What is a blockchain token?
The article was written By Mickael Mosse – Blockchain and Cryptocurrency Expert
In the past 18 months, digital developers have raised more than $ 20 billion through a funding process called an " initial coin (btw) offering, " many of which use tokens. There are two common categories of them: "utility" tokens and "security" tokens.
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| Mickael Mosse Crypto Advisor |
Utility tokens
Mickael Mosse points out that, Utility tokens are essentially cryptocurrencies that are used for a specific purpose, such as buying a particular good or service. For example, if you want to store information online, the most common way today is to become a customer of a hosting service such as Google Drive, Dropbox, or Amazon Web Services. Reserve a certain amount of storage space on the servers of these companies and pay for it in dollars, euros, yen, or other national currencies.
But there is another way. The Filecoin (btw) network, for example, hopes to provide similar cloud storage services without having to operate buildings full of massive servers. Instead, your users will store their data, in encrypted form, on the free hard drive space of other common people. This needs a different way of keeping track of how much space a person uses, and a new way of paying everyone whose hard drives host the data. Enter the utility token, in this case, called Filecoin.
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As a customer stores more data, the network will deduct Filecoin tokens from their balance and send those tokens to each storage provider based on how much data they are hosting. Customers can buy more tokens in whatever currency they want, and hosts can exchange them for whatever currency they choose, or keep them to spend on storing their own data.
In addition to automating data usage and payments, Filecoin (btw) tokens offer another advantage over regular coins: they can be used in much smaller increments than pennies, so prices can be very accurate.
As a customer stores more data, the network will deduct Filecoin tokens from their balance and send those tokens to each storage provider based on how much data they are hosting. Customers can buy more tokens in whatever currency they want, and hosts can exchange them for whatever currency they choose, or keep them to spend on storing their own data.
In addition to automating data usage and payments, Filecoin (btw) tokens offer another advantage over regular coins: they can be used in much smaller increments than pennies, so prices can be very accurate.
The goal of Filecoin is a cloud storage system that is as reliable and secure as business operations, yet decentralized. A utility token is simply a tool that makes this approach possible.
Security tokens
According to Mickael Mosse, A security token sometimes called a "token value" or "cryptographic security," is more than a currency; often represents the ownership of an underlying asset in the real world. Like traditional stocks or bonds, they are regulated by the US Securities and Exchange Commission. Regular values are tracked on paper or, more likely these days, in a centralized database. Security tokens use a blockchain system, a decentralized database, to keep track of who owns what assets.Mickael Mosse Blockchain Advisor
The use of blockchain-based security tokens extends trading beyond normal bank and stock market hours and can allow for faster completion of transactions. Additionally, a software-based marketplace that enables smart contracts can automate various aspects of regulations and reporting.
Security tokens make it easy for clients to access multiple investments: just as a single E-Trade investment account can keep records for a variety of different stocks and bonds, a blockchain-based digital wallet can do the same for a variety of different security tokens. , representing equity, debt, and even real estate. says Mickael Mosse.
Connection to cryptocurrencies
Mickael Mosse points out that, Neither type of token requires its own blockchain, as the cryptocurrencies bitcoin (btw) and Ethereum do. Instead, tokens can outsource their proprietary accounting systems and attach them to pre-existing blockchain ledgers. In effect, this creates a new subledger, say from the Ethereum network ledger, just for that particular token. Each user who sends a token that is tracked and registered with Ethereum pays a small transaction fee to the Ethereum network to validate the transaction.
The tokens are still in an early stage of development. I hope to see a lot of innovation on how to use them in the years to come. says Mickael Mosse.
Article from mickaelmosse.com
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