Crypto Tokens 101: Powering the Future of Digital Payments

Tokens are one of the new words that have spread across the modern information space. For many years, Internet users have been using them to run businesses online, and the number of users is growing rapidly. As of 2024, the number of cryptocurrency users is over 560 million people. Among the main reasons why people pay attention to tokens and cryptocurrencies is a flexible, transparent, and secure system for conducting financial transactions and storing data.

However, before introducing such an innovation as tokens and cryptocurrencies, it is necessary to understand the main essence of this technology, to understand the difference between just tokens and cryptocurrencies, and also to understand their main purpose. More about this in a new blog post.

A Beginner’s Guide to Tokens

Before we get into the main purpose of a token, let’s explain its basic meaning. In general, a token used to be any commemorative sign or coin that immortalizes a certain event or person, that is, serves as a symbol of respect. Today, a token is considered to be a unit of data that serves as a carrier of information or rights, a digital property that can be exchanged, bought, sold, or disposed of in a blockchain system.

Authentication Tokens Explained

Authentication tokens are short strings that confirm the authorization of a user or service and are transmitted in HTTP headers or other requests. One type of authentication token is the API token, which is used for secure access to an API, and the server checks the token to determine whether the requesting client has the appropriate rights. There is also a type of authorization token, such as the JSON Web Token, which is used to securely exchange claims between clients.

How Crypto Money Work

Payment tokens are also known as cryptocurrencies, developed to conduct financial transactions in a decentralized system. Thanks to cryptocurrency, users can buy and sell directly without intermediaries, such as banks or payment systems. Bitcoin, Litecoin, Dash are among the most famous examples of cryptocurrencies that customers constantly use.

In particular, payment tokens are also divided into separate subspecies according to their purpose: utility tokens and security tokens. The first type is directly used to pay for goods and services within the system. However, the main purpose of security tokens is to represent a share of ownership in the underlying asset, and the exchange of security tokens is limited by its features.

What Is a Stablecoin?

Stablecoins are a special class of cryptocurrencies engineered to hold a constant price relative to a target asset or basket of assets. They connect the reliability of traditional currencies with blockchain’s benefits—near-instant settlements, robust security, and borderless access. By anchoring their value through various mechanisms, stablecoins serve as a dependable bridge between fiat finance and decentralized ecosystems.

There are three primary approaches to maintaining StableCoin:

1. Fiat-Collateralized Stablecoins. These coins keep a 1:1 reserve of government money (USD, EUR, etc.) in trusted banks or custodial services. Every token in circulation corresponds directly to a real-world dollar or euro held in a vault. Well-known examples include Tether (USDT) and USD Coin (USDC).
2. Crypto-Collateralized Stablecoins. Rather than fiat, these use other cryptocurrencies as collateral, and often over-collateralize to guard against volatility. A smart contract holds a diversified basket of tokens whose locked value exceeds the amount issued. MakerDAO’s DAI and Pax Dollar (USDP) illustrate this model, leveraging Ethereum assets to back each token.
3. Algorithmic Stablecoins. No direct reserves here—instead, protocol-driven algorithms adjust the token supply automatically to uphold the price peg. If demand spikes, new tokens are minted; if it falls, tokens are bought back and burned. US Digital Dollar (USDD) and FEI USD (FEI) follow this non-collateralized, algorithmic method, though their stability depends entirely on the strength of their code-based mechanisms.

Top Benefits of Crypto Tokens: From Liquidity to 24/7 Global Access

Tokens are increasingly used online, as they offer several advantages:

• Acceleration of financial transactions by eliminating financial institutions and payment systems as intermediaries. In addition, cryptocurrencies are credited to the account in just a few seconds and are active 24/7;
• global ubiquity. Tokens are available to all users from any country in the world and, as mentioned above, financial transactions with cryptocurrencies can be carried out any day and at any time of the day;
• security and transparency. Each financial transaction is recorded in the immutable blockchain registry, which virtually eliminates forgery and fraud;
• flexibility and programmability. Smart contracts ensure automatic execution of a financial transaction without involving third parties, and they can also be programmed for various business models.

Behind the Scenes: Our StableCoin Gold Project Journey from Concept to Launch

Given the growing popularity of tokens, we have employees in the company who have experience working with cryptocurrencies. So, we developed the new StableCoin Gold project, a smart contract with an admin panel, which displays the current prices for our token per gram of gold, our liquidity pool, and how much money and tokens are in the liquidity pool.

The algorithm works according to the following logic: if the price of gold rises above the cost of one gram of the token, the system adds funds to the pool or reduces the number of tokens to balance the price. Conversely, when gold becomes cheaper relative to the token, it can buy back tokens or withdraw money from the pool. Thanks to these corrections, the rate is always kept as close as possible to the market level.

Every transaction with tokens or funds takes place through the client’s wallet, from which a transaction fee is debited on the blockchain. A separate module compares the market price of gold and the current value of the token every minute, and then automatically makes a small purchase or sale to maintain the peg. This is how our system ensures the stability and accuracy of the Stable Coin Gold rate.

Tokens have become an integral part of the modern fintech landscape, combining the functions of a means of payment, an engagement tool and a mechanism for programmatic interaction. Thanks to transparent transactions, they reduce operating costs, increase trust and open up new monetization models (staking, yield farming, Coinbase Earn). In addition, modern tokens in the blockchain system also serve as reliable protection for important personal data, are open to change and customization according to any working business model.

As a result, tokenization contributes to the democratization of access to valuable assets, reducing operating costs and accelerating the global integration of traditional and digital finance.