Token Taxonomy
Defining different types of tokens.
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Defining different types of tokens.
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Here are some simple categories to help understand token economics. They are not mutually exclusive.
Social tokens (also recognized as "community tokens" or "social money") comprise the emergent development of token networks to integrate with the creator economy and online communities of various types.
The creator economy emerged over the past 10 years due to technical advancements in content creation and connectedness from social networks. Social tokens include both fungible and non-fungible token types.
Social token economies today include investment communities, creatives, cam artists, and visual designers. The most common social token use (aside from NFTs creating verified digital ownership) is tokenized access. This will evolve rapidly.
Utility tokens define a network created for some specific use case outside of simply recording and computing transactions.
The ICO boom of 2017 propagated thousands of new companies who envisioned use cases for utility tokens including tokenizing commodities/supply chains, tokenizing identity, tokenizing computation, and using tokens as a governance system.
Today, many of these ideas remain unrealized due to the necessity of further adoption and technical progress.
The protocol layer for crypto networks include blockchains that work to serve the most basic foundation of recording and computing transactions. Decentralized applications are built on top of these protocols.
The most important protocols today include Bitcoin, Ethereum, and any other token created to support some underlying technical protocol. Protocols use tokens to incentivize behavior that builds value for the network in some way.
Often, protocols give these tokens as rewards to participants helping record transactions that happen across the network via some consensus mechanism (proof of work, proof of stake, etc.).
