<p>Tokens are digital assets built on top of an existing blockchain, serving various purposes within the crypto ecosystem. They can represent assets like stocks, commodities, or even fiat currencies, or function as utility tokens for accessing services within a specific blockchain network.</p>

<h2>How It Works</h2>
<p>Tokens are created through a process called token generation events, often referred to as ICOs (Initial Coin Offerings) or IEOs (Initial Exchange Offerings). These events allow projects to raise funds by selling their tokens to the public. Tokens can be created using smart contracts, which are self-executing contracts with the terms of the agreement directly written into lines of code. The most common platform for creating tokens is Ethereum, which uses the ERC-20 standard for fungible tokens.</p>

<h2>Why It Matters</h2>
<p>Tokens play a crucial role in the crypto world by enabling the creation of decentralized applications (dApps), which run on blockchain networks. They facilitate transactions, enable voting rights, and provide access to services within these dApps. Additionally, tokens can be traded on <a href="/NewSite/encyclopedia/cryptocurrency/" class="ency-link">cryptocurrency</a> exchanges, allowing investors to speculate on their potential value. The token economy has also led to the creation of new business models, such as decentralized finance (DeFi) platforms, which aim to provide financial services without the need for intermediaries.</p>