how crypto tokens work
crypto or cryptography refers to the various encryption algorithms and cryptographic techniques that safeguard crypto tokens and currencies such as elliptical curve encryption public private key pairs and hashing functions cryptocurrencies on the other hand are virtual currencies on a blockchain these systems that allow for secure online payments and the storing of value crypto tokens are transactional units created on top of existing blockchains by blockchain companies or projects they are created using standard templates like that of the ethereum network such blockchains work on the concept of smart contracts or decentralized applications wherein the programmable self executing code is used to process and manage the various transactions that occur a smart contract is a self executing program that automates transactions two parties agree on terms then code is written to execute the transaction once the agreed upon terms are met for example you might receive a crypto token representing a certain number of customer loyalty points on a blockchain that manages such details for a retail chain another crypto token might give the token holder the entitlement to view 10 hours of streaming content on a video sharing blockchain a token can even represent other cryptocurrencies such as a crypto token equalling 15 bitcoins on a particular blockchain such crypto tokens are tradable and transferrable among the various participants of the blockchaininvestors can use crypto tokens for any number of reasons they can hold onto them to represent a stake in the cryptocurrency company or for an economic reason to trade or make purchases of goods and services as a practical example decentralized storage provider bluzelle allows you to stake your tokens to help secure its network while earning transaction fees and rewards the financial industry regulatory authority finra continues to issue alerts about cryptocurrency and token fraud so be sure you research before investing in any cryptocurrency the same way you would with any stock 9crypto tokens vs cryptocurrenciesthe term crypto token is often erroneously used interchangeably with cryptocurrency however these terms are distinct from one another a cryptocurrency is used for making or receiving payments using a blockchain with the most popular cryptocurrency being bitcoin btcusd altcoins are alternative cryptocurrencies that were launched after the massive success achieved by bitcoin the term means alternative coins that is cryptocurrency other than bitcoin they were launched as enhanced bitcoin substitutes that have claimed to overcome some of bitcoin s pain points litecoin ltcusd bitcoin cash bchusd namecoin and dogecoin dogeusd are typical examples of altcoins though each has tasted varying levels of success none have managed to gain popularity akin to bitcoin s while cryptocurrencies have their own blockchain and are its native asset crypto tokens are built on an existing blockchain which acts as a medium for the creation and execution of decentralized apps and smart contracts the tokens are used to facilitate transactions on the blockchain in many cases tokens go through an ico and then transistion to this stage after the ico completes 