Digital Tokens 101: What is a digital token?

Digital Tokens 101: What is a digital token?

Digital tokens are a relatively new addition to our everyday vocabulary, and it’s closely related to cryptocurrencies like bitcoin, but also with electronic tokens which are used to symbolize various resources on a blockchain. What is a digital token? How can you use a digital token? Read this short guide to understand the different types of digital tokens and to be able to join a conversation nest time someone mentions digital tokens.


Digital Tokens 101: What Does it All Mean?

The term ‘token’ can lead you to think about the plastic casino chips, or that thing used to swap to get a beer under a particular platform or within a particular market such as a festival.

Let’s explore the origin of this term ‘digital token’, and then have a look to the area of cryptocurrency tokens, differentiating between blockchain-native tokens like BTC on Bitcoin or even ETH on Ethereum, along with asset-backed tokens like IOUs on Ripple.

How Digital Tokens appeared


Chances are that we’ve all seen a digital token before, even though we didn’t realize it. Let’s think about when subscribing to an online service or newsletter.

After you enter an email address into a site to join a mailing list, you are often asked to look at your email and click a hyperlink. The link you get to confirm your subscription may look something like this: token=4bdebebc-135b-4748-b7ab-25b31a285df8

In cases like this, the ‘token’ is that this series of characters that was delivered to you. This number or string of characters is unique, so the company who sent you the confirmation email will know it’s your email address if you click on it.

So, the site sent you a token, and you shipped it back, demonstrating you had control of the email address.

But the term ‘token’ is presently being utilized in a totally different manner to identify different items in the cryptocurrency world.


Cryptocurrency Tokens


Cryptocurrency tokens do not exist as a number like the one in the example above (they’d be simple to replicate ), but instead, they exist as entrances on a ledger (a blockchain). You have those ‘tokens’ since you’ve got a secret which allows you to make a new entrance on the ledger, re-assigning the possession to another person. You do not store tokens in your own pc, you save the keys that allow you to access or reassign the amount.

Those ‘tokens’ could be considered as electronic resources that you can have control of, and you may reassign control to somebody else.

“Cryptocurrency” can refer to both tokens and coins, but differences exist between the two labels.

We’ll cover two kinds of token:

  1. “intrinsic”, “native” or “built-in” tokens of blockchains
  2. “asset-backed” tokens issued on the blockchain by a third party onto a blockchain, which can be redeemed at a later time

1. Intrinsic tokens (also called ‘native or ‘built-in’ tokens)
Intrinsic tokens are conceived for their usefulness.

Here are some famous examples of intrinsic tokens are:

  • BTC (Bitcoin blockchain)
  • XRP (Ripple network)
  • NXT (NXT platform)
  • ETH (Ethereum)

Check out the top 100 cryptocurrency tokens, and the entire list on Coin Market Cap.

All these ‘coins’ or ‘digital tokens’ stand at the core of their projects and blockchain. Without them, the blockchain wouldn’t work. It’s not rare to find digital tokens as part of a reward system, which encourages users to create blocks by validating transactions on the blockchain. Each blockchain has its own digital tokens system, although some can look alike.

How are intrinsic tokens created?

These tokens are created by computers and are not backed up by anything. It’s like writing down on a piece of paper “I have 1 billion coins”.

In reality, if you did this, then kept a fantastic record of those friends you gave them to, and in the event that you could record forward trades as your buddies gave them to other friends, you’d do pretty much exactly what these digital ledgers do.

Let’s take the most famous digital tokens for instance:

Bitcoins are ‘mined’ according to a schedule. The recently created coins are made to reward to the block-maker. The entire amount of bitcoins increases with time. They can be then traded.

The digital tokens XRP, were ‘pre-mined’ (created all the beginning) and shared among key participants. Each trade has a small XRP fee. These XRPs are destroyed over time. The entire amount of XRPs circulating goes down with time.

  • NXT, NXT

The NXT tokens were pre-mined. Each trade on the NXT system includes a commission in NXT. The fee goes into the block-maker (in NXT that is known as a ‘forger’ as opposed to a ‘miner’). The entire amount of NXT stays constant with time.

Ethereum has been pre-mined. Transactions and smart contracts require an ETH fee to be created and to operate, and the block-maker is rewarded with ETH. The block-maker also receives a block reward.

coin_issuance bitcoin ethereum ripple what is digital token

What is the purpose of intrinsic digital tokens?

The primary purposes of intrinsic digital tokens appear to be:

  1. Block validation incentives (‘miner rewards’)
  2. Transaction spam avoidance (if all trades cost a token, it restricts the capacity to create spam transaction and jam the network)

Even though these coins have worth (you can purchase and sell some of them on a cryptocurrency exchange for some other cryptocurrencies or fiat), they are not supposed to represent anything. They just exist as a digital token.

2. Asset-backed tokens

If we take a look at the history of money, we can observe an antique practice people had. In the old times, you could deposit gold at your goldsmith’s shop, and get a receipt or “I Owe You” (IOU) note from them. These notes could be moved from person to person, and anyone holding these notes could go back to the goldsmith and get into the possession of the actual gold.

Asset-backed tokens would be the electronic equivalent. They’re claims within an underlying asset (such as the golden), that you have to maintain from a particular issuer (the goldsmith). The trades are listed on the blockchains, as tokens become passed between individuals, and also to maintain the underlying asset, you ship your token into the issuer, and the issuer sends you that the underlying asset.

Asset-backed tokens are claims on an underlying asset, by a particular issuer.

Popular assets for all these schemes are currencies (USD, EUR, etc) and precious metals (Cryptocurrencies seem to attract the same crowd as silver and gold). People monitoring these assets on ledgers by producing a digital token to represents each of them.

How do asset-backed tokens work?

Let us take the case of Coins-R-Us, a false Bitcoin exchange, issuing Euro-backed digital tokens.

You send fiat money to Coins-R-Us by logging into your internet banking. It’s like a normal bank payment you sent Eur to the Coins-R-Us’ bank accounts. Let’s say you sent 100 Eur. Then you log into your account and see 100 electronic asset-backed tokens known as Coins-R-Us-EUR.

The production of the tokens is listed on a blockchain. This could be on the Bitcoin Blockchain, or as a resource on Ripple or NXT, or even a smart contract on Ethereum. Now you can send these digital tokens to your friends (possibly in return for some thing or as a present), and also the tokens continue to be monitored on the exact same blockchain.

At some point, one of your friends will want to exchange this asset-backed token to get something real. He would have to go back to Coins-R-Us, set up an account on their platform, tell them his bank account number, and send them the Coins-R-Us-EUR he got out of you. They would then sent him Eur to his bank account from their bank account.

The advantages of using asset-backed tokens are that they are a good way to keep records of transactions and are easy to transfer, but the users still need to go back to the issuer if they ever want to transform it into liquidity.

cryptocurrency vs digital tokens what are digital tokens

What are Cryptocurrencies?

What is the definition of cryptocurrency?

A cryptocurrency is a virtual or digital currency which is encrypted (secured) using cryptography. Cryptography refers to the usage of encryption methods to secure and check the transport of trades. Bitcoin represents the very first decentralized cryptocurrency, which can be powered with a general public ledger that lists and validates all trades chronologically, known as the blockchain.

A Cryptocurrency is a math-based, decentralized digital money that’s protected by cryptography

Cryptocurrency is a short expression for “cryptographic” money. Cryptocurrency integrates the principles of cryptography to execute a distributed, decentralized, protected information market.

Cryptocurrency is a kind of “virtual money” compared to fiat money that’s used more commonly, like the dollar or the euro. Virtual currencies are supposed to be utilized as money; they are mainly meant to be utilized as a medium of trade. Though some persons speculate about the value of one currency versus different money, the aim of these currencies is to be used as a medium of trade rather than as an investment.

In 2015, the Commodity Futures Trading Commission (CFTC) from the United States, declared that “Bitcoin and other virtual currencies are encompassed in the definition and properly defined as commodities.” However, because virtual currencies aren’t securities, they aren’t regulated by the Securities and Exchange Commission (SEC).

Briefly, this is how a blockchain functions:

digital tokens

(Source: The Bernie Group)

Cryptocurrencies have been around before Bitcoin was created, but its creation marks a significant milestone in the domain of digital currencies, mainly because of its decentralized blockchain and user adoption.

The development of Bitcoin precipitated the growth of a verdant and much more varied ecosystem of different coins and tokens, which are frequently regarded as cryptocurrencies generally, even if a lot of them don’t fall under the definition of “money”.

Digital tokens vs Cryptocurrency

Tokens, on the other hand, are usually an addition to a blockchain and reflect an asset or a utility. Digital tokens belong to a platform (e.g. the Ethereum network), to exist and function, and are created when a crypto project launches an Initial Coin Offering (ICO). Tokens, also known as crypto-tokens and digital tokens, are often given to early investors in exchange for cryptocurrencies such as Ether, Bitcoin, or even some other Altcoins, and can also be used as a kind of payment for utilizing a platform, or app.

Now, how do you tell exactly what token does what? There is a number token and they all exist independently. However, the main types of tokens are security tokens and utility tokens.

In the crypto space, people refer to digital tokens as crypto tokens.

Think of digital tokens the same as you would think of the tokens that we utilized in actual life actions. The most important intention of the tokens would be to provide clients with an equivalent priority for maintaining an item or something that the tokens belong to.

For example, in banking, they utilize tokens to facilitate the customers’ access to their account.

Digital tokens work in a similar manner, but they’re primarily utilized at the idea of ICO.


Coins vs Tokens: Categorization of Cryptocurrencies


It’s essential to be aware that all coins or tokens are considered as cryptocurrencies, even though the majority of the coins don’t be a currency or medium of exchange.

The expression cryptocurrency is a misnomer because money technically signifies a unit of account, a store of value and a medium of trade.

These features are inherent inside Bitcoin, also since the cryptocurrency area was kick-started by Bitcoin’s production, some other coins conceived following Bitcoin is normally believed to be a cryptocurrency, although most don’t meet the aforementioned qualities of genuine currency.

The most frequent categorization of all cryptocurrencies are:

  • Choice Cryptocurrency Coins (Altcoins)
  • Tokens

 crydigital tokens ptocurrency altcoin tokens


Cryptocurrency which is not Bitcoin is also known as altcoin or just “coins”. They are frequently used interchangeably. Altcoins only refers to coins which are an option to Bitcoin. Nearly all altcoins are a version (fork) of Bitcoin, constructed using Bitcoin’s open-sourced, first protocol with modifications to its inherent codes, thereby simplifying a totally new coin with another set of attributes. A fundamental notion of changing open source codes to make new coins is known as hardforks. To understand better what a hardfork means, you can study Bitcoin Cash which is a hard fork from Bitcoin.

This normally results in the introduction of a new coin. There are various sorts of forks like hard fork, soft fork or casual fork.

You will find different altcoins which are not derived from Bitcoin’s open source protocol. Instead, they’ve established their very own blockchain and protocol which affirms their native currency.

Interesting fact: The very first Altcoin has been Namecoin, that was made in April 2011. It’s a decentralized open source data registration and transport system.


Tokens are a representation of a specific utility or asset, that generally resides on a blockchain. Tokens can signify essentially any resources which are fungible and tradeable, from commodities to loyalty factors to other cryptocurrencies!

Creating tokens is a far simpler process since you don’t need to change the codes from a specific protocol or design a blockchain from scratch. All you need to do is follow a standard template around your blockchain (e.g. Ethereum, Waves system), which permits you to produce your own tokens. This performance of producing your personal tokens is made possible via the usage of smart contracts.

What is a smart contract? A smart contract is a self-executing programmed computer codes which don’t require some third-parties to function.

This is how the process works:

digital tokens how smart contract work
Tokens are made and distributed to the general public via an Initial Coin Offering (ICO), which is a method of crowdfunding, through the launch of a newly created cryptocurrency or token to finance o project development. It’s very similar to an Initial Public Offering (IPO) for shares, but there are some crucial distinctions. Many eagerly participate in ICOs, and see it as a fantastic method to invest in projects which may offer excellent returns of investment.

Interesting fact: A template for token creation is fantastic since it provides a standard interface for interoperability between tokens. This makes it much easier for you to save different sort of coins inside one wallet. An illustration is that the ERC-20 standard on the Ethereum blockchain, which is utilized by over 40 tokens.

What is a Security Token?

Security tokens are synonymous with an investment contract. Security tokens could represent shares in a business, earnings flows, an entitlement to dividends or interest obligations. From a financial view, they’re similar to stocks, bonds or derivatives.

The national laws apply to ICOs, and they are different from country to country. This means that securities, asset tokens fall under these laws. That’s why it’s important to know the country in which the ICO is launched, to know the regulations which apply to a token.

How to know if a token is a security token?

Usually, If the answer to the question “Is the token increasing in value over time, and is that increase connected to the company’s performance?” is Yes, then that is a security token.

A Security Token is an electronic token that represents debt, equity, an investment contract, or other security in an enterprise.

It isn’t a coin nor is it meant to be money. The four conditions that have to be fulfilled in order for the tool to be considered a security are:

  • It’s an investment of cash;
  • There’s an expectation of gains from the investment;
  • The expense of cash is in a frequent venture; and
  • Any gain comes from promoters or third party.

This is called the Howey test, which was a Supreme Court case, between the Securities and Exchange Commission (SEC) and Howey. They determined that if a digital token fulfils the four requirements of this test  (such as other securities) it’ll be controlled by the SEC. So these digital tokens are securities, not commodities or currencies, and therefore they’re not governed by the Commodity Futures Trading Commission (CFTC).


  • Regulatory framework, depending on the country
  • Expectation of return
  • Similar to a stock

What is a Utility Token?

Utility tokens are much like the tokens you would purchase at an arcade, and grant you access to an organization’s services or products. They are not regulated, and therefore utility tokens are not investments.

From time to time, the lines between a security and a utility token may become confusing, especially once you add in unclear regulations, which are added in the absence of a globally-accepted frame. But when a utility token is correctly structured and functions as a “voucher” for the organization’s services, it stays a utility and usually exempt from rigorous regulatory oversight.

A Utility Token is an electronic token created for utilization only, not for investment.

It’s not a coin.

If a person is buying a utility token for investment purposes, it’s very likely to be regarded as a security token, ( the SEC stands by this view). A utility token is a token which can only be utilized on the 1 platform or network (where it is issued) and can’t be converted into fiat or electronic money.

It’s somehow similar to loyalty points and gift cards. Gift cards or loyalty points can only be used on a single platform or community and are often representative of a prepayment for services.

In discussing the gap between utility tokens and security tokens, SEC chairman Jay Clayton said: “A token that represents a participation interest in a book-of-the-month club” shouldn’t be a security token.

On the flip side, tokens in “a yet-to-be-built publishing house with the authors, books and distribution networks all to come” will probably be a security token since “prospective purchasers are being sold on the potential for tokens to increase in value — with the ability to lock in those increases by reselling the tokens on a secondary market — or to otherwise profit from the tokens based on the efforts of others.”


  • Not, or less, regulated
  • Aren’t investments
  • Give Accessibility to a product/service

Security Tokens vs Utility Tokens: Why It Matters

Knowing the distinction between a utility token along with a security token is an essential aspect.

Whether you are holding tokens or are arranging a crowdsale, then you want to be aware of the difference.

To begin with, you do not wish to purchase something without understanding exactly what it is, and secondly, you have to understand what legislation the token should be compliant with pre-launch of a token crowdsale.

Prior to picking what coin to start your own ICO with, you will need to ask yourself a question: “Which are the requirements of my ICO?”. And make sure you don’t fall into these common traps:

Avoiding Security Tokens

Even if you intend to avoid regulations and call you token a utility token because that doesn’t make it a utility token. By calling a token a “utility” token or structuring it to supply a utility doesn’t stop the token out of being a safety.

In case a security token gets the features that your ICO needs, then pick a security. When there’s absolutely no demand for a security token, then do not make one unnecessarily.

Underutilizing Utility Tokens

Utility tokens are of numerous types and with different attributes and can cover the needs of an ICO. Utility tokens are dynamic. Many overlook their features, however, it is crucial that you do your homework before ignoring the choice completely. By exploring all the features, one can get a better understanding of the capabilities of a token, have a better chance to successfully launch their own token or invest in a profitable project.

Altcoins vs Tokens

The most important difference between altcoins and tokens lies within their construction. While altcoins are different currencies using their ow blockchain, tokens function within a blockchain that eases the introduction of decentralized software. Nearly all coins in  (near to 80%) are tokens because they are much simpler to make.

Cryptocurrency vs Digital Tokens

Can you answer the question “What are the common for a dollar bill, the stocks of a company and a prepaid gift card?”

They don’t have a lot of things in common. Now let’s take this analogy to cryptocurrency (or virtual currency), security tokens and utility tokens. Again, they don’t have that many things in common.

But if you comply with that the world of digital translators from the media and popular media, you’d believe virtual currencies, security tokens, and utility tokens are very similar as they’re often simultaneously and discussed under the subject of “cryptocurrency.”

Many online publications and even investment guides use the term “cryptocurrency” to describe virtual currencies, security tokens, and utility tokens. But these three terms describe extremely different concepts, each of which can be subject to various legal frameworks and regulations.

While every one of the items is made on distributed ledgers using the blockchain technology, from both a legal and a practical standpoint, the similarity ends there. We should rethink using the term”cryptocurrency,” and instead use the phrases that are particular to the classes that have grown: virtual currency, security tokens, and utility tokens. Within our descriptions below we supply more details about the significance of each one of those classes.

digital token and icos what is a digital tokens

Initial Coin Offerings (ICOs) and Digital Tokens

ICO is the abbreviation for Initial Coin Offering. This is similar to crowdfunding or IPO. The essence of this process is that cryptocurrency projects are inviting anyone to become an investor in their project. The majority of these crypto projects launch a new cryptocurrency.

Let us clarify the usage and term of “ICO”

ICO stands for First Coin Offering. The normal ICO denotes the offering of electronic tokens that are generally either safety tokens or utility tokens. Furthermore, an ICO is generally not the first offering of the issuer. While ICO rhymes with IPO and is still a tricky term, it shouldn’t be confused with the public offering of securities.

As the marketplace rises, the terminology used in the field of cryptocurrency will hopefully get a wider spread and be understood properly. The differences between the different kinds of tokens are important. By understand their purposes, we can better apply the laws on their sale, use and the way they are created.

By ‘participating’ in an ICO, an investor is actually funding the project developers with more famous cryptocurrency, such as Bitcoin or Ethereum. With these funds, the project owners will be able to develop the project, and the investors are holding the digital tokens similar to stocks.

If a trader holds an electronic token, he then owns those shares from the project.

Digital Tokens Plays Important role in ICO:

The importance of digital tokens is revealed when we started learning about the fundraising which many startups need and acquire through ICOs. The creation of a crypto token requires some particular features and need to fulfil a certain task, while registered on the blockchain. Nowadays, there are websites willing to help with any part of the creation of a blockchain project.

Cryptocurrencies can be hard to understand, particularly because of their inherent blockchain technologies, which it’s all about complex math calculations and terminology you haven’t heard before. But we have you covered. Here are some resources to help you get started in the crypto world:

The concept of Tokenization

Tokenless Blockchain

As in Tim Swanson’s excellent report on permissioned ledgers, there is the concept of tokenless blockchains. This might imply a blockchain or decentralized distributed ledger that lacks an intrinsic token (eg Ripple with no XRP), nevertheless, asset-backed tokens are most likely to still be utilized. ‘Tokenless’ doesn’t refer to the lack of the asset-backed token, but to the lack of intrinsic token.

We do not always require a token. Based on the blockchain system, you might or might not require an inherent token.

Generally, permissionless ledgers where anybody may add a block, want some type of incentivisation scheme for block validators to perform their job. But in distributed ledger systems in which you control both the validators and block-creators, they then might do their task for a number of motives (perhaps the task is part of a contract). , such as since they’re contractually bound to do so. There is a bit more about it here.

Dematerialization and Tokenising legal constructs

Presently there’s a great deal of buzz in the blockchain circles and all sorts of things are tied to a blockchain: stocks, gold, debt, businesses, IPOs, diamonds, artwork, decentralized organisations, wine, music, countries and so forth.

Sometimes the objective is to have the ability to transfer resources (or IOUs) fast and easily while maintaining the physical thing secure (in a warehouse).

Other times, it is to get a digital token whose electronic possession matches the physical travel thing. For instance, once I offer you an actual diamond, I send you the electronic diamond-token, so you can control it now, and thus that the blockchain recordings the provenance of this diamond, such as a supercharged certificate-of-origin that contains a complete listing of possession.

Seeing legal constructs, notably stocks and companies, I think there’s a gap between monitoring claims to inherent objects onto a ledger, and really lawfully dematerialising the thing.


Dematerialising something is the process in which we replace a material item with an electronic one. For instance, paper share certificates have mostly been replaced by possession entries in databases. Some paper contracts are replaced with pdf documents.

Even though you’re able to declare “this digital token represents a share of a company”, and you’ll be able to send this to somebody else, this does not have any legal position. The token is not the share, even in the event that you possess the share in actual life, and you issue the token on the rear of it. The token is something beyond the law that you’ve created.

Sure, since the owner of stocks, you might devote to others that should they own that token, you then are going to pass the privileges (such as if you have this token, I’ll pass any dividends I purchase (from actually possessing the shares ) to you.

But if the shares are registered on your name in the shares registry, the authentic and legal shares registry, not the blockchain ledger that you’re using to monitor the electronic token you’ve created, then you own them.

That is why it’s untruthful when people say they’re generating *insert legal construct here* on the/a/some blockchain. They are not, It’s just as someone would create a business by writing “I create a business with 100 stocks” on a napkin, without doing all of the actual work of lawful firm creation and registering the business to a national authority of the country he lives in.

Sure, even if the legislation changed and a particular blockchain becomes part of the system or has been deemed equal to the country’s register of organizations, then yes, on this statutory blockchain, you might create a business. This is something all blockchain enthusiasts are looking forward to seeing: how legislation will gradually adapt to the blockchain technology.

Crypto Resources To Get You Started

If you are beginning your journey into the world of cryptocurrencies, then here is a list of useful guides and resources which can get you started:

Trading & Exchange

What is an asset-backed cryptocurrency?

What is an asset-backed cryptocurrency?

Would the world benefit from an asset-backed cryptocurrency? YES! So how does an asset-backed cryptocurrency works?

Since Bitcoin introduced the idea of digital forms of money to a massive audience, the characterizing topic of basically all crypto tokens has been their extraordinary instability. But soon all that can change for the asset-backed cryptocurrency and asset-backed tokens (ABT).

The world is loaded up with resources, including land, stocks, gold, oil, among numerous others. The vast majority of these benefits are not actually transferable or sub-dividable physically. A change to a computerized framework along the lines of blockchain presents a suitable answer for these issues, subsequently the developing enthusiasm for asset-backed cryptocurrency.

What is an asset-backed cryptocurrency?

An asset-backed cryptocurrency or token is a cryptocurrency that utilizes a physical asset, such as real estate, for investment and revenue purposes.

They are considered to be the most reliable because the revenue system is backed by a physical asset which can be seen and accessed and therefore, it is easier to trust. Some analysts consider asset-backed cryptocurrency to be the next steps in the growth of cryptocurrencies.

There exist numerous digital currencies on top of the blockchain. The currencies (or tokens) can be used to transfer ownership of assets or objects outside the blockchain. This, in essence, is the tokenization of real assets.

Is an asset-backed token possible?

Land, gold, fiat money or oil are all examples of resources that could support and be part of the development of crypto tokens and possibly asset-backed cryptocurrency.

Being connected to a physical resource gives something extra and can influence how that asset-backed cryptocurrency is being transacted. Since most resource sponsored coins are attached to outer markets on which those benefits are exchanged.

Let’s take, for example, precious stones or silver. If the awareness of the token grows, at that point financial specialists will exploit the disparity and money out the physical resource.

Exactly how the basic resource of the token is overseen and secured in this procedure it will keep on being of fundamental significance. Institutional and standard financial specialists will be attracted to those coins upheld by systematised activities for managing and stripping resources.

Read more on Mainstream cryptocurrency adoption

Challenges of tokenization and ABT

While the tokenization and asset-backed tokens of genuine resources come with a guarantee, there are some challenges to overcome. Financial motivation help solve some of these challenges, and organizations and governments take part in the goal of creating a strong foundation in this field. Here are some of the issues:

  • Regulatory vacuum — The fields of cryptocurrency, tokenization and asset-backed cryptocurrency
    are not well regulated. As such, they introduce certain risks to qualified investors and customers.
  • Legal enforce-ability of property rights — Does owning tokens and asset-backed cryptocurrency confer ownership over the corresponding asset? In the event that the asset is inexistent, who is liable? How does the owner recover damages?
  • Technical infrastructure — There is a need to improve security and safety standards to make sure that asset-backed cryptocurrency is connected to its assets in the real world.

Read more on Regulation of Cryptocurrency Around the World Report

Benefits and Perspectives of asset-backed tokens

By joining the upsides of blockchain and traditional venture instruments, tokenisation can affect exchanges and speculation. The advantages of tokenization and asset-backed cryptocurrency are various and can be outlined as pursues:

  • Improves liquidity of assets like real estate
  • Allows fractional ownership
  • Permits the diversification of risk by owning parts of several assets
  • Alleviates territorial and temporal barriers
  • Allows newer models for raising capital
  • Allows more control, and even the ability to choose the level of control over an investment with implemented digital democracy
  • Decreases the number of intermediaries, and therefore the amount of fees
  • Unlocks liquidity premium

Read more on How to earn free cryptocurrency (without investing or mining)

As the digital currency advertise keeps on advancing, develop, and expanding, asset-backed cryptocurrency and tokens will be the portal to more extensive applications.

What Can You Buy Using Cryptocurrency?

What Can You Buy Using Cryptocurrency?

Rumours of merchants accepting Bitcoin have been circulating for years. After all, everyone knows at least one-foot soldier who spreads the good word of Satoshi wherever they can find a listening ear.

So then, what can you actually buy with cryptocurrency? If you’re not counting on holding for that Lambo anytime soon, let’s see what you can get for a few satoshis.

Flights and hotels

Due to the explosive growth of the cryptocurrency ecosystem in the past nine years, it is now possible to travel the world by spending cryptocurrency.

Established travel agents such as CheapAir, Destinia  Expedia and Surf Air accept bitcoin as a payment method to book flights, car rentals, and hotels and for those who prefer to stay in an apartment when travelling can book accommodation using bitcoin (BTC) or ether (ETH) on CryptoCribs.

The growth of the bitcoin ATM market also means travellers are now able to convert their cryptocurrency into local currency in most major cities around the world.

Movies, games and app-based services

Microsoft dipped its toes in the waters back in 2014, when it started accepting Bitcoin for online game and app purchases on its Windows and Xbox online stores. After a lover’s quarrel over volatility last year, the tech powerhouse stalled payments but has since rekindled the flame and picked up where it left off. While the tech giant is yet to accept BTC across the board, their support carries some serious weight.

While you won’t be getting the latest Windows from Microsoft, there’s always a back door – Newegg will proudly sell PCs, hardware, software, and an arsenal of miscellaneous equipment for bitcoins. Whether you’re in the market for a mining motherboard or a fly-fishing rod, Newegg seems to have it.

Some musicians (Bjork, Imogen Heep) will let you download their music in exchange for cryptocurrency.

Did you know you can Play blockchain games for free and win cryptocurrency?

Online Services

Your classic offline businesses are usually the last to jump on the bandwagon, while traditionally web-based businesses are quicker to catch on to tech trends.

Web services seem to be leading the pack, and you can just about create an entire website using Bitcoin. First, grab yourself a domain name on Namecheap, and if you won’t settle for their hosting package, try HostWindsGlowHost or HawkHost.

Once you’ve laid out the bones for your new site you’ll want a fresh installation of WordPress, where you can lock down a sexy theme and plugins galore – all purchased using Bitcoin, naturally. If all of this sounds a bit too much, you can jump the queue over on Reddit and launch your project as a premium feature.

Bitcoins also jangle around the darker corners of the world wide web, where romance comes at a price. There’s SuicideGirls, an eerily named “adult” community, or if you’d rather do things the old-fashioned way jump on OKCupid for some online dating action – both accept Bitcoin as payment for membership.

Read more on How blockchain technology is used in non-cryptocurrency applications.


Need to furnish your house or buy a special present for someone? Overstock was one of the first big retailers to start accepting bitcoin, back in 2014, and its founder – Patrick Byrne – is still one of the technology’s most active proponents.


Fancy some gold? Sharps PixleyAPMEX and JM Bullion will take bitcoin off your hands in exchange for bullion.


The first Bitcoin transaction ever recorded was for pizza, and apparently, the novelty never wore off. Accepting bitcoin for pizza since 2013, Pizzaforcoins is a third-party intermediary that will happily take your BTC and convert that into doughy, cheesy goodness made by your vendor of choice. (If you live in the US.)

If you’ve got a hankering for something less greasy, there’s a chance your local Subway will convert your crypto-assets into a foot-long classic. One punter traded 0.04 BTC for a Chicken Bacon Ranch 4 years ago- that said, BTC payments don’t seem to be a franchise-wide policy (being left to the discretion of individual store owners).


If it’s knowledge you’re hungry for, several private and public universities, as well as a couple of New York preschools, accept bitcoin. I bet you would have never guessed what you can buy using cryptocurrency.

Legal and accounting

Some legal and accounting firms also accept payment for their services in the cryptocurrency.


If you want to use bitcoin to buy presents, the most obvious solution is gift cards, via Gyft or eGifter. The recipient will then be able to spend the gift card at one of a wide range of retailers.


Whether you’re looking to bolster transparency with WikiLeaks, build clean water solutions in Sub-Saharan Africa with The Water Project, or SaveThe Children, the number of charities and nonprofits accepting Bitcoin is growing every day. Take your pick from art, entertainment, NGOs, open-source projects, activism, and even religion- you can find a full, up-to-date list on Bitcoin Wiki

Of course, you could always buy yourself some happiness by donating to one of the bitcoin-accepting charities or crowdfunding sites, such as BitHopeBitGive or Fidelity Charitable.

Search for offline shops

For a list of offline stores near you that accept bitcoin, check this list of resources to help you spend BTC away from the keyboard:

Where to Spend Bitcoins UK – An all-encompassing directory of shops, pubs, websites and places that accept Bitcoin as payment, complete with a map function.
Use Bitcoins – A directory platform listing 5,000 registered businesses that accept BTC.
CoinMap – An interactive map of worldwide businesses accepting Bitcoin.
Spendabit – A search engine to help you find a retailer for a specific good (that accepts BTC).

What can you buy using cryptocurrency? – Conclusion

Slowly but surely, merchants are warming to the idea of our old friend Bitcoin and slapping up their “Bitcoin Accepted Here” stickers with glee. That said, the process will certainly take some time, with the full force of FUD, regulation, and tech challenges all holding back your average Joe from seeing Bitcoin as a credible payment method.

Before spending, sometimes you also need to think about how to acquire it. Earning Bitcoins might seem like a daunting task if you leave out the option of buying Bitcoin. Check out some platforms which will help you earn free cryptocurrency and Bitcoin.

As an early adopter, sometimes you have to count the wins. While we are a long way off from BTC being as good as cash, there are some heavy hitters on this list that are bound to put the scent of FOMO in the air, jump-starting a mad scramble for competitors to join the crypto revolution.

Until that glorious day, your best bet is a Bitcoin debit card, which you can use just about anywhere that accepts regular old Visa. Try SpectroCoin, Uquid or Cryptopay, and you’ll be swiping and spending your satoshis like nobody’s business.

What is a smart contract in the Ethereum blockchain?

What is a smart contract in the Ethereum blockchain?

smart contract is a computer protocol intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract. Smart contracts allow the performance of credible transactions without third parties. These transactions are trackable and irreversible.

Proponents of smart contracts claim that many kinds of contractual clauses may be made partially or fully self-executing, self-enforcing, or both. The aim of smart contracts is to provide security that is superior to traditional contract law and to reduce other transaction costs associated with contracting. Various cryptocurrencies have implemented types of smart contracts.

Smart contracts were first proposed by Nick Szabo, who coined the term.

With the present implementations, based on blockchains, “smart contract” is mostly used more specifically in the sense of general purpose computation that takes place on a blockchain or distributed ledger.

In this interpretation, used for example by the Ethereum Foundation or IBM, a smart contract is not necessarily related to the classical concept of a contract, but can be any kind of computer program.

In 2018, a US Senate report said: “While smart contracts might sound new, the concept is rooted in basic contract law. Usually, the judicial system adjudicates contractual disputes and enforces terms, but it is also common to have another arbitration method, especially for international transactions. With smart contracts, a program enforces the contract built into the code.”


Byzantine fault tolerant algorithms allowed digital security through decentralization to form smart contracts. Additionally, the programming languages with various degrees of  Turing-completeness as a built-in feature of some blockchains make the creation of custom sophisticated logic possible.

Notable examples of implementation of smart contracts are:

  • Bitcoin also provides a Turing-incomplete Script language that allows the creation of custom smart contracts on top of Bitcoin like multisignature accounts, payment channels, escrows, time locks, atomic cross-chain trading, oracles, or multi-party lottery with no operator.
  • Ethereum implements a nearly Turing-complete language on its blockchain, a prominent smart contract framework.
  • RootStock (RSK) is a smart contract platform that is connected to the Bitcoin blockchain through sidechain technology. RSK is compatible with smart contracts created for Ethereum.
  • Ripple (Codius), smart contract development halted in 2015

Replicated titles and contract execution

Szabo proposes that smart contract infrastructure can be implemented by replicated asset registries and contract execution using cryptographic hash chains and Byzantine fault tolerant replication.  Askemos implemented this approach in 2002 using Scheme (later adding SQLite) as contract script language.

One proposal for using bitcoin for replicated asset registration and contract execution is called “colored coins”. Replicated titles for potentially arbitrary forms of property, along with replicated contract execution, are implemented in different projects.

As of 2015, UBS was experimenting with “smart bonds” that use the bitcoin blockchain in which payment streams could hypothetically be fully automated, creating a self-paying instrument.

smart contract

Security issues

A smart contract is “a computerized transaction protocol that executes the terms of a contract”. A blockchain-based smart contract is visible to all users of said blockchain. However, this leads to a situation where bugs, including security holes, are visible to all yet may not be quickly fixed.

Such an attack, difficult to fix quickly, was successfully executed on The DAO in June 2016, draining US$50 million in Ether while developers attempted to come to a solution that would gain consensus. The DAO program had a time delay in place before the hacker could remove the funds; a hard fork of the Ethereum software was done to claw back the funds from the attacker before the time limit expired.

Issues in Ethereum smart contracts, in particular, include ambiguities and easy-but-insecure constructs in its contract language Solidity, compiler bugs, Ethereum Virtual Machine bugs, attacks on the blockchain network, the immutability of bugs and that there is no central source documenting known vulnerabilities, attacks and problematic constructs.

What’s the Difference Between Bitcoin and Ethereum?

What’s the Difference Between Bitcoin and Ethereum?

The blockchain technology has been in involved in the most important news worldwide for the last 2 years. Even if some people haven’t heard of digital currencies or cryptocurrency yet, they sure have heard of Bitcoin. Not so many of them have heard about Etherium. “What is Ethereum?” you ask? Ethereum is another cryptocurrency and a platform, similar to Bitcoin, but still very different. In this article will explore the difference between Bitcoin and Ethereum.

With massive trading volumes and market capitalizations for some of the larger crypto-currencies rivalling that of some of the worlds largest corporations, the Ethereum vs Bitcoin is like the competition between Messi and Ronaldo or Federer vs Nadal. They are each special., but different. We will try to make some light in these very disputed topics, trying to showcase what makes Ethereum different and what are the differences between cryptocurrencies.

What is the difference between Bitcoin and Ethereum?

To discover the difference between bitcoin and Ethereum, we first need to explain and understand how and why each was created. How does Bitcoin work? How does Ethereum work? What is the value of Bitcoin and what is the value of Ethereum? The fight for cryptocurrency supremacy is disputed and we will once it for all try to put everything into a simple and understandable language so that even cryptocurrency newbies can fully understand what is the difference between Bitcoin and Ethereum.

Let’s start by explaining what is Bitcoin.

Bitcoin. What is Bitcoin?

The easiest way to define Bitcoin is to call it a “digital dollar.”

That’s really all it is — minus all the formal regulations that come with a bank (which is what makes it such a disruptive concept). It’s not a technology. It’s not a company. It’s your money, held in a digital form.

Read more on What is Bitcoin and how does Bitcoin work?

bitcoin vs ethereum


How can you use Bitcoin? Why do people buy Bitcoin?

Some people buy Bitcoin because they want to store their money somewhere other than a bank. That’s all good, but take care of where you store your Bitcoin and other cryptocurrencies and digital assets. This can be a sensitive topic and the security of the crypto world needs to be talked about. Here are some newbie cryptocurrency mistakes to avoid. Spoiler: Don’t store your cryptocurrency, Bitcoin, Ethereum, digital assets, digital tokens, crypto collectables on a cryptocurrency exchange, except for when you are trading, selling or exchanging it. Store crypto in a wallet! Also, a good idea is to research some cryptocurrency exchanges and get started from there.

Some buy Bitcoin as an investment, hoping that the price will jump (once more) within a short period of time or in some years time. Here is where you can see people for what they are. They all call themselves crypto investors, but they really divide into two categories: long-term cryptocurrency investors and day-traders (just like the ones on the stock market). Of course, both ways are and have methods to increase your funds, but it requires a lot of research. Unless this isn’t your job, making money out of cryptocurrency is either a stroke of complete luck or not happening.

Others purchase Bitcoin as a means of investing in companies that raise money through an ICO since equity in those companies cannot be purchased with traditional currency. You can only purchase tokens with Bitcoin or Ether, which is Ethereum’s cryptocurrency.

The ones participating in ICOs are the true crypto enthusiasts or some who want a fast penny. But the year of fast-growing cryptocurrencies was 2017, and it is not coming back. AS time passes, the only true cryptocurrency projects remain and advance in their development. The others are thrown away into the pit of oblivion.


Ethereum is another cryptocurrency, and many people see it as a potential threat to Bitcoin as the dominant coin in the market.

What makes Ethereum different from Bitcoin is its technology, not the fact that it’s yet another cryptocurrency. Ethereum’s coin value is referred to as “Ether,”. Ether, just like Bitcoin, it can be is bought and sold on cryptocurrency exchanges, and used by investors to buy into ICO opportunities. So this is how Ethereum is similar to Bitcoin.

bitcoin vs ethereum


Read more on What is Ethereum?

But what is the difference between Ethereum and Bitcoin?

The difference between Ethereum and Bitcoin is the fact that Bitcoin is nothing more than a currency, whereas Ethereum is a ledger technology (a platform) that companies are using to build new programs.

Both Bitcoin and Ethereum operate on what is called blockchain technology, however, the Ethereum blockchain is far more robust. If Bitcoin was version 1.0, Ethereum is 2.0, allowing for the building of decentralized applications to be built on top of it.

In a nutshell: The Ethereum blockchain is great for innovation.

Furthermore, there is heavy support behind Ethereum’s technology in what is called The Enterprise Ethereum Alliance.

bitcoin vs ethereum

This is a super-group of Fortune 500 companies that have all agreed to work together to learn and build upon Ethereum’s blockchain technology — otherwise referred to as “smart contract” technology. In this case, “smart contracts” mean that demanding business applications can automate extremely complex applications.

What has so many people excited about Ethereum’s technology is its potential to impact projects and processes across all industries. It’s by no means a perfect technology yet, but it has opened the door for a wide variety of unique innovations.

Here is where the value of Ethereum is visible. Having all the functionalities of an improved blockchain compared to the Bitcoin blockchain, Ethereum has and it’s setting the pace for future blockchain opportunities, and it does so by offering this technology innovation to anyone willing to work with it. Ethereum is an open-source blockchain and gives its users to create their own open-source applications, also known as Dapps.

What is a Cryptocurrency Exchange?

What is a Cryptocurrency Exchange?

What does Cryptocurrency Exchange mean?

A cryptocurrency exchange is any system that operates on the basis of trading cryptocurrencies with other assets. Like a traditional financial exchange, the cryptocurrency exchange’s core operation is to allow for the buying and selling of these digital assets, as well as others.

A cryptocurrency exchange is also known as a digital currency exchange (DCE).

Think about the ways that these new types of exchanges are different from traditional financial exchanges. Cryptocurrencies are inherently unstable in terms of value and sourcing. Cryptocurrencies like bitcoin have been associated with major disruptive events where bitcoin value changed dramatically over a short period of time, or where major exchanges went under due to theft, fraud or other problems.

Cryptocurrency exchanges have to build in protections from some of these events. However, these exchanges do serve as a key vehicle for liquid use of cryptocurrency assets.

Read more on What is cryptocurrency and why do we need it?

In other ways, cryptocurrency exchanges work just like traditional exchanges. On many of these platforms, cryptocurrency buyers and sellers can make limit orders or market orders, and the brokering process works like it would for any other kind of asset. The cryptocurrency exchange helps with the transaction and collects the fees. The difference is the underlying asset – Bitcoin or Ethereum or some other cryptocurrency that does not have the same valuation properties as a national currency.

There are several types of cryptocurrency exchanges:

“Traditional” Cryptocurrency Exchanges

These are the exchanges that are like the traditional stock exchanges where buyers and sellers trade based on the current market price of cryptocurrencies (with the exchange playing the middle-man). These type of trading platforms generally charge a fee for each transaction.

Some of these types of exchanges deal only in cryptocurrency, others allow users to trade fiat currencies like the U.S. dollar for cryptocurrencies like Bitcoin.

Coinbase’s GDAX (AKA Coinbase Pro) is an example of this type of exchange, as is Kraken. There are those run by third parties (they have a middle man who supports and correct some problems) and Decentralized Exchanges or DEXs that mimic traditional exchanges like IDEX (trading is based on smart contracts and not facilitated via a centralized third party’s software for the most part).

Generally, centralized exchanges will require a lot of info, but often allow fiat trading, and DEX exchanges won’t allow fiat trading, but require less information.

cryptocurrency exchange

Cryptocurrency Brokers

These are website-based exchanges that are like the currency exchange at an airport. They allow customers to buy and sell cryptocurrencies at a price set by the broker (generally at the market price plus a small premium).

Here the exchange is between the buyer or seller and the broker, not between a buyer and seller. Coinbase is an example of this type of exchange. Shapeshift provides a similar service as well (it lets you swap on a type of token for another).

This is the simplest solution for new users. You’ll generally pay slightly higher prices than you do on the exchanges due to the ease of use and the work the broker puts in.

Direct Trading Platforms

These platforms offer direct peer-to-peer trading between buyers and sellers. Direct trading platforms of this type don’t use a fixed market price.

Sellers set their own exchange rate and buyers either find sellers via the platform and preform an Over the Counter (OTC) Exchange, or they denote the rates they are willing to buy for and the platform matches buyers and sellers.

Many Decentralized Exchanges are of this type (although some are closer to being like traditional exchanges, which is why they are listed in the first category).

This type of exchange can be the only solution in some regions. In regions where trading is limited to direct exchange, but where trading isn’t smart contract based (like it is with DEX exchanges), make sure to do some extra research and ensure you are using a trusted platform and dealing with highly rated users.

Also, make sure to check market prices on Coinmarketcap, as you aren’t buying/selling at a fixed market price!

For an example of a decentralized peer-to-peer direct trading platform, see (here the DEX facilitates direct swaps between users via smart contracts, and thus may require no information). For an example of a centralized peer-to-peer exchange that facilitates the exchange of fiat and crypto, see

Cryptocurrency Funds

Funds are pools of professionally managed cryptocurrency assets which allows public buy and hold cryptocurrency via the fund. One such fund is GBTC.

Using a fund you can invest in cryptocurrency without having to purchase or store it directly. As a trade-off, you can’t use crypto in a fund as money, these are strictly for investment.

In almost every case a person new to crypto trading will want to use an exchange or broker. Newcomers will generally only want to use a direct trading platform when their options are limited (either limited by regulation or limited by coin choice). Meanwhile, while funds might be ideal to some, they tend to have a range of restrictions. GBTC and ETCG are the only funds open to the public for example.