Tokens (for dApps)

Nithvik
2 Min Read

The third main type of cryptocurrency is a token. Out of the three main types of cryptocurrency, these are the most interesting. Compared with other two cryptocurrency types, they are completely unique. They do not have their own blockchain.

They used on dApps (decentralized applications); these are the apps that can be built on blockchains like Ethereum and NEO. The dApps are built to use smart contracts, which is why they use tokens.

Their tokens don’t have to represent a physical thing like electricity or a house, though. They can instead be used to purchase things on the dApp. Either that, or they can be used to get certain advantages — things like discounted fees and voting fees.

Token
Token

Tokens always have a price that they can be sold for, which is why some people buy them. Some people buy tokens to sell them later for a higher price, instead of buying them to use them on the dApp.

Because dApps are built on other blockchains (like Ethereum and NEO), a token transaction is still verified by the nodes on the Ethereum or NEO blockchain. This means the transaction fee is still paid with Ether or NEO, and not with the token.

So, to make a transaction on a dApp (i.e. to use a token), you must have some Ether or NEO (or whichever altcoin the dApp is built on) to pay for the transaction fees.

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