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What is a Cryptographic Token?

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  • Last Updated : 19 May, 2022
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A cryptographic token is a digital unit that has a value and does not have its own native blockchain. Blockchain technology has huge potential to build a secure future internet system and also be able to solve big business problems. A blockchain is a digital, decentralized public ledger that has the special ability to record every data transaction exchange on its network. The blockchain network is able to track orders, payments, and more. 

Purpose of Cryptographic Tokens

Cryptographic Tokens are tokens that do not have their own native blockchain. Hence, cryptographic tokens exist on the existing blockchain infrastructure. of another cryptocurrency. Therefore owners of cryptographic tokens can use them for purchasing products or they can also be used for trading for making a profit just like other securities. If one wants to create a high-performance token, then there is a need to develop the token on a high-performance blockchain like Ethereum, and then the token runs on a highly secure network and it is also secure from cyber attacks. Tokenization is less expensive in terms of money and time when leverage is existing on decentralized architecture and implementing a consensus mechanism.

Features of Cryptographic Tokens

Below are some of the features of crypto tokens:

  • Cryptographic Tokens operate on existing blockchain infrastructure, therefore Cryptographic Tokens are secure.
  • It makes payments easier and more secure.
  • Cryptographic Tokens are used in a wide range of fields such as trading and investment.
  • A cryptographic Token is a cryptocurrency that represents an asset.
  • Tokenization is less expensive and time-consuming.

Types of Cryptographic tokens

Different types of cryptographic tokens are discussed below:

  1. Utility tokens: Utility tokens are user tokens that grant access to users for specific services. For example, When an organization creates a utility token for their customers, it means they create a digital voucher that can be redeemed for discounts or for gaining special access to a service of that organization. There are many Utility tokens that exist in the market like Filecoin, Civic, and many more.
  2. Payment tokens: Payment tokens are best known as coins. The main purpose of payment tokens is to serve as a medium of exchange of currency. Most cryptocurrencies like Bitcoin are payment tokens. Bitcoin is a digital currency that uses blockchain technology. It was created primarily to speed up cross-border transactions, reduce government control over trade, and simplify the entire process without the need for third-party intermediaries. The absence of intermediaries greatly reduces transaction costs. It uses cryptography to keep it secure. There are no physical bitcoins, bitcoin is a digital currency.
  3. Security tokens: Security tokens work just like traditional securities. Security tokens are also known as equity tokens. As I said, security tokens are traditional assets that look like stocks and shares of a company or organization, security tokens are handed over to the buyer once the initial token supply ends. security tokens give the holder ownership rights along with sharing in the company stocks.
  4. Defi tokens: Defi stands for Decentralized Finance. Defi token is a cryptographic token that uses a protocol designed to create a new financial system with the functions same as the old financial system such as lending, saving, trading, etc., by using blockchain technology with the use of smart contacts. For example, instead of borrowing money from a lender, you can borrow money in form of a Defi token from the Defi platform. Defi platforms have their own official currency in the form of tokens and they depend on investors who lend out their crypto funds for lending.
  5. Crypto rewards: As discussed above, Defi platforms have their own official currency in the form of tokens, and they rely on investors to lend out their crypto funds to borrow. In return, investors gain (profit) crypto rewards. Crypto rewards are usually paid in the form of crypto tokens.
  6. Governance token: A governance token is a cryptographic token and specialized defi token that gives its holders voting rights for the token’s future. Governance token holders can propose and vote on proposals that will help determine the future of that particular cryptocurrency.
  7. Non-Fungible Tokens: Non-Fungible Tokens (NFTs) are Cryptographic tokens that use blockchain technology. Non-fungible tokens (NFTs) are not a cryptocurrency because non-fungible tokens cannot be used for trading or exchange purposes, it is used as a cryptographic asset.NFTs are uniquely identifiable therefore they are different from most fungible cryptocurrencies such as Bitcoin. Non-Fungible Tokens (NFTs) are associated with digital things like photos, videos, arts, audio, etc. 

How do Cryptographic Tokens Work?

Cryptographic tokens are the same as digital currency which is stored in a digital wallet. Below are steps to show how cryptographic tokens work:

  1. Develop Token: Cryptographic Token Developer develops tokens with the help of blockchain technology.
  2. List Cryptographic Token: Developers decide when to list their tokens on cryptocurrency exchanges. 
  3. Token Available for Buy and Sell: Any user can now buy a token from a cryptocurrency exchange.
  4. Token stored in Digital Wallet: After buying a token it is stored in the user’s digital wallet. 

If one wants to transfer a token to someone else, it “leaves” the user’s digital wallet and moves to another person’s wallet. If one wants to sell it, the user will get money at the current price of that token in the market. Unlike Bitcoin or other coins, they use a system of public and private keys to facilitate transactions. The exchange with tokens uses a system called “smart contracts”. Every blockchain as a token platform has a technical standard that defines smart contracts.

How Cryptographic Tokens Work



Cryptographic Tokens vs Cryptocurrencies vs Altcoins

To describe cryptocurrencies, the terms like Cryptographic Token, Cryptocurrencies, and Altcoins are used. Below are some points of these terms to help clarify the difference between each.

Cryptographic TokensCryptocurrenciesAltcoins
Cryptographic Tokens are tokens that do not have their own native blockchain. Hence, cryptographic tokens exist on the existing blockchain infrastructure. of another cryptocurrency.A cryptocurrency is a digital currency, which uses cryptography for secure transactions. It is designed to act as a medium of exchange on a computer network without relying on a central authority such as a government or a bank to manage it.Altcoins are a different type of cryptocurrency than Bitcoin and have different functions. Altcoins are like stablecoins, they have the potential to solve problems the same as Bitcoin does in the everyday medium of exchange.
Cryptographic Tokens can be used for trading, storing as an asset, and using as a digital currency.Since cryptocurrencies do not use third-party intermediaries, therefore the exchange of transactions is going to be easy, fast, and secure.Altcoin gives high returns. A wide variety of altcoins exists in the market with their unique uses and for their competitive advantages.
Cryptographic Tokens have value and can be traded, but most important thing is that cryptographic tokens represent a physical asset.Cryptocurrencies traded in the market are subject to price fluctuations.Buying altcoins is not easy as they are only available on certain altcoin exchanges.

Top Cryptographic Token in the Market

Below are some top cryptographic tokens in the market with their market cap according to the year 2022:

  • Tether: Market cap of Tether is $83,149,403,092
  • USD Coin: Market cap of USD Coin is $49,044,062,431
  • Binance USD: Market cap of Binance USD is $17,876,805,072
  • Shiba Inu: Market cap of Shiba Inu is $11,533,509,510
  • Wrapped Bitcoin: Market cap of Wrapped Bitcoin is $10,996,787,602 and More.

From where we can get Cryptographic Tokens?

The most common or easy way to get cryptographic tokens is through cryptocurrency exchanges. Cryptographic Tokens Developers decide when to list their tokens on cryptocurrency exchanges. The cryptocurrency exchange market on the Internet is huge. Many cryptographic tokens are often frozen by government regulation or by hacking attacks. One can buy tokens from any cryptocurrency exchange.

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