What is Token
An overview of cryptocurrency tokens and how to check their validity. The list of tokens supported by the Zenland platform and their networks is given below.
- A token is commonly referred to any cryptocurrency except Ethereum (ETH) and Bitcoin (BTC).
- It is a complex algorithm that manages all receiving and sending requests for a particular token.
- When the request is sent, this algorithm adds/minuses from a balance of a specific address.
- The process is managed by standard protocols, the set procedures that token contracts follow.
- This ensures that a value of 1 token is always equal to the value of any other token of the same type.
- Most tokens are not backed by gold, fiat, or physical assets, and are affected by supply and demand.
- Stablecoins like Tether(USDT), a.k.a. asset-backed tokens are backed by reserve assets (U.S. dollar).
- This backing stabilizes the price of such tokens and simplifies their use as a digital currency.
- Some stablecoins are accepted between multiple networks; others are only used within a single one.
- An explorer shows the price per token, its total supply, the number of holders, and transaction history.
Except for Ethereum (ETH) and Bitcoin (BTC), nearly all cryptocurrency coins are sometimes referred to as tokens. You may have seen both "coin" and "token" used when mentioning new crypto.
In the blockchain world, a token can be used to represent anything tangible or intangible, and by nature is a digital asset.
A blockchain is simply a database of all the transactions within its network. The records are stored on many computers (nodes) around the world and thus, is a distributed database.
Ethereum explains tokens as assets that mean anything from lottery tickets or skills of a character in a game to shares in a company or ounces of gold.
While this is true for stablecoins, or asset-backed tokens, most tokens are not backed up by assets like gold, real estate, or fiat. The value of these tokens depends on the number of people buying and selling them.
In other words, the supply and demand of the cryptocurrency market, which is influenced by many factors. Media, government regulations, and the number of token holders are all the factors that influence the perceived value of a token.
An example of token volatility is a Dogecoin (DOGE). Launched in 2013, this meme coin has grown 9530% within a year after a famous Elon Musk tweet.
Also, the fathers of the modern currency, Bitcoin (BTC) and Ethereum (ETH), are often on top of "the most unstable cryptocurrencies" lists. This volatility makes it difficult to pay with crypto for products or services.
As a solution and an easier way to use cryptocurrency for daily operations, Tether (USDT), has introduced the first stablecoin in 2014. Because its price is designed to be pegged to a price of a U.S. dollar, it is not difficult to calculate the number of USDT a user must send or receive (1 USDT ≅ 1 USD). This simplifies their use as a digital currency and explains the widespread adoption of stablecoins.
Other commonly used stablecoins pegged to a U.S. dollar include Binance USD (BUSD), USD Coin (USDC), and TrueUSD (TUSD). The price of 1 of any of these coins is roughly equal to 1 USD.
Tokens (and stablecoins) are created and managed by token contracts published into a specific blockchain.
These contracts are the types of smart contracts that keep track of all the transactions involving a specific token. Think of them as a brain controlling the movements of arms and legs. When the transaction is requested from a certain address a token contract maps the address to their token balance. Based on the request, it either adds or deducts X number of tokens from the balance registering every change in the contract.
A smart contract is a special type of a blockchain program which stores encrypted information, dates, and/or cryptocurrency. In simple terms, it is a complex algorithm which performs certain tasks when the set conditions are met.
How does the token contract manage millions of balances and keep track of the total token supply on the network?
Tokens are managed by standard protocols, the guiding principles for all operations with tokens. These protocols are also used by developers when building smart contract applications for fungible tokens, a.i. tokens, and non-fungible tokens (NFTs).
At this stage of development, Zenland does not support NFTs, but has plans to extend the platform's future use. The goal of the current phase is to make smart contracts accessible for people buying and selling regular products/services.
These token standard protocols ensure that the value and price of 1 ETH are always equal to that of any other ETH on the blockchain. One of the standard protocols of the Ethereum blockchain, known as ERC-20, ensures the validity and working state of token contracts deployed (published) to the Ethereum network. It allows users to transfer tokens from one account to another and get their token balances.
Similar to viewing network transactions and regular smart contracts, specific details of any token contract can be verified via a blockchain explorer. To get the data you will need to enter the token contract address into the search. Explorers like Etherscan and BscScan have Token Trackers that point to token contracts. Clicking on it will take you to the token contract of the respective token.
An explorer is a specific blockchain search engine that is used to get important details of a particular transaction or contract. These details may include transaction status, its value and timestamp, and receiver's and sender's wallet addresses.
Besides the history of all token transactions, token contract details will show:
- the token price (per unit); for example, USD-backed stablecoins will always be around $1 U.S. dollar;
- maximum token supply (the amount of all tokens created and regulated by the token contract),
- the number of holders (the wallets, who own that token),
- the number of transfers (the total number of transactions made with a specific token),
- the market capitalization of the token (a valuation of the maximum total supply of the token),
- token contract address (the address of the actual token contract in the blockchain),
- the official website and social profiles of the organization that have developed a token.