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he term crypto token refers to a special virtual currency token or how cryptocurrencies are denominated. These tokens represent fungible and tradable assets or utilities that reside on their own blockchains. Crypto tokens are often used to fundraise for crowd sales, but they can also serve as a substitute for other things. These tokens are usually created, distributed, sold, and circulated through the standard initial coin offering (ICO) process, which involves a crowdfunding exercise to fund project development. KEY TAKEAWAYS Crypto tokens are a type of cryptocurrency that represents an asset or specific use and reside on their own blockchain. Tokens can be used for investment purposes, to store value, or to make purchases. Cryptocurrencies are digital currencies used to facilitate transactions (making and receiving payments) along the blockchain. Altcoins and crypto tokens are types of cryptocurrencies with different functions. Created through an initial coin offering, crypto tokens are often used to raise funds for crowd sales. How Crypto Tokens Work As noted above, crypto tokens are cryptocurrency tokens. Cryptocurrencies or virtual currencies are denominated into these tokens, which reside on their own blockchains. Blockchains are special databases that store information in blocks that are then chained or linked together. This means that crypto tokens, which are also called crypto assets, represent a certain unit of value.1 Here's how it all works. Crypto refers to the various encryption algorithms and cryptographic techniques that safeguard these entries, such as elliptical curve encryption, public-private key pairs, and hashing functions.2 Cryptocurrencies, on the other hand, are systems that allow for secure payments online which are denominated in virtual tokens. These tokens are represented by ledger entries internal to the system.1 These crypto assets often serve as the transaction units on the blockchains that are created using the standard templates like that of the Ethereum network, which allows a user to create tokens.3 Such blockchains work on the concept of smart contracts or decentralized applications, wherein the programmable, self-executing code is used to process and manage the various transactions that occur on the blockchain.