If you are dealing in cryptocurrencies then you might have heard the word token. But do you know the true meaning of word tokens and how they are mistaken with coins?
Here is a complete guide to giving you a full understanding of the tokens in the Cryptosphere.
What does a token refer to?
A token is a type of cryptocurrency which is issued on top of another blockchain. It does not have a currency use case. The utility of an asset is represented by tokens.
A token is the secondary asset on any blockchain which has an independent market value. Tokens cannot exist independently while coins can exist independently like Ethereum. Tokens such as GNT and CIVIC cannot exist without the Ethereum infrastructure.
Benefits of Using Crypto Tokens
The ownership and the transfers of the tokens in the blockchain platform is transparent and verifiable. These tokens cannot be counterfeited which gives them real value.
- Usability and speed of exchange
The tokens in the crypto world are exchangeable for other forms of value. The speed of transactions is very fast with the help of crypto tokens and the cost is much less as compared to traditional methods.
Drawbacks of the Crypto Tokens
No technology comes without drawbacks. As there are many advantages of using crypto tokens, there are some drawbacks too.
- No government Control
Although it is considered the biggest benefit if cryptocurrency that it has no government control over it, but it is also the biggest drawback for the tokens. Lack of government control enhances the chances of frauds and scams in this crypto world which can cause people to lose millions.
The legal status or the location of the company or an ICO is unknown and since so many things are available on the internet, people make use of this drawback to their advantage to cause frauds.
- Attractive to Scammers
ICOs are based on promises that a fruitful product will be launched and at the ICO stage it is only a mere idea and not a full-fledged product. It allows fraudsters to make easy money and then disappear without a trace.
Thus, cryptocurrencies are like free money to scammers and the irreversible feature of the cryptocurrencies make it more beneficial for the bad elements to make money.