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Crypto tokens have become a buzzword lately owing to the popularity of blockchain technology and its application in various industries. To account for this popularity, this article explains crypto tokens and describes why they have become so popular.
What is A Crypto Token?
A crypto token is a digital asset representing a unit of value in a decentralized network. Value means a shared and agreed worth that drives exchange and commands the flow of goods and services.
Most cryptocurrency projects, therefore, rely on tokens for exchange and as a core aspect of their economic design. The design purpose of tokens is to secure decentralized networks by serving as a reward for good actors and punishment for bad actors.
Proof-of-stake blockchains exemplify this, as validators receive new tokens as rewards for validating transactions. At the same time, their staked assets can be reduced or seized if they validate an invalid transaction.
The most common kinds of tokens are non-fungible tokens and fungible tokens on blockchains like Ethereum and Binance Chain. These ERC20 and BEP-2 tokens represent the standards for creating tokens that smart contracts must meet to add something of value to the blockchain.
Most projects on Ethereum issue tokens under the ERC20 standards, while BNB Chain uses the BEP-2 standard. It is important to note that these standards and the tokens created using them are mostly exchangeable on their native blockchains unless the user uses specific smart contracts known as bridges to move the tokens around.
Why DeFi Crypto Tokens Are Popular
Crypto tokens are the unit of account and store of value on most decentralized blockchains. It is hard to imagine why such a useful asset wouldn’t be popular. They serve as a medium of exchange similar to fiat currencies in traditional finance and can be converted to other tokens using DeFi exchange platforms.
Although intangible, the amount of a crypto token held by a DeFi user can be converted to actual cash through cash on-ramp services. However, the ease of cash conversion depends on the liquidity or quantity of pairs with other tokens, especially stablecoins on DeFi exchanges.
Crypto tokens are also used as a tool for economic regulation, growth, and sustainability mechanisms in cryptocurrency and blockchain projects.
To achieve this objective, blockchain projects issue a token as equities of their project to users for a share in the daily decision-making process. Holding these tokens on specific decentralized exchanges or platforms affiliated with the DeFi project often attracts rewards as an extra incentive to keep the token. These incentives are paid out in the native token of the issuing project or stablecoins.
Some projects also use tokens as a fundraising tool. Crypto fundraising works like IPOs in traditional finance, where companies go public and sell their equities to general investors. Blockchain projects often engage in ICOs or initial coin and token offerings to raise capital to build their ideas.
Tokens sold during ICOs often go at a discounted price and could result in significant profit when the project goes live on an exchange. ICOs have, however, been faced with serious backlash from regulators who consider tokens given out under such conditions a form of security.
The problem with having a token as security is that they are not fully regulated due to the nature of the asset. It is impossible, for example, to ascertain the jurisdiction and laws that apply to blockchain tokens. When such assets are issued as a security, it goes against the law for being unregulated. Hence crypto projects have often avoided being identified as unregulated securities.
Why Tokens in the Pandora Ecosystem Are Popular
Let’s now look at why crypto tokens on Pandora, one of the best DeFi exchange platforms on the BNB Chain, are becoming so popular in DeFi. There are two tokens in the Pandora ecosystem, each performing a unique function to ensure stability and long-term sustainability.
PSR or Pandora Spirit is the governance token with a maximum supply of 10,000,000. It is the token used for staking in PandoPools, DroidBot upgrade payment, NFT Purchase on the PandoMarket, payment of PandoMarket commission fees, reserve staking on DroidBot slots, and crafting of PandoBoxes. Pandora allocates the token in a fixed linear schedule, with a total supply of 10 PSR, all pre-mined.
PAN is the rewards token of the Pandora ecosystem that lets users earn PAN for transactions on the exchange through a trade-to-earn mechanism. The token has no hard capitalization, but its emission is limited. Users can also earn pan by farming and staking on Pandora Exchange.
Tokens, adverts, and hype are everywhere on social media, and celebrities charge huge fees to get the word out. There are also a lot of Gen Zs and Millenials who have made a fortune by buying tokens early, which also explains the popularity of crypto tokens.
Many people are jostling to get the next 100x token. Understanding crypto tokens will help you make an objective decision when you have that spare cash to invest.
Pandora, one of the best DEX on the BNB chain, rewards users in the native token for using the platform. One of the core qualities of great tokens is a sound issuing project. Looking closely at Pandora, it is clear that the project was built to be sustainable from the ground up.
Aside from rewards on transactions and Yield Farming earnings, it may interest anyone keen on investing that Pandora recently launched the first decentralized bonds with the backing of traditional finance to reward its users. NFT Securities, as they are called, are highly in-demand as a stable hedge in all market conditions. The flexible investment asset offers an APR of about 12% and can also be staked for interests in the Pandora ecosystem.
These contents are for general information purposes only. They are not investment advice, a recommendation, or solicitation to buy, sell, or hold any digital asset or engage in any specific trading strategy. Some crypto products and markets are unregulated, and you may not be protected by government compensation and/or regulatory protection schemes. The unpredictable nature of the crypto asset markets can lead to loss of funds. Tax may be payable on any return and/or on any increase in the value of your crypto assets, and you should seek independent advice on your taxation position.
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