Ethereum builds on blockchain and cryptocurrency concepts, so if you are not familiar with these, it’s worth reading a gentle introduction to bitcoin and a gentle introduction to blockchain technology first. This article assumes the reader has a basic familiarity with how Bitcoin works.
This post tries to describe two very different uses for blockchain technology: Digital Token Ledgers that record ownership changes of digital tokens, and Activity Registers that record timestamped proofs of existence of data or agreements about data. Bitcoin is used for both.
Digital tokens have come to the fore recently, firstly with excitement about cryptocurrencies such as bitcoin, then with digital tokens being used to represent different assets on a blockchain. What are they? How can you digitise a token? Why is it important?
When I hear the word ‘token’ I think of round plastic things like a casino chip, or something which I can use to exchange for a beer under a specific system or in a specific marketplace.
My idea of tokens.
We will explore the original usage of the phrase ‘digital token’, then take a look into the world of cryptocurrency tokens, differentiating between blockchain-native tokens like BTC on Bitcoin or ETH on Ethereum, and asset-backed tokens like IOUs on Ripple.