What is Token?
Token is a term used to describe all cryptocurrencies except Bitcoin (CRYPTO:BTC). They get their name from the fact that they are an alternative to Bitcoin and traditional fiat currencies.
The first tokens appeared in 2011, and today, there are thousands of tokens.
Early tokens were designed to improve various aspects of Bitcoin, such as transaction speed or energy efficiency.
In brief, recent tokens have a variety of different purposes depending on the goals of the developers.
the Types of Tokens
There are several different types of tokens, depending on how it works and what its purpose is.
The following are the main types.
Stablecoins are cryptocurrencies designed to follow the price of another asset.
Most of the largest stablecoins are pegged to the U.S. dollar and try to mimic the value of the dollar. Also, If the price fluctuates, the issuer of the coin will take steps to correct it.
This type uses a process called mining to verify transactions and add more cryptocurrency to the supply.
Miners use equipment to solve mathematical equations.
Since Bitcoin is a mining-based cryptocurrency, mining was the first method used to process cryptocurrency transactions. But the disadvantage is that it requires a lot of energy.
These cryptocurrencies use a process called “staking” to validate transactions and increase supply.
In the meantime, holders can choose to stake their cryptocurrency for transaction processing.
Cryptocurrency blockchain protocols choose a participant to validate a block of transactions. In return, he receives a reward in cryptocurrency.
Governance tokens are cryptocurrencies that give holders voting rights to help shape the future of a project. In most cases, these tokens allow you to create and vote on cryptocurrency-related proposals. This helps make cryptocurrencies a decentralized project because all holders have a say and decisions are not made by a central authority.