What is a token in crypto?

In short

A token is a crypto-asset created by a smart contract on an existing blockchain, as opposed to a coin, which is the native asset of a blockchain of its own. A token can represent almost anything, including a currency, a claim on an issuer, access to a service or a unique item, and its rules are whatever its contract says.

Also called
Crypto token, Digital token, Blockchain token
Family
Crypto and trading
Facts checked

How a token works

A token contract keeps a table of which address owns how many units, and exposes functions to transfer them. Standards such as ERC-20 on Ethereum and TRC-20 on Tron fix those functions, so wallets and exchanges handle every conforming token in the same way.

The issuer decides the supply when writing the contract, and may keep powers to mint, burn, pause or freeze. Moving a token costs a network fee paid in the blockchain's own coin, not in the token.

The kinds of token

  • Stablecoins: designed to hold a steady value
  • Utility tokens: access to a good or service from the issuer
  • Governance tokens: votes on a protocol's rules
  • Security tokens: shares, bonds or fund units in token form
  • Non-fungible tokens (NFTs): each one unique

How EU law treats tokens

MiCA classifies crypto-assets into three types: e-money tokens, asset-referenced tokens, and all others, utility tokens among them. Article 3 defines a utility token as one only intended to provide access to a good or a service supplied by its issuer.

MiCA does not apply to crypto-assets that are unique and not fungible with other crypto-assets, or to those that qualify as financial instruments. The class a token falls into decides what an exchange checks before listing it.

Token, coin or payment token?

Coin
The native asset of its own blockchain, such as bitcoin or ether, used to pay that network's fees.
Payment token
In card payments, a substitute for a card number, issued by a card scheme or a vault. It has nothing to do with blockchains.
Access token
A credential that proves a session or a device to an API. Again unrelated.

Where a token shows up in a platform

Modules that do the work

Platforms that need it

Where it is written

The laws and standards this page's facts come from.

General information, not legal advice: what applies to you depends on your services and your market.

Every term

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