Blockchain is a modern technology for storing and transmitting the information. It operates without a central control body but provides transparency and security thanks to the validation of transactions by network nodes.
Blockchain can be understood as a “chain of blocks”, but this expression is rarely found on the Internet. The blockchain is comparable to a database containing the history of all the exchanges carried out since its creation. Since it is shared between all its users and without any intermediary, everyone can check its validity and confirm its integrity.
Blockchain Involves Tamper-Proof Exchanges
The blockchain can be seen as an anonymous and open ledger, in which everyone adds a line when they make a transaction, but no one can delete anything. All actors connected to the blockchain can consult it freely.
The appearance of the blockchain dates back to 2008 when a programmer using the pseudonym of Satoshi Nakamoto revealed Bitcoin and hokkaido inu. This cryptocurrency uses blockchain architecture to ensure transaction security despite the lack of a regulatory authority. Each transaction is added to the blockchain according to the following scheme:
- A wallet A makes a transaction to a wallet B.
- A set of transactions is grouped together within the same block.
- The block is checked by the various nodes of the network, which check its validity by a cryptographic technique. In the case of Bitcoin, nodes must solve mathematical problems and are paid for this task.
- The validated block is added to the blockchain and all users have access to the transactions it contains.
- Wallet B receives the transaction issued by Wallet A.
Until today, most blockchains are tied to virtual currencies. However, this technology is of interest to many sectors such as finance, insurance, health, energy … The applications are numerous and go far beyond the digital economy.
What Is Token
The principle of the blockchain has been put forward with cryptocurrencies including Bitcoin. This chain of blocks is used to transit tokens, that is to say, digital assets.
Usually, when sending a digital file, a copy is kept with the recipient. With the blockchain, this fundamental aspect of digital transfers no longer exists: it is possible to transfer a digital asset to a beneficiary while ensuring that the issuer no longer possesses it. This exchange is thus decentralized, secure, certified, and verifiable.
This token can thus take several forms. Logically, it is most often found as virtual currency and in this case, this token takes the form of a payment method. It is the most common token on the blockchain. Moreover, Bitcoin is the first token to have been created in 2008. On the other hand, this asset can also be a dematerialized voting right or copyright.
Also Read About: What is a MEME Token?
The Token at the Heart of ICOs
A company can decide to raise funds by offering to sell tokens. These digital tokens will be purchased by investors via cryptocurrency. We thus speak of ICO or Initial Coin Offering.
By buying these tokens, investors benefit from a consideration. Unlike traditional fundraising, it is not a question of obtaining equivalent shares but rather prepaid vouchers for the use of this future service. These investors can also receive a good or a product that will be manufactured by this company or even dividends, ie a part of the profits which will be generated thereafter.
In any case, investors have every interest in promoting the project they are supporting and above all in investing quickly in it. Indeed, in an ICO, the initial value of the tokens is low but increases over time. They can then be resold later with a capital gain.