A token is a digital asset created on top of an existing blockchain by a smart contract. Unlike a coin such as ETH or SOL, which is the native currency of its own blockchain, a token runs on a network that already exists. Tokens can represent almost anything: money, voting rights, access, loyalty points, a share in an asset, or a unique item.
Types of tokens
- Fungible tokens: every unit is identical and interchangeable, like euros. On Ethereum and EVM chains they follow the ERC-20 standard; on Solana they are SPL tokens.
- Non-fungible tokens (NFTs): every token is unique, following ERC-721. ERC-1155 combines both kinds in one contract.
- Stablecoins: tokens whose value is pegged to a currency such as the euro or dollar, such as USDC or EURC.
- Utility and governance tokens: give access to a service or voting rights in a protocol or DAO.
- Tokenised assets: represent ownership of something outside the blockchain, such as bonds, real estate or funds.
How does a token work?
A token contract keeps track of which address holds how many tokens and offers standard functions, such as transfer to send tokens and approve to let another contract, for example a DEX, spend tokens on your behalf. Because all tokens of a standard share the same interface, wallets, exchanges and apps support new tokens automatically. The rules for supply, minting, burning, fees and vesting are set in the contract and in the project's tokenomics.
Launching a token: what to consider
Creating a token is technically simple; doing it well is not. Important choices are the blockchain, total supply and distribution, whether new tokens can be minted and by whom, upgradeability, admin keys and their security, and listing and liquidity. The contract must be tested and preferably audited. In the EU, offering tokens to the public can fall under the MiCA regulation, with requirements such as a crypto-asset white paper, so get legal advice before launching. See our custom token contract development, Solana token tooling and our case study secondary token launch with tokenomics redesign.
Frequently Asked Questions about Tokens
What is the difference between a coin and a token?
A coin is the native currency of its own blockchain and is used to pay transaction fees, such as ETH on Ethereum. A token is created by a smart contract on an existing blockchain.
Can anyone create a token?
Technically yes, often in minutes. That is also why many worthless or fraudulent tokens exist: check who controls the contract and whether the code is verified and audited.
Where are my tokens stored?
On the blockchain, in the token contract's records. Your wallet holds the key to the address that owns them.
What is token burning?
Permanently removing tokens from circulation, usually by sending them to an address nobody controls or via a burn function in the contract. It reduces the total supply.