Tokens in Web3
Web3 represents the next generation of the internet, focusing on decentralization, security, and user control. At the core of this ecosystem lies the concept of tokens. In web3, almost everything can be represented as a token. Therefore, if you're a web2 developer, it's crucial for you to understand this fundamental principle as you transition to building web3 applications.
What is a token?
In the context of web3, a token is a digital representation of an asset or utility living on a blockchain. Tokens can represent ownership, access rights, or other value types, such as your account data in a web3 social media application. They are a versatile and powerful way to manage assets and interactions in a decentralized environment.
Types of Tokens
Tokens in the web3 ecosystem can be broadly categorized into fungible and non-fungible tokens. The table below provides a quick comparison of their key characteristics and use cases:
| Feature | Fungible Tokens | Non-Fungible Tokens |
|---|---|---|
| Interchangeable | Yes | No |
| Value | Equal for each unit | Unique for each token |
| Use Cases | Cryptocurrencies, Stablecoins, Utility Tokens | Digital Art, Gaming, Real Estate, Identity |
| Divisibility | Yes | No |
Fungible Tokens (FT)
Fungible tokens are interchangeable and identical in value. Each unit of a fungible token is equal to another, much like traditional currencies (e.g., dollars, euros, or Bitcoin).
Fungible tokens are widely used in decentralized finance (DeFi) platforms for various purposes. For example, on platforms like Uniswap and Aave, users can trade, lend, and borrow cryptocurrencies. Stablecoins, another type of fungible token, provide a stable value compared to volatile cryptocurrencies and are frequently used in transactions and savings. Additionally, utility tokens grant users access to services or features within decentralized applications (dApps). For instance, a decentralized cloud storage dApp might require users to pay with a utility token to store their data.
Non-Fungible Tokens (NFTs)
Non-fungible tokens are unique and cannot be exchanged on a one-to-one basis. Each NFT has distinct properties and values, making them ideal for representing unique items.
NFTs are used in various platforms for digital art and collectibles. Platforms like OpenSea and Rarible enable users to buy, sell, and trade digital art and collectibles as NFTs. In gaming, NFTs represent unique in-game items, characters, or real estate, as seen in games like Axie Infinity and Decentraland. NFTs also play a role in representing ownership of physical assets or digital identities, providing a secure and verifiable way to prove ownership and authenticity.
Although these tokens are unique, they are editable, allowing you to add or remove data from them. For instance, if you use a social media app that stores all your data in your own NFT, the information in your NFT will change as you interact and create new posts.
Why Everything is a Token in Web3
The concept of everything is a token in web3 means that various forms of value and rights can be tokenized, enhancing their liquidity, transparency, and security. By representing assets as tokens, developers can create more liquid markets where these assets can be easily traded or transferred. For instance, tokenizing real estate allows fractional ownership, making investment more accessible and reducing barriers to entry.
Tokens can also be used to manage access rights within decentralized applications. Holding a specific token might grant a user access to premium content, features, or services within a dApp, creating a straightforward way to handle permissions and memberships. In decentralized autonomous organizations (DAOs), tokens represent voting power, democratizing decision-making and aligning the interests of the users with the platform.
Moreover, tokens can interact across different platforms and applications, creating a seamless ecosystem. For example, a token earned in one dApp could be used in another, fostering a more interconnected and versatile digital environment.
Versatus LASR
Understanding the role of tokens in web3 is essential for web2 developers making the transition. By seeing everything as a token, developers can unlock new possibilities for asset management, access control, and user engagement in decentralized applications.
Versatus LASR provides templates for you to create applications based on fungible or non-fungible tokens. These templates aim to help you to start creating new applications. In case you need additional guidance, you can check one of Versatus LASR tutorials:
- BURD: A microblog application similar to Twitter that uses NFTs to store user data.
- LASR Chess: A Virtual Chess game built in LASR, leveraging the chess.js library allowing users to play matches against each other.