In plain English
What Token means
A token is a digital record whose behavior is defined by code and, where applicable, issuer terms. It might represent access to a service, a stablecoin balance, a governance interest, an asset claim, or a tokenized financial instrument. Tokens often use an existing blockchain’s infrastructure and its native coin to pay network fees. The word token alone does not establish what a holder owns or can redeem.
Why it matters
Tokens can look similar in a wallet while carrying very different rights and risks. A token may be freely transferable, restricted, redeemable, or subject to an issuer’s control. In the United States, whether a token or transaction is regulated as a security depends on facts and circumstances, not merely on the technical label.
Example
A company deploys a smart contract on an existing blockchain and issues 1 million units called APP. The APP token grants a discount inside the company’s software but no share of profits or claim on company assets. Users transferring APP still pay the host blockchain’s native coin as the network fee. This example is simplified.
Quick answers
Common questions
What is the difference between a token and a coin?+
A coin is native to its own blockchain. A token is commonly issued on an existing blockchain using a smart contract or comparable network mechanism, although market participants sometimes use the labels loosely.
Can a token represent a traditional security?+
Yes. A tokenized security can represent or format a financial instrument such as a stock, bond, or fund interest. The relevant legal rights and applicable securities laws remain important.
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