How do tokens work and how to keep them safe
With the growth of cryptocurrency’s popularity we have more and more questions about tokens. While it is a bit more clear with coins it is still difficult with tokens. Let’s learn what tokens are and how we can use them.
What is an ERC20 token?
We may say that tokens have many similarities with bitcoins. Simply put, they have a value attached to them which is accepted by a community. However tokens serve a much broader purpose. Ethereum is not just a network that can be used as a digital currency system, it is also a platform where other applications can be built. Ethereum’s blockchain protocol is more complete than bitcoin’s blockchain as experts have stated and ERC20 tokens are built on the Ethereum network. To comply with such a standard an application must have certain types of functions. It is like face control for the token to have a right to be called ERC20. For example, if a token application is a TV, ERC20 ensures that it has some HDMI inputs or outputs compatible with other electronics.
Token are a way to support useful projects
In a general sense most tokens are created to be distributed to the public through an Initial Coin Offering (ICO). These ICOs are a means of crowdfunding, this can be used so that different projects can find some financial support through the release of their new token. It is a bit similar to an Initial Public Offering (IPO) for stocks, but there companies offer you to buy their shares, not their tokens. Tokens, however, are generally created with the issuing of smart contracts. It is necessary to mention that many people are crazy about ICOs because they are the most popular way to learn and support many different interesting projects. Some of these cool projects include a CrowdPainting art project, MedicalChain that uses blockchain technology to store patient health records, the KodakOne platform that allows token holders to upload images and manage the rights for their images and many other fascinating and useful projects.
A “fuel” for your token transaction
To send ERC20 tokens you must sign a transaction. Each token transaction is sent on Ethereum blockchain. Your transaction will use a certain amount of gas (the internal pricing for running a transaction or contract in Ethereum). Any transaction or other operation requires fee. When you make a token transaction your fee is higher than for ethereum transaction because you also deal with smart contracts. When sending tokens check whether you have enough ETH for fee.
Hey guys, you’d better mind your safety!
As you have to choose a safe place to keep your dollars you also need to find a secure wallet for your tokens. However, it should not just be any token wallet. As you choose a reliable bank for your dollars you should pay attention to security, privacy, and most of all the anonymity of your token wallet. For example, Lumi wallet allows you to hold your tokens comfortably and forget about interfaces that are impossible to understand. You can install it for both iOS and Android and open its interface on your laptop, PC, or tablet. Here you may also find good articles about secure token wallet and how to protect it.
Smart crypto holders exchange tokens quickly
You can buy tokens for fiat currency or exchange some coins for them. You are quite lucky if you have a wallet with an in-app exchange. This option allows you to exchange coins to tokens in just a few simple clicks. Lumi has a detailed guide on how to use its in-app exchange.
Progress is moving very quickly and a necessary process of our world. We believe users should make all devices and innovations work for themselves. Check out new and interesting projects, and keep your tokens safe with Lumi!