A coupon can entitle you to a free drink. A casino chip could be worth one hundred dollars. A digital token works in the same way. It represents a specific amount of digital resources you can own, assign to another, or redeem later.

Digital tokens are either intrinsic or created by software and assigned a certain utility. Examples of intrinsic digital tokens are bitcoin and ether. The other type of digital token is asset-backed, which is issued to represent a claim on a redeemable asset such as legal tender or precious metals.

People also searched for…

Read More about “Digital Token”

You may have encountered several people or businesses who offer to pay or accept payments in the form of digital tokens. Digital tokens also go by the name “cryptocurrencies” as they are a type of crypto asset. They function as a medium of exchange, albeit on limited platforms, since not all online businesses accept cryptocurrencies.

What Can You Buy Using Digital Tokens?

Although cryptocurrency has become the rage as of late, it still can’t be used to buy everything. So what, exactly, can you buy using a digital token? Here are some examples:

  • Domain names: Domain name registrars such as Namecheap accept cryptocurrency payments, specifically Bitcoins.
  • University tuition: A private school in Cyprus was the first university to accept payments in Bitcoin.
  • Hotel accommodation: Expedia, one of the largest travel booking sites, allows its users to pay for their hotel accommodation using digital currency.
  • Electronic gadgets: Some e-commerce stores that specialize in selling electronic devices now accept Bitcoin payments. Newegg is an example.
  • Jewelry: You may now buy watches, earrings, jewels using digital tokens. Reeds Jewelers is among the merchants that accept such payment method.
  • Donations: You can also donate to nonprofit organizations such as Wikimedia, the foundation behind Wikipedia, and Save the Children in the form of cryptocurrency.

These are just some of the items that you can pay for using digital currencies. However, you can buy almost anything using Bitcoins or any cryptocurrency since some retail stores such as Overstock accept this method of payment. Shopify has also given its merchants a choice to accept digital currencies.

3 Types of Digital Tokens

Notice that in our list above mentions Bitcoins repeatedly. Bitcoin is only one among thousands of cryptocurrencies in the market. This fact could be overwhelming for anyone, even those who are well-versed in the industry. Digital tokens though, can be categorized into three major types:

  • Currency tokens: Bitcoin is a type of currency token meant to pay for goods and services. Bitcoin was, in fact, created to replace fiat money.
  • Utility tokens: Utility tokens are more than a means of payment. Specifically, they give users the power to trade cryptocurrencies at lower fees since utility tokens provide them access to the developers’ platforms. An example of a utility token is Ethereum, although it can also fall under the currency token category. Ethereum, an example of a utility token, was intended for use on a single platform.
  • Asset or investment tokens: By the name itself, these tokens refer to assets that can give investors a positive return on their investment. An example is The DAO, which is a blockchain company backed by a smart contract.