What is a token?

A token is a digital item recorded on a blockchain that stands for something of value, or a right to something. It might stand for money, a share in a fund, a ticket, a vote or something else. When you own a token, the blockchain shows it in your account, often called a wallet. Only whoever holds that account’s private key, a secret code that works like a password, can move it.

There are two main kinds. Native tokens are built into a blockchain itself, like bitcoin on the Bitcoin blockchain or ether on Ethereum. Other tokens are created on top of an existing blockchain using a smart contract. That’s how most stablecoins (tokens designed to stay worth one dollar) and tokenized funds work. One blockchain can carry thousands of these tokens, while its native token still pays the fee for every transfer.

Why does this matter? Tokens can move from one account to another in seconds, at any hour, without several middlemen each updating their own records. But a token is only worth what stands behind it: a promise from whoever issued it, a real asset held somewhere, or just what other people will pay for it. So the first question to ask about any token is “What backs this, and who stands behind that promise?” How much the answer matters depends on your role, whether you hold the token, lend against it or keep it safe for someone else.