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Crypto Tokens: Everything You Need To Know

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What is a Crypto Token?

A crypto token is a unique form of virtual currency. The two primary differences between a crypto coin and a token are: 1. the coin has its own blockchain, and the token runs on a shared blockchain 2. Crypto coins have monetary value, and tokens don’t have a monetary value. Tokens come in two forms – fungible (interchangeable with the same type) and non-fungible (non-interchangeable).

Crypto tokens are often used in fundraising programs. They are created, distributed, sold, and circulated through the ICO or IEO process. In general, tokens can be used for investment purposes, store value, or make purchases. Token creation has become a hot business in the recent months, especially after a number of countries ease crypto regulations.

Tokens can represent anything virtual – reward points, online tickets, game characters/skins/weapons, lottery tickets, financial assets/shares, fiat currencies, ounces of gold/silver, and more.

What are the Types of Tokens?

Security Tokens

Security tokens are crypto assets that validate and ensure ownership rights. They act as the value-transfer medium for assets that have values, like real estate or cars. Security tokens are issued on a permissioned or permissionless blockchain, and they are unique. A security token represents a stake in an external asset or enterprise. Entities like governments and businesses can issue security tokens that serve the same purpose as stocks, bonds, and other equities. This token type benefits from the properties of the blockchain platform it is issued on, like transparency, rapid settlement, no downtime, and divisibility. Security tokens are managed by smart contracts, can be quickly sent to blockchain addresses, and are traded on crypto exchanges or through peer-to-peer transactions.

Security tokens are created using ERC-1400 (Ethereum) and ST-20 (Polymath) token standards.

Types of Security Tokens:

  1. Debt tokens
  2. Equity tokens
  3. Real assets tokens

Utility Tokens

Utility tokens are distributed during crowdsales, and they usually represent user tokens or app coins. Utility tokens can be considered digital tickets or coupons that can be used in the future to access a company’s products or services. To be more specific, it is a form of access to a particular value. The purchase of these utility tokens is made in different cryptocurrencies and even with fiat currencies. The person interested in the project pays a certain amount of money for the tokens they want, and they are assigned to them.

Utility tokens are created using ERC-20 (Fungible tokens) and BEP-20 (Binance Smart Chain).

Governance Tokens

Governance tokens are cryptocurrencies that represent the voting power on a blockchain project. These tokens are mostly integrated into DeFi projects since they can distribute voting rights and powers to users to remain decentralized. There is no mining involved here, and the decision-making process is solely limited to the investors. Governance tokens provide excellent benefits like complete decentralization, collaboration opportunities, community participation, and efficient development.

Non-fungible Tokens

Commonly called NFTs, the non-fungible tokens are unique digital assets that act as proof of ownership and retain the ownership rights. Artworks, game collectibles, VIP passes, music, video, real estate deeds, and many other real-world assets can be converted into NFTs. They don’t have similar counterparts, and each NFT has at least one distinguished character. They are non-interchangeable and cannot be used in commercial transactions. Since these tokens run on the blockchain, content creators & artists can connect with buyers & collectors without any intermediaries.

We provide Non-fungible token development services using ERC-721 and ERC-1155 token standards.


Stablecoins are cryptos whose values are based on a fiat currency (like the US dollar) or an asset (like gold). They are characterized as simple, stable, scalable, and secure. They also provide benefits such as transparency, immutability, security, fast transactions, low fees, and privacy, all without losing the trust and stability of using fiat currencies. Stablecoins are usually created using ERC-20 or ERC-223 protocols. Unlike cryptocurrencies, stablecoins are pegged to assets with values like a commodity, crypto asset, fiat currency, and seigniorage. For example, the USDT stablecoin is tied to the US dollar, and the DAI stablecoin is backed by the MakerDAO.

Where are tokens used?

Initial Coin Offering

ICO is the most popular fundraising method used by startups to raise capital for their crypto or blockchain projects. When an ICO is launched, interested investors can participate in the offering and invest money if they find the project credible. Each investor will receive crypto tokens for their contributions. The tokens will usually have utilities in using the company’s products or services, and sometimes they represent a stake in the company. The tokens can also be bought and sold with cryptos once they’re listed on the exchanges.

Looking for ICO development services? We provide end-to-end ICO services at affordable costs.

Initial Exchange Offering

Initial Exchange Offering is conducted on a cryptocurrency exchange. An IEO is administered by a crypto exchange on behalf of the startup that seeks to raise funds with its newly issued tokens. As the token sale is conducted on the exchange’s platform, token issuers have to pay a listing fee along with a percentage of the tokens sold during the IEO. In return, the tokens of the crypto startups are sold on the exchange’s platforms, and their coins are listed after the IEO is over.

Security Token Offering

A Security Token Offering is a type of public offering. The security tokens (also known as tokenized digital securities) are sold to buyers/investors through crypto exchanges or security token marketplaces. The primary reason behind the launch of STOs is to overcome the lack of oversight and bring regulation to blockchain-based crowdfunding campaigns. In STOs, buyers/investors are assured that the tokens they receive in exchange for their investments are backed by tangible assets.

Common Token Standards

About ERC-20

ERC-20 tokens are blockchain-based assets that have value and can be sent & received. The primary difference is that instead of running on their own blockchain, ERC-20 tokens are issued on the Ethereum network.

About ERC-721

ERC-721 is a free, open standard that describes how to build non-fungible or unique tokens on the Ethereum blockchain. While most tokens are fungible (every token is the same as every other token), ERC-721 tokens are unique. Think of them like rare, one-of-a-kind collectibles.

About BEP-20

The BEP-20 is a Binance Smart Chain token similar to ERC-20. This token standard ensures basic functionality for the tokens, such as transferring, returning a balance, viewing token ownership, etc. In other words, BEP-20 is a blueprint of how a token is spent, who spent it, where it has been spent, and also its overall usage. Therefore, the BEP-20 token standard is usually preferred when the company wants to create utility tokens.

Things to remember while creating tokens 

  1. Define the purpose – When you develop a token, you should tell the purpose of its existence, like what it will be used for, who can use it, and what problems it will solve.
  2. Legal implications – Ensure that ‘crypto’ is legal in your country (or where you are developing). Consult a legal advisor to ensure that whatever you are doing is legal.
  3. Resources – You need to invest in a good team (crypto analysts, spend a few thousand dollars as an initial investment. Contact us to get an estimated cost of token development.
  4. Team – The success of your token depends on the team you have on your side. So choose a team that is skilled in the blockchain and the crypto space.

Technical Overview Of Crypto Token Creation 

  1. Consensus – Pick a credible consensus mechanism with the necessary protocols to validate the transactions and add them to the block.
  2. Blockchain – Ethereum, Hyperledger, and IOTA are the most popular blockchain platforms. The best blockchain platform depends on the chosen consensus mechanism.
  3. Nodes – Design the nodes after you have decided the functionality of the blockchain.
  4. Architecture – Set the internal architecture – address format, workings, functionalities, and other essential decisions.
  5. API – You can provide pre-built APIs or partner with a third-party API provider.
  6. Interface – Your interface should be outstanding! Ensure that the web, server architecture, and databases are the latest versions.
  7. Legal – Your crypto should abide by the laws of international cryptocurrency regulations and regional laws.