Token
A digital asset created on an existing blockchain platform using smart contracts. Tokens can represent various things including utility, governance rights, or real-world assets.
Why It Matters
Tokens represent assets or utilities on a blockchain, driving many of the functions in the crypto ecosystem. Understanding tokens is key for recognizing the different purposes cryptocurrencies can serve.
Example
For example, you might use an application token to pay for premium features in a blockchain game or as a reward for participating in its community.
Beginner Context
For newcomers, tokens highlight the diversity within cryptocurrency, showing how they can be used beyond just currency, encompassing a vast range of applications and rights in different ecosystems.
Mike Starr
Founder, CryptoWizardTools · M.S. Organizational Management
Last reviewed: August 2026
Related Terms
Uniswap
The largest decentralized exchange by trading volume, built on Ethereum. Uniswap pioneered the AMM model, allowing users to trade any ERC-20 token directly from their wallet using liquidity pools rather than a traditional order book.
Layer 1 Blockchain
The foundational layer of a blockchain ecosystem — the main chain that processes and records all transactions. Bitcoin and Ethereum are the most well-known Layer 1 blockchains. All Layer 2 solutions build on top of a Layer 1.
Cross Chain
Refers to the ability of two or more separate blockchains to communicate and exchange data or assets with each other. Cross-chain bridges enable tokens to move between networks like Ethereum and Solana.
Aave
One of the largest decentralized lending protocols in DeFi. Users can deposit crypto assets to earn interest, or use their deposits as collateral to borrow other assets. Aave introduced features like flash loans and variable/stable interest rates.
Collateral
Assets pledged as security when borrowing cryptocurrency in DeFi. If the value of the collateral drops below a required threshold, it may be liquidated to repay the loan. Overcollateralization is common in DeFi lending protocols.