buy crypto tokens?
Via Coinmerce, you can easily buy and manage various cryptocurrencies in one environment,
with clear information and a user-friendly app.
Frequently asked questions
What is a meme token?
A meme token often originates from internet culture and community hype.
Prices can be highly volatile, so always review tokenomics and liquidity.
What is a fan token?
A fan token is linked to a community, club, or brand and may provide access to promotions,
content, or limited voting rights.
What is an NFT token?
An NFT refers to a Non-Fungible Token: a unique token representing a specific digital item,
such as art, collectibles, or memberships.