Token is a term often used in the Blockchain environment. A topic that is talked about a lot, everywhere, on the web in particular, but that still generates a lot of confusion.
We can define tokens as digital information recorded on a distributed ledger and representative of some form of right: ownership of an asset, access to a service, receipt of a payment, and so on.
The Blockchain, on the other hand, serves first and foremost because it allows token exchanges to take place securely and without intermediaries. Since it is also programmable, it allows smart contracts to be used to create new tokens. The Blockchain is a set of advanced technologies, where the ledger is structured as a blockchain containing transactions and consensus is distributed across all nodes in the network. All nodes can participate in the validation process of transactions to be included in the ledger.
From the definition of Blockchain we can start to explore the most interesting aspects related to this technology. The Blockchain digital revolution, born from the Bitcoin and cryptocurrency world, is in fact just beginning. The applications are many, the potential really incredibly huge, mostly still to be explored and not only in the financial field.
Blockchain technology is part of a complex and evolving Universe that can be defined as the "Internet of Value", which means those systems that make it possible to exchange value on the Internet with the same simplicity with which information is exchanged today.
The Internet of Value is defined as a digital network of nodes that transfer value through a system of algorithms and cryptographic rules that allow consensus to be reached, even in the absence of trust, on changes to be made to a distributed ledger that keeps track of unique digital asset transfers.
In conclusion, creating a token on the Blockchain means defining in a smart contract all its fundamental characteristics. Such as: the number of tokens in circulation, who is authorized to transfer them, those who can dispose of the tokens (the so-called "token holders"), the rules of access to the tokens.
Each token, ideally, can be constructed differently, although in reality some common standards have been adopted to simplify their creation (for example ERC20 and ERC721). Once tokens are created, they can be sent easily and without the need for anyone to keep track of different balances and transactions. Blockchain takes care of that, providing transparency and traceability: thanks to the technology's own features, anyone can see the code and verify that the tokens were created correctly. Moreover, some tools called wallets make it easy to manage and exchange them.
There are even tokens that are used just like a currency. For example, their value can be pegged to that of traditional currencies. These tokens are called stable coins, and they offer the same versatility and programmability as cryptocurrencies, but with the guarantees and stability of traditional currencies.
However, the purpose of tokens is not only to create digital currencies. We can divide the applications of tokens on Blockchain into two large families: fungible tokens on the one hand, related precisely to the idea of cryptocurrencies, and non-fungible tokens, on the other hand, related to objects and entities.
Fungible tokens are those that can be replaced with something identical. This is the case with banknotes (it does not count returning the same banknote, but a banknote of the same value). To this category belong tokens that can be used as cryptocurrencies and in general all those that have characteristics similar to those of a digital currency.
The non-fungible tokens instead can be used to represent particular and unique objects, both of the physical and digital world, while the fungible are basically digital currencies. With exceptions. Many times, even a fungible token could be used to represent assets or parts of them (this is the case of stocks, works of art, real estate).
Going beyond the division between what is fungible and what is not, this description makes us understand how the link between Token and Blockchain is increasingly able to offer applications and opportunities.
Theoretically anything can operate through a token, so much so that in the not too distant future we hope and expect a real revolution comparable to what was the advent of the internet in our society. In fact, blockchain promises to revolutionize not only all aspects directly related to finance, but also public and civil services. It is likely that we will soon live in an economy entirely subject to tokens, where every form of value storage and public record will be represented by a token.
At the moment, several sectors are experimenting with token conversion, which has already been implemented not only in real estate (with luxury condos enabled tokens on Ethereum) but also in sectors such as artwork and sports. The strength of the asset token concept lies in the fact that it is possible to make liquid assets that would otherwise be indivisible, and to manage assets encumbered by excessive bureaucracy through the concrete implementation of the concept of "democratization" of shareholding. Not only that, it is possible to digitize anything, exploiting the flexibility and security of the token to implement a whole series of commercial initiatives that were previously unthinkable. In the real estate sector, for example, the purchase of a small fraction of a property allows even small investors to enter a market usually precluded to them, without recourse to mortgages and intermediation of credit institutions. For builders, the advantage of this type of financing is that it offers more flexibility and capital inflow in the short term. A great revolution.
Same concept for the use of a token for some works of art, where, participants in special auctions received digital shares of the work. Even in the world of sports, some companies have decided to manage business decisions through decentralized platforms that allow shares and rights to be sold to fans around the world quickly and securely, giving fans the advantage of access to exclusive content and services.