In any area, when a failure occurs, the vocabulary is slightly distorted. New words get into the lexicon. Sometimes nouns are used interchangeably – an abbreviation that in a sense reduces the nuances and differences that help us understand what’s really going on.
It’s the same with technology and what might be called the “token economy”, which includes a “cryptocurrency” economy other than bitcoins and blockchains. And don’t even force us to get started with Dogecoin.
We’ll unpack it all for you, starting right here with the first part of the series.
Tokens have been around for a while, but increasingly, conditions are being created for ecosystems – trading, but also all types of exchanges – to take advantage of the speed and security offered by tokens to innovate new (and not yet implemented) ones. seen) use cases.
To understand just how widespread cryptocurrencies are becoming, consider this week’s news that eBay is contemplating the introduction of non-fungible tokens (NFT) and is also exploring the possibility of accepting cryptocurrencies as payments. Most of them have little knowledge of NFTs, which are used to turn art, music, tweets, memes, and all manner of collectibles into one-off digital offerings that can sometimes reach astronomical prices in the tens of millions of dollars. Altcoins like Dogecoin are digital tokens that have sometimes caused speculative frenzy (as reported by Bloomberg, Robinhood’s cryptocurrency systems have been inundated with demand).
In another nod to tokenization, in another part of the commercial space, Visa said in its income statement that it crossed an important milestone in the first quarter, breaking the two billion token mark, up from 1.4 billion in September. …
But: Blockchain is not Bitcoin, it is not Dogecoin, it is not NFT, it is not the token economy.
The token itself
Conceptually, a token is simply an object – a coin, if you will, actually a vessel – that represents something else: value, some information, a good, a service, a contract that is exchanged between the parties. Security tokens in yet another type of offer can provide recipients with fractional ownership of a real asset, such as real estate. Utility tokens are tied to a specific purpose, such as completing a transaction.
In the digital age, tokens are increasingly created using digital means that cryptographically contain these units of value and data.
… And blockchain
Don’t confuse tokens or cryptocurrencies – bitcoin token or Ethereum token – with blockchain. Blockchains are digital “ledgers” that are used through a decentralized database to track exchanges between parties. Not all assets or holdings that cross blockchains are tokens, and not all tokens need blockchains for cross-platform communication between parties. Perhaps we are seeing tokens and blockchains converging.
This is because at least some of the components of the blockchain – the layer underlying the overall rise of the “token economy” – are universally attractive to those willing to participate. Namely: peer-to-peer transactions, without intermediaries. This supposedly allows transactions to be fast and secure – and they are cheaper because fewer parties involved “touch” the transaction. What is directly traded between the parties is rights, and sometimes economic values, are invariable – to bitcoin (and its accompanying $ 56,000 value), for example, this flow between digital wallets.
Tokens can be fungible and can represent a claim against, say, a commoditized holding. Every bitcoin is the same as any other bitcoin, and every tokenized claim for silver or fractional ownership will be the same as any other commensurate amount. Non-fungible tokens are associated with a unique piece of art or tweet by Elon Musk. Tokens can also entitle you, for example, to watch an event live or provide travel ID.
Next: Bitcoin’s Growth and Targeted Blockchains
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