A digital asset (or might be a deed) that is built on the blockchain of a cryptocurrency. A cryptocurrency is necessarily built on a blockchain (and stored in blockchain wallets). If a cryptocurrency doesn’t have its own blockchain, but rather uses another cryptocurrency’s blockchain, then it’s a token. As cryptocurrencies, crypto tokens are assets with value, which can be transferred and traded, and they’re stored in blockchain wallets (programs or hardware devices that’s used to store cryptocurrency). If a token is built on Ethereum, then the Ethereum blockchain will process and keep track of all transactions for that token.

Tokens are units of value that are developed and issued by blockchain-based entities for specific purposes. While tokens are compatible with the cryptocurrencies of the same blockchain, tokens constitute a completely different digital asset class.

Crypto tokens may be used as currencies (e.g., for payment) but can also serve other purposes including decentralized finance (DeFi), rights in a cryptocurrency project (government token), ownership of digital assets (non-fungible tokens/ NFTs) or physical assets, or even utilities or services. Tokens are typically classified as utility tokens, security tokens or equity tokens.

For example, an equity token represents ownership (equity interest/ stake) in an underlying asset, usually a share of stock of a company. All the terms and conditions related to the stock holdings (equity holdings) are registered on a blockchain. Equity tokens are specifically issued through the equity token offering (ETO) process and are tradable on the blockchain, offering their holders more voting transparently as to decision making and control of voting rights of the issuer through the blockchain.