TechnologyThe token rage: the new reality or just a...

The token rage: the new reality or just a fad?

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The term Token has become relevant in recent times. It is perhaps one of the concepts that is most related to all the literature of cryptocurrencies. Gurus, companies, artists, among many others, are already beginning to give us brushstrokes of this digital world and its new endings. So much information makes it necessary to have an agenda at hand to understand and be able to enter the world that is coming.  

Before launching ourselves fully into this new technology, let’s understand what we are talking about when we talk about tokens. Tokens are objects similar to coins but they lack legal tender value. William Mougayar, author of the book ‘The business blockchain’, the new term for the digital economy, completes with the following definition: “a unit of value that a organization creates to govern its business model and give more power to its users to interact with its products, while facilitating the distribution and sharing of benefits among all its shareholders”.

The Tokens would be like the currencies with the most utilities since they can represent any fungible and negotiable asset, but without legal tender. What does this mean? Let’s go to a practical example: casino chips. Those famous chips inside the casino have an assigned value but outside the casino we can do little with them. And this is what Tokens basically do: they represent any form of economic value or right of access. But is it a trend that every day takes more prominence or a passing fad? Next, we go into more detail. 

Types of Tokens, advantages and benefits… Let’s go? 

At this point you will ask yourself, why do Tokens exist? As we have seen, Tokens are created to represent something and although one of their functions may be a means of payment, it is not their true purpose. There are many possibilities, due to the large number of tokens that exist, each with its own particularities and functionalities.  

There are different types of tokens. There are the famous utility tokens that allow their holders to access future products or services provided by the company, something like an access coupon. Back in 2017, these became very famous due to different cryptographic projects during the well-known “Boom ICO”. The objective of the same was to finance the companies for the development of some project. In exchange for this, the companies delivered a certain amount of utility token that could be used when the company launched its project.  

On the other hand, Security Tokens are another specific type of Asset Tokens that are classified as securities under financial market regulations. However, the interpretation of what constitutes a security is subject to local law. 

As we have reviewed, tokens represent things, and in this case, the intention is to digitally represent things using blockchain technology. In this way, they allow a decentralized control of the same, in addition to greater security, cost reduction and easier handling. Equity Tokens work in a similar way to traditional shares and their value is linked to the success or not of the company that issues them.  

While the Governance Token grants the owner the right to participate in the decision making of the project. It allows you to propose new features, request changes, make corrections and vote for or against the other decisions that involve the project. 

And finally, NFTs (Non-Fungible Tokens) are those that are contributing to the development of digital art. They are collectible and unique assets with which it is possible to represent, for example, a work of art. This action is a new way of investing in art. 

Therefore, asset tokens (Asset Tokens) allow the digital representation of any physical asset or security and could introduce a variety of new cases that may not have been feasible before. In recent years, they have begun to become key elements in our daily lives: they create new forms of payments, function as financial actions, transform physical objects into digital objects, among other things. 

Today we have dived into the basic concepts of the world of tokens: what they are, what they are for and what types exist. Stay tuned because we will update this information with news and scoops of this new technology and its implications for new uses within Telefónica.  

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