Written By
Nader
Product Manager

What is a Token?

April 19, 2021

A token can be defined as a crypto asset built on top of a blockchain. For example, Ethereum has its native currency (ETH), but there is also a wide array of tokens built on top. Tokens are the simplest way to express ownership of a digital asset.

Fungibility

Token types can be broken down into main categories, fungible and non-fungible. Fungibility means that items within a set are indistinguishable from each other. The fungibility of a token is determined by the token standard the smart contract follows.

fungibility of tokens
Fungibility of different assets

ERC-20 Tokens

Tokens that follow the ERC-20 standard are fungible by nature and are highly divisible. They are the cornerstone of DeFi and allow for smart contracts to easily keep track of balances. They can also be thought of as the most simple unit of account and have a wide range of use cases including currency, governance, debt slips, interest accruing bonds, and much more.

Non-Fungible Tokens

Non-fungible tokens (NFTs) are tokens that express ownership of a distinct or unique asset. Thinks of NFTs as one of a kind. Projects like CryptoKitties and CryptoPunks were the first to implement this type of token. They are truly non-fungible in that for every CryptoKitty token minted there is only one with that specific combination of traits. However, there are certain tokens that are semi-fungible where they express multiple copies of a unique asset.

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