What Are Tokens?

Tokens give us digital ownership in Web3, a decentralized and community-governed internet run on top of blockchains. Other than domain names, tokens are the first thing we can truly own on the internet that no one can take away, stored in crypto wallets like Metamask that we can freely move across websites and applications. There are two basic types of tokens that we can own, fungible and non-fungible:

Fungible Tokens

Fungible tokens are divisible, non-unique, and interchangeable; they are currencies that function on a blockchain. Fungible tokens can be payment systems, stores of value, and more. For example, Ether is a fungible token that serves as the cryptocurrency for payments on the Ethereum blockchain, and it also serves as the fuel that powers decentralized applications on the Ethereum blockchain.

Non-Fungible Tokens (NFTs)

Non-fungible tokens are indivisible, unique, and irreplaceable; they give us the ability to own objects on a blockchain. NFTs can be art, code, music, governance rights, access passes, and more. I think that NFTs are a very general concept that users and developers will iterate on in the coming years, like how the first websites just looked like magazines but then they became Google, Amazon, Netflix, etc., over time.

The Role of Tokens

For decentralized applications built on top of Ethereum like the online game Axie Infinity, fungible tokens already represent in-game currencies, and NFTs already represent in-game objects that a user can freely take out of the game to buy, sell, or trade. In the past, if we stopped playing a game, all of our in-game goods had to be given up, similar to how in Web2, we only borrow or rent things in the applications we use from tech giants. But now, tokens allow us to actually own things in a permanent inventory on the internet as we do in the real world, and they let us participate in the value creation, governance, and economics of Web3 applications.

Tokens flip the power dynamic – instead of tech giants creating the rules and expecting us to adapt to them, now we can own things, and websites and applications are asked to interact with them. Tokens are a new, user-centric way to think about the internet, and I believe that in the future, most of the value on the internet will be created through tokens.