The Ethereum Blockchain is Helping Create the Next Generation of Tokens

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by Rupert Hackett

Tokens have been around as long as money has. And at times it has been difficult to differentiate between the two. But what has consistently separated them is that tokens are units of value created by private citizens, corporations or institutions for specific purposes.

There are those that have served as tools of social exclusion. For instance, in Europe, Africa, and the Indian subcontinent, in the past, leper colonies were very common. These were special and isolated places where people suffering from leprosy lived.

Some of these colonies ended up issuing tokens that served as money. This was driven by the general believe that the disease was highly contagious and thus having the rest of the population share money with those suffering from it could spread it even more.

In ancient Roman Empire, there were tokens that were used as payment at brothels. These tokens were called Spintriae, and they came to being as a way to bypass the requirement that citizens shouldn’t dishonor the emperor by using official currency coins with his image or symbols in brothels.

Early Christian churches in North America designed their own coins that believers would use to give tithes and offerings. This was to avoid old currencies finding their way into the offering bowl.

In the 18th and 19th centuries, it was also common for churches to issue what was called communion tokens. These were pieces of metal that anyone who qualified for the communion celebrations had to provide at the door.

And indeed, tokens have also been created to serve as unofficial currency during coinage shortage occasioned by hard economic times. This has been particularly common in the 19th century United States.

But the tokens that have endured the longest are those that serve as symbols of love and thus are shared amongst family members or friends as gifts. There are also those that commercial enterprises issue to loyal customers (think of loyalty point).

In the recent past, we’ve seen the rise in popularity of gaming tokens. These have become the currencies in casinos, where they are also called gaming chips. Also, video gaming has seen its own token culture grow, with players earning them through competitive winning, exchanging with money or selling virtual gaming assets.

The three stages tokens have gone through

Like money, tokens take different forms. And like money we can say that tokens have undergone three major phases.

In the beginning, they were physical items representing value such as precious metals. And the past is littered with gold, silver and bronze pieces that were passed from one to the other as tokens.

In the recent past, gift cards and coupons have served as physical tokens.

With the emergence of the internet, however, we began creating, sending and receiving tokens online. Even gift cards and coupons have also taken the digital form. Now, you can send, receive and redeem them without ever touching anything physical.

At the basic level, digital tokens are entries on ledgers residing on servers. While this has served us well for decades now, it has its own serious challenges. Two that stand out are privacy and security.

Indeed, with most tokens online, for you to use them, you have to provide personally identifying information to the issuer. For example, you can’t receive and use Amazon gift cards without first registering with the online megastore.

Even more, given that the tokens are managed on ledgers hosted on servers, there is always the risk of an adversary getting access and tampering with the records. Also, users need to trust that those who maintain the ledger won’t be motivated to act rogue.

The Blockchain secures the issuance of digital tokens

The Blockchain has ushered in a new way of creating, managing and securing digital tokens. What’s more, it doesn’t take a lot for anyone to create tokens of their own, which others can trust to hold.

Indeed, issuing tokens has never been easier. You can do it in a matter of seconds, especially using the tools that Ethereum has made available to you. All you need is to download the Ethereum wallet.

On its smart contract section, you have a place to write the token code.

Don’t know how to code? Don’t worry Ethereum has done that for you too. On the Ethereum foundation official website, there is already written code for tokens. You just have to copy and paste it onto the token creating editor on the Ethereum wallet.

One of the things you need to take care of if you were to create digital tokens independently, is to provide the infrastructure for its users. Maybe you will need to create the software that will enable users to receive, hold and send the tokens.

With Ethereum generated tokens, you don’t need all that. Your tokens are automatically compatible with already existing wallets. Also, the users are assured that on Ethereum, you’ve met basic standards of creating tokens.

Indeed, on the Blockchain, the line between currency and tokens is still not that easy to draw. However, both are more secure, protect user privacy and their issuance is more transparent.

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