As a sector with a market cap exceeding one trillion dollars, cryptos have been exciting the world with amazing use cases and boundless potential. More and more businesses are looking to embrace this revolutionary digital culture by adopting cryptos in many ways. For such adventurous business owners, the services of a crypto token development company have been immensely helpful in facilitating their transition into the fully digital arena. This blog discusses in detail everything relevant to crypto tokens and the role of professional companies in assisting ventures to glory in the competitive market. Before going further, here’s a quote on how cryptos are perceived today.
There are 3 eras of currency: Commodity based, politically based, and now, math-based. — Chris Dixon, Co-founder and Former CEO of Hunch.
Crypto Tokens: What are They?
If you have stayed long enough in the crypto space, you might have heard the words crypto coin and crypto token. While most people use these terms interchangeably, doing so is factually incorrect.
In fact, crypto coins are native tokens of blockchain networks, such as Ethereum, that are primarily used to pay for transactions and incentivize validators. They can even be used for payments in applications built on the particular blockchain, hence making them functional tokens.
Crypto tokens, on the other hand, are cryptocurrencies built upon existing blockchain networks. Technically speaking, we can say these crypto tokens are smart contracts loaded with some utility and follow certain rules known as token standards.
According to CoinMarketCap, over 1.8 million different cryptocurrencies (including coins and tokens) are in existence in the current market. Note that only a few out of these million-plus cryptocurrencies actually have utilities and are popular among people.
Types of Crypto Tokens
Payment Tokens
Payment tokens are used to pay for purchases and services inside a blockchain application, such as an NFT marketplace or a play-to-earn (P2E) game. Popular payment-based crypto tokens include Chainlink ($LINK), Filecoin ($FIL), The Sandbox ($SAND), and Decentraland ($MANA). These tokens are loosely equivalent to loyalty reward points we earn for shopping at supermarkets and brand outlets.
Utility Tokens
Utility tokens are smart contracts backed with use cases inside a particular application. Some uses include voting for decisions, gaining access to premium services, and pledging to get loans. Famous utility crypto tokens include Uniswap ($UNI), Maker ($MKR), and Aave ($AAVE). These tokens are a prominent class of crypto tokens nowadays due to their extensive potential and flexibility.
Security Tokens
Unlike what you might think, security tokens do not improve the security of your experience in blockchain applications. Rather, they are used as financial instruments backed by blockchain technology. These are mainly used for staking, a process that incentivizes users to lock their tokens into the network to enhance their liquidity. These tokens can even represent other financial instruments, such as stocks, bonds, and real-world assets.
Non-fungible Tokens (NFTs)
Non-fungible token (NFT) is a different type of crypto token that represents ownership of digital and physical assets. These tokens came into the limelight in late 2021 when multiple digital artworks exploded in value as they sold for millions of dollars. Now, they represent a diverse range of assets, including artworks, music albums, in-game assets, real estate, and metaverse avatars.
Prevailing Crypto Token Standards
Different blockchains have different token standards, and most derive their standards from Ethereum. The reason? Ethereum was the first network to implement smart contracts that allowed people to create crypto tokens within a layer-1 network. Here, we will see the popular Ethereum-native token standards in prevalence currently.
ERC-20
ERC-20 is the most famous crypto token standard out there – it is, in fact, the first-ever fungible token standard to arise in the mid-2010s when Ethereum launched smart contract functionality. These tokens are fungible in nature, meaning they can be exchanged for one another like crypto coins and fiat currencies.
ERC-721
ERC-721 is one of the first breakthroughs in the crypto space, as it enabled the existence of non-fungible tokens (NFTs). These smart contract-based tokens let people create and manage assets based on various real-world and digital items. They are designed in such a way that one cannot exchange them with a similar token, unlike fungible crypto tokens.
ERC-1155
ERC-1155 is another popular token standard that is useful for the gaming industry. It allows people to create multiple tokens with the same traits within one smart contract, reducing gas costs as a result. For example, if you want to create 10,000 NFT versions of an avatar skin, it is enough to enter the traits to be used in a smart contract to facilitate the process.
How Can a Crypto Token Development Company Help in Creating Tokens?
If you are aspiring to create crypto tokens, you might have a lot of concerns to address and a lot more questions that need to be answered. While performing the token creation process yourself can give you valuable insights in the long run, learning lessons as an early-stage business is not smooth. To combat such challenges, you can opt for the services of a crypto token development company. Here are some points that let you know how these companies aid you:
- A company working on crypto token development has experienced professionals who can help throughout the process to make your token project a success.
- Such companies have access to the latest technological stacks, allowing you to stretch your vision and explore uncharted territories with potential in the blockchain business space.
- A crypto token creation company also has insights on both historical and latest market trends and statistics that can contribute to creating your token to face market movements.
- Lastly, utilizing such a company’s services can significantly reduce the costs of setting up your business as opposed to hiring and training an entire team of developers, designers, and other professionals.
Conclusion
Therefore, we have seen the fundamentals of crypto tokens and the role of a crypto token development company in facilitating a crypto venture to kickoff. While utilizing crypto tokens as a full-fledged business option may not sound feasible, doing so might be a start for more things to come. For example, you can use crypto tokens to build a huge community and offer them great products and services where your tokens will come into play. If you want to develop these tokens with professional aid, opt for our world-class team of experts who excel in creating tokens on numerous blockchains. Fill out the form below to contact one of our professionals to discuss your project idea!
