Tokens

Digital assets issued on a blockchain that represent value, ownership, rights, or utility within a specific protocol or ecosystem. Unlike coins, which are native to their own blockchain (ETH on Ethereum, BTC on Bitcoin), tokens are created on top of existing blockchains using smart contracts and inherit the security of their host chain. The token category is broad and functionally diverse: fungible tokens follow standards like ERC-20 on Ethereum or SPL on Solana and are interchangeable with each other, while non-fungible tokens (NFTs) are unique and indivisible. Tokens can represent governance rights, protocol fee accrual, community membership, real-world asset ownership, stablecoin value, or purely speculative exposure. The technical simplicity of creating tokens on EVM chains through ERC-20 deployment, or on Solana through the SPL program, has enabled thousands of tokens to be created with minimal friction, contributing to both the richness of the crypto ecosystem and its susceptibility to low-quality or fraudulent projects. Example: In the context of AI, the term 'tokens' takes on a distinct meaning: units into which text is divided for processing by large language models. A token in this AI sense is typically three to four characters of text, and LLMs have context windows measured in tokens rather than words. This dual meaning sometimes creates confusion when discussing AI x crypto topics, where 'token' might refer to either a blockchain asset or an LLM processing unit. Why it matters for Web3: Tokens are the fundamental unit of value and coordination in Web3, representing the mechanism through which blockchain protocols align incentives between users, developers, and investors. The ability to create tokens easily and trade them globally, combined with smart contract programmability, enables entirely new organizational and economic models that have no precedent in traditional finance.

Category: tokenomics, cryptocurrency types

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