One of the most widespread uses of Blockchain technology are cryptographic information units that can be transferred directly between users of the Blockchain. These units are called Tokens and can be used for different purposes.
Tokens are built on an existing Blockchain. The majority of all tokens existing today are based on the Ethereum-Bblockchain and use the standard protocol of this Blockchain called ERC-20. Therefore, the names Ethereum tokens or ERC-20 tokens have been established for these tokens.
Ethereum tokens can be equipped with various functions based on the programming of self-fulfilling contracts (smart contracts). Smart contracts are protocols that technically represent a contractual regulation and can grant the owner of a token certain rights. The smart contract of a Token is designed by its issuer in such a way that it fulfills the notable purpose and benefit.
Different types of tokens can be distinguished depending on the design of the smart contract on which a token is based and thus on the rights granted by holding a token. A differentiation of the following types has been established in practice:
Utility-Token (also "usage token")
Utility-Tokens have usage rights. These entitle the Token owner to use a certain service or grant him access to a defined product.
Security token (also "equity token",)
Security-Token holders receive rights or claims that correspond in whole or in part to those of shares or debt instruments. These include, for example, a claim to dividends, voting rights, interest or repayment claims.
Accordingly, Tokens can be understood as digital value units that are programmed on the blockchain and can be transferred there. They serve to represent rights of use or are intended to act as a security equivalent.