Ethereum Tokens

Tokens? Tokens... Tokens!

In the context of the Ethereum blockchain, tokens can be seen as a representation of an asset. By highlighting some of their use cases, we can potentially better understand what they are:

• Tokens can represent ownership of various assets such as a house or a company share, among others.
• They can also represent your right to vote on a given platform.
• Non-Fungible Tokens (NFTs) are the most well-known use case for tokens right now, as they represent ownership of digital assets such as images, videos, songs, and more.

Where are my tokens?

Where are they? Where do my tokens actually reside? To answer this, we need to introduce a new concept: Token Contracts. Token Contracts are Ethereum smart contracts that manage the ownership of tokens. They define how many tokens a given address has, allow for the transfer of tokens, check a user's token balance, and more.

In other words, you own as many tokens as the Token Contract says your token balance is.

Interoperability

Having standards/protocols in any context allows two interacting entities to understand each other. Consider the example of speaking a language. Two people who speak the same language can communicate with each other because they both understand the language's protocol.

Similarly, Ethereum Token Contracts have standards that have been defined to create more interoperability between tokens. For example, if a voting platform supports the ERC-20 standard and your Token Contract also implements it, the platform should be able to easily integrate with your Token Contract.

You can find more information about token standards in the official documentation.

Fungibility?

There are two types of tokens: Fungible and Non-Fungible.

• Fungible tokens have the same value as any other token. For example, if a token represents your voting rights, two of the same tokens represent the same thing (a vote) and are therefore interchangeable.
• Non-Fungible tokens, on the other hand, are unique, and no two tokens are the same. This is the use case, for example, with NFTs, which represent ownership of specific things such as an image, a song, or even a house.

That's it! That's my introduction on Ethereum Tokens. Hope it was useful, have a good one!

Vicente

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Further reading

• Open Zeppelin primer on tokens
• Ethereum documentation on token standards

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Articles in this web3 series

1. Blockchain - What is a Blockchain?
2. Ethereum Tokens - What are Ethereum Tokens?
3. Filecoin Lite Node - How to setup a Filecoin Lite Node locally
4. Lighthouse - A perpectual storage solution using IPFS and Filecoin
5. Boost - Filecoin deal management tool for Storage Providers