Token Fundamentals & Blockchain Basics

# What is a Token? Understanding Digital Assets ## Introduction Tokens are digital assets that represent value, utility, or ownership rights on a blockchain network. Unlike traditional currencies, tokens exist entirely in digital form and are secured by cryptographic principles. ## Key Concepts ### 1. Token vs Coin - **Coins** (like Bitcoin, Ethereum) have their own blockchain - **Tokens** are built on existing blockchains (like ERC-20 tokens on Ethereum) - Tokens can represent various things: currency, utility, ownership, access rights ### 2. Types of Tokens #### Utility Tokens - Provide access to products or services - Examples: Binance Coin (BNB), Chainlink (LINK) - Used within specific ecosystems #### Security Tokens - Represent ownership in real-world assets - Subject to securities regulations - Examples: tokenized stocks, real estate #### Governance Tokens - Give holders voting rights in protocol decisions - Examples: Uniswap (UNI), Compound (COMP) - Enable decentralized governance #### Non-Fungible Tokens (NFTs) - Unique, indivisible tokens - Represent ownership of digital or physical items - Examples: Art, collectibles, gaming items ### 3. Token Standards #### ERC-20 (Ethereum) - Most common token standard - Fungible tokens with standard functions - Easy to integrate with wallets and exchanges #### ERC-721 (NFTs) - Non-fungible token standard - Each token is unique - Used for collectibles and digital art #### BEP-20 (Binance Smart Chain) - Similar to ERC-20 but on BSC - Lower transaction fees - Compatible with Ethereum tools ## Real-World Applications ### 1. DeFi (Decentralized Finance) - Lending and borrowing protocols - Decentralized exchanges - Yield farming and liquidity mining ### 2. Gaming - In-game currencies - Character and item ownership - Play-to-earn mechanics ### 3. Supply Chain - Product tracking and verification - Authenticity certificates - Logistics optimization ## Key Takeaways - Tokens are versatile digital assets with many use cases - Different token types serve different purposes - Token standards ensure compatibility and interoperability - Understanding tokens is crucial for navigating the crypto space ## Next Steps In the next lesson, we'll explore blockchain technology and how tokens operate within these networks.