In all areas, in the event of disturbance, the vocabulary is a little muddled. New words enter the lexicon. Sometimes the names are used interchangeably – a shorthand that somehow bypasses the nuances and distinctions that help us understand what’s really going on.
The same is true with technology, and with what you might call the “token economy” – which includes the “crypto” economy, distinct from bitcoin and blockchain. And don’t even get us started on Dogecoin.
We’ll unbox it all for you, starting here, with the first installment in a series.
Tokens have been around for some time, but the stage is increasingly set for ecosystems – of commerce, but also for all forms of exchange – to take advantage of the speed and security that tokens offer to enable the innovation in new seen) use cases.
To get a feel for how crypto is becoming ubiquitous, consider the news this week that eBay is considering the introduction of non-fungible tokens (NFTs) and also considering whether to accept cryptocurrencies as payments. Most have a passing familiarity with NFTs, which are used to turn art, music, tweets, memes, and all manner of collectibles into unique digital deals, which can sometimes fetch astronomical prices of tens of dollars. millions of dollars. Altcoins, like Dogecoin, are digital tokens that have sometimes sparked a speculative frenzy (as Bloomberg reported, Robinhood’s crypto trading systems have been overwhelmed with demand).
And in another nod to tokenization, in a different part of the business realm, Visa said in its earnings call that it had taken a major milestone in the first quarter by crossing the two billion token mark, against 1.4 billion in September. .
But: Blockchain is not Bitcoin is not Dogecoin is not NFT is not the token economy.
The token itself
Conceptually, a token is simply an object – a coin, if you will, a ship, really – that represents something else: a value, a bit of information, a good, a service, a contract, which is traded between parties. Security tokens, in another type of offering, can give recipients fractional ownership of real property, such as real estate. Utility tokens are tied to a specific purpose, such as the transaction.
Increasingly, in the digital age, tokens are created by digital means, cryptographically harboring these units of meaning and data.
… And the Blockchain
Do not confuse tokens or cryptos – the bitcoin token or the Ethereum token – with the blockchain. Blockchains are digital “registers” which, via a decentralized database, are used to track the exchanges that occur between the parties. Not all assets or holdings that cross blockchains are tokens, and not all tokens need blockchains to cross between parties. Arguably, we are seeing tokens and blockchains converging.
Indeed, at least some components of the blockchain – the layer underpinning the general rise of the “token economy” – are universally appealing to those who wish to participate. Note: Transactions are peer-to-peer, eliminating intermediaries. Apparently, this allows transactions to take place quickly and securely – and they’re cheaper, because fewer parties involved “touch” the transaction. What is exchanged directly between the parties are rights, and sometimes economic values, immutable – to a bitcoin (and its associated value of $ 56,000), for example – which circulate between digital wallets.
Tokens can be fungible and can represent a claim on, for example, an unmarked farm. Every bitcoin is the same as every other bitcoin, and every tokenized claim of money ownership or fractional ownership would be the same as any other proportional amount. Non-fungible tokens are associated with a unique art or a tweet from Elon Musk. Tokens can also provide the right, for example, to enjoy a live broadcast event or provide proof of identity for travel.
Next step: the rise of Bitcoin – and specially designed blockchains
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