Different Types Of Tokens

With the term “Token Makers” people can refer to different types of tools designed for different purposes. Utility tokens, for example, are often there in blockchain-based platforms and grant access to specific services or products. That is within their ecosystems. Security tokens, on the other hand, are regulated by financial authorities and represent ownership in traditional assets like real estate or company shares. Governance tokens empower holders with decision-making rights within decentralized organizations or protocols. Non-fungible tokens (NFTs) represent unique digital assets, ranging from digital art to virtual real estate, and are indivisible and distinguishable from one another.  

Here, in this article, you will get complete insight into various types of tokens.  As it can assist you in meeting your needs with ease. Try to keep things in perfect order. 

Different Types Of Tokens You Can Make Use Of 

There are several types of tokens you can use from your end when you want to grow your assets perfectly. Ensure that you follow the correct solution from your end. Some of the key tokens that you must be well aware of are as follows:- 

1. Utility Tokens

The “utility” we talk about in this case is a good or service delivered by the issuer, which can be brought using these tokens at a later date. Most of the time utility tokens are like tickets for a show.  They have a very specific function and they can be usable only at a certain date in the future. This makes utility tokens different from other traditional financial assets. Nevertheless, utility tokens can be on trade for coins or other types of currencies.  If someone is there to buy them, the same way someone could decide to sell. Someone else can buy and sell their tickets to a show.

This is the simplest use of utility tokens, but they can be used in many different ways outside a simple transaction. For example The Aventus Protocol is working on a project that would work like a “Blockchain for Ticketing”. As they state on their website “The protocol grants rights holders to showcase rules across the ticketing supply-chain including promoters, primary/secondary agents as well as venues– to which everyone must adhere.”. 

In this case, the blockchain would deploy utility tokens that represent tickets to events and concerts. These utility tokens would then be distributed to people based on certain permissions decided by the owner.

 For example, the ticket issuer could deliver the ticket for a show of a certain artist based on the rights people have and so people would have the ticket they paid for in the form of a utility token.

2. Security Tokens

Let’s start talking about the difference between security tokens and utility tokens. The difference in this case is rooted in the names themselves. A utility token as we said represents a utility, which is a good or service provided by the issuer to the buyer. The security tokens on the other hand are equivalent to financial securities like a stock or bonds. Security tokens are often issued by companies operating on the blockchain to raise capital, the same way a company decides to make an IPO to go public. When this happens the security tokens become a representation of equity held by people who invested in the company by buying the tokens. In short, security tokens serve as financial assets.

3. Governance Tokens

The Crypto word on the basis of decentralization, which is the process by which the activities of an organization.  Especially those regarding decision-making), are there for distribution or delegation? These are  away from a central point of control. Governance tokens are cryptocurrencies that allow people to express their decision-making power in decentralized projects. Other cryptocurrencies, like Bitcoin for example, are usable  as a means of payment, and owning them doesn’t involve you in deciding of the future of the crypto project. Governance tokens on the other hand gives the owners voting power, incentivizing engagement in the community and helping making the project 100% decentralized.

Governance tokens give people who hold them the right to vote on specific decisions made by the network. For example the network might propose to change the code of a software or upgrade their protocol. In this case if you hold governance tokens you can express your opinion. Governance tokens bring the owner real decision making power, allowing them to choose the direction the crypto project will take.

At this point it’s easy to understand how governance tokens are essential to create a decentralized ecosystem that reduces the risk of a central point of control and increases trust by all participants. They in fact are an incentive for people to participate in the network and be part of its growth. This will bring more people to adhere to the project making the project grow, starting a virtuous cycle that benefits both people participating in the project and the project itself.

4. Non-fungible Tokens

NFTs gained a lot of popularity in the last years. The acronym NFT stands for Non-fungible tokens, which are assets that have been tokenized using a blockchain. NFT are unique identification codes made using metadata using an encryption function. After the creation,of tokens are there on a blockchain and the asset that has been tokenized is stored elsewhere. Each NFT connects to one and only one asset and the connection between the two is what makes NFTs so special.  

After the creation of NFTs can be applicable for trading. Like all other assets, for money, cryptocurrencies or other NFTs and their value (and price) depends on a number of different factors. Including the market and value of the token.

For example, if you draw a sticky man on an apple and take a picture of it, you could make a token of that picture. In this case the picture would be the metadata on which the NFT is based. At this point the NFT of your picture is for storing on a blockchain and can be tradeable. Whoever has the private keys to your NFT owns the rights you assign to the token itself.

Aren’t cryptocurrencies token as well? Yes, but they are fungible, which means that two cryptocurrencies from the same blockchain are interchangeable.  While two NFTs from the same blockchain are not interchangeable, they are in fact, non-fungible tokens.

How To Tokenize Real-World Assets   

Tokenizing real world assets can serve different purposes, for example it can be a good way to raise capital for a real estate project. The process to tokenize real assets is completely different to the one of creating other tokens, like NFTs for example. This is the reason way there are companies (like the german NYALA) that offer tokenization among their services.. These companies specialize in creating tokens starting from real world assets. For example, if you are raising capital to build a complex of buildings.  You can tokenize the asset (the completed project) and then sell the tokens to interested buyers.