What is a token?

Welcome to the first article of Ambo Learn! With this series, we’re going to take some of the complex topics, made up words, and other mind-bending crypto-concepts, and make them a bit easier to digest.

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What are tokens?

Tokens are built on top of Ethereum and can allow anyone to create an investment opportunity that can then be speculated on by other people. There are thousands of tokens, made up of a few different specifications, but most are known as “ERC20 tokens.” (We’ll get into utility tokens and tokens that use other ERC standards later.)

Your average ERC20 token can be used to:

  • Send to friends and colleagues.
  • Trade as speculative investments.
  • Fundraise for a project. (This is where you send ETH to a project and get an equivalent amount of that project’s token in return, also generally known as an ICO, or Initial Coin Offering)

Aside from the above uses, many ERC20 tokens have their own unique functions according to the project they were made for.

One benefit of having an ERC20 token standard is that, while each token is unique, they all follow the same basic protocols. This allows every single ERC20 token to be accessed on a variety of platforms — wallets, decentralized exchanges, DeFi protocols, etc. — very easily. For example, the Ambo app allows you to store and trade over 200 different ERC20 tokens. We will cover details of specific tokens and DeFi protocols in a later article, so stay tuned!

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