With the rise of cryptocurrencies, the term Token has found a new life in a new context, and it’s now part of the technological revolution currently sweeping our globe. What is novel about the Fyooz marketplace is that you can invest in tokens of things, people, projects and ideas. But what is a Token? And what can you do with it?
What is a Token?
The most basic definition of a token is that it constitutes a unit of value issued by a person or a business. A Star Token is a digital asset. To give you something you can picture in your mind, think of a token as an object that represents something. At festivals and concerts, you might exchange cash for a token that you could use for food and drinks. A token in that sense is a chip. It’s a symbol representing something.
In the crypto space, a token is a cryptocurrency issued on a blockchain or digital ledger. In more technical terms, a token is a unit value that exists on an blockchain. Tokens do not have their own blockchain, but depend or exist on an existing Blockchain of a cryptocurrency like Ethereum or Bitcoin. Since tokens generally represent a unit value, they are tradable. The value can be in the form of coins, points, certificates, in-game items, etc.
An organisation, individual or business creates a token in the context of a specific business model, so that it can incentivize user interaction and distribute rewards throughout the network of token holders.
At present, there is no agreed global standard for the classification of tokens, either in Switzerland or internationally. Swiss Financial regulator FINMA categorizes tokens into four types, but hybrid forms are also possible:
Security tokens are tokens given in an STO (Security Token Offering). Similar to traditional shares, their value is derived from an underlying asset that the security represents. Under Swiss law, Security tokens are treated in the same way as traditional securities.
Payment tokens are synonymous with cryptocurrencies and have no further functions or links to other development projects. They have no other purpose than to pay for goods and services.
Asset tokens represent assets such as participation in physical underlying assets, companies, or earning streams, or an entitlement to dividends or interest payments. In terms of their economic function, the tokens are analogous to equities, bonds or derivatives.
Utility tokens represent the right to use or provide digital access to an application, product or service and aren’t designed as traditional investments or currencies. They grant holders access to a company’s future utility, whether it be a product or service.
Equity token represents some stock or equity in the company that issues it.
The purchase of security tokens is seen as an investment because they represent ownership; therefore they are subject to federal securities regulations. On the other hand, utility tokens are not considered an investment as they provide access to a product or service.
The Fyooz Coin has been qualified by FINMA as Payment Token, Star Tokens as Utility Tokens.