What Are Digital Tokens?

[vc_empty_space height=”20px”]What is a digital token? What is it used for? When we get into this topic, more questions arise than we have time to find answers for. Because digital tokens are fairly new, there is much to take in. 

Digital tokens are an online form of currency. Quite different from physical money—or even digital dollars, like those attributed to a bank account—digital tokens come with their own nuances. 

They can be traded and spent online, and there are many forms of said tokens. Each version may have its own value, the process of spending (or earning), and more.

Take a look at these nuances and the types of digital tokens to understand more. 

The Basics of Digital Tokens

Let’s discuss how many names there are for digital tokens. While they all mean the same thing, digital tokens are referred to with many terms, like crypto, cyber currency, digital currency, or just coin or token. 

There are many names, but they all refer to digital tokens. Essentially, they are a digital representation of a certain value. However, that value doesn’t always have to be financial. Bear with us; we’re going places with this one.

This is where it gets confusing. Older generations are used to money that means money. But with digital tokens, money isn’t always the case. It can be, of course, but that’s not the rule.

Digital tokens can also be rights toward development or a platform. In this case, as the value as a whole goes up, so does your portion, kind of like stock. 

In most cases, digital tokens also provide access or instruction on how to access said assets or shares. This is because each kind of digital token has its rules and guidelines. 

How To Spend Digital Tokens

Each type of digital token has its own rules for how they are to be used. If digital coins are accepted as currency, you can usually “cash in” or pay just as you would with regular money. Instead of entering card information, you enter your cyber currency info.

If your digital tokens aren’t monetary but rather those that are similar to a stock, you can still transfer these for value. That is because, on some level, they are still money. They represent the value of something else—perhaps a brand or company and how much it’s worth. 

For example, Bitcoin, one of the most recognized forms of cyber currency, shot up tremendously in value. In the first quarter of 2021, Bitcoin shot up from roughly $15,000 in value to more than $60,000 per Bitcoin. Since then, it plummeted to under $30,000 each, before increasing to more than $67,000 a pop by early November. 

By 2025, Bitcoin is slated to be worth more than $250,000 each and a massive $5 million each by 2030. Of course, only time will tell if this will be true, but the news speaks for itself. Bitcoin appears to have value; therefore, it has value. It’s attractive as a digital token, causing users to obtain it at higher and higher amounts. 

This increase caused people to both buy and sell. Those who had earned money wanted to cash in on their new funds, while the growth was attractive to new buyers. The same is true for all digital tokens. As the value changes, so do the goals of those who own them. 

How To “Spend” Digital Tokens

You may be wondering this: if digital tokens are all digital, how do you “spend” them? With a physical coin, you spend it in person. Say you go into the gas station and purchase a piece of candy for a quarter. You hand the cashier your quarter in exchange for your goods. You spent the coin.

Even when using a credit or check card, you could get the cash. By going to the bank or an ATM, you could obtain the cash and physically hold it in your hands. Even if it’s not there, it could be.

With digital tokens, you never receive anything in your hand to hold. Instead, an ongoing ledger states who owns what, who owns how much of each token, and how much the value is worth.

This ledger contains your online wallet information. There’s no name attached to it, but rather, an online stopping point. Consider it like a bank account that tells others where your digital token belongs. 

Where Does Digital Tokens Come From?

Despite the recent popularity leading most to believe that digital currency is a very new operation, it’s actually been around for decades. Back in 1983, the first idea for digital currency was published, leading to the creation of DigiCash. It was founded in Amsterdam in 1989. 

This first popularized the idea that currency could be digitized and soon prompted big businesses to work on logistics to make this possible. While it wouldn’t catch on for decades, these early discoveries helped make way for digital tokens as we know them today. 

The Value of Digital Tokens

In the same way that the value of money is constantly changing, so is the value of digital tokens. By pairing the value against other currencies, you can look at how digital tokens are growing (or shrinking) in comparison. This is a great way to track your investment or to research if you’re considering purchasing digital currency in the future. 

The point is, the value is always changing. Money doesn’t stand still; it is constantly changing. Take a look at the market to see how it adjusts in the future. This value will allow you to make sound purchases, see how your money fares in the future, and more. 

Who Needs Digital Tokens?

At this point in history, there is no direct need for digital coins. While you could argue that money is needed to survive, the same is not true for digital money. Therefore, there is no need to obtain these types of funds. You can absolutely be a contributing member of society without personally owning digital tokens.

However, if it interests you or you see it as a budding business opportunity, it is likely worth pursuing. Whether for your financial portfolio or personal interests. And in many cases, people have found both success and entertainment through the use of digital tokens. 

If nothing else, you can follow its progress and any news stories online. See where the market goes as a way to stay up on up-and-coming topics in the world, including finance.

A Token of Appreciation/Depreciation

Digital tokens are a symbol of value that exists only online. Rather than having physical tokens in your reach, online ledgers track who owns how much value in each type of currency. Because there are many types of coins, you should note which brand you’re dealing with and its subsequent value. This is one more way to stay up on your finances and hobbies or to take note of new markets in which you can get involved. 

Next, pay attention to the values of each digital coin. Some are meant to be used as funds directly, while others provide value on a product or platform. In either case, the tokens can be traded, bought, and sold. 

The options for using digital tokens are essentially endless. Follow what interests you most and move forward in a way that allows you to feel comfortable. Whether that’s learning more about digital tokens, using them to help you earn funds or trade, or just learning about their existence, there are plenty of options ahead. 

To learn more about digital tokens and how you can best use them toward your particular goals, check out our previous articles. Do you have personal experience with digital tokens, whether buying, selling, trading, or just following how digital trends have changed over the years?

Tell us below. Sign up for our newsletter to stay in the loop. 

Sources:

Crypto Price Prediction: Bitcoin Forecast To Hit $5 Million As Price Soars Through 2021 | Forbes

What Is Cryptocurrency? | Forbes Advisor 

What are NFTs and why are some worth millions? | BBC