Definition

Token — a digital asset created via smart contract on an existing blockchain. The most popular standard is ERC-20 on Ethereum.

Coin vs Token

Characteristic Coin Token
Blockchain Own External
Examples BTC, ETH, SOL USDT, UNI, LINK
Creation Complex (fork/new code) Simple (smart contract)
Fees Paid in this coin Paid in network coin

Types of Tokens

By Standard

Standard Network Purpose
ERC-20 Ethereum Regular tokens
ERC-721 Ethereum NFTs
ERC-1155 Ethereum Multi-tokens
SPL Solana Solana tokens
BEP-20 BNB Chain Binance tokens

By Purpose

  1. Utility — provide functionality (UNI, AAVE)
  2. Governance — voting rights (MKR, COMP)
  3. Security — represent securities
  4. Stablecoins — pegged to fiat (USDT, USDC)
  5. Wrapped — wrapped assets (WBTC, stETH)

How Tokens Are Created

// Simplified ERC-20 contract
contract MyToken {
    string public name = "My Token";
    string public symbol = "MTK";
    uint256 public totalSupply = 1000000;
    mapping(address => uint256) public balanceOf;
}

Anyone can create a token — it takes minutes and costs ~$50-100 in gas.

Tokenomics

When evaluating a token, understand:

Parameter What to Check
Total Supply Total number of tokens
Circulating Supply How many in circulation
Vesting Unlock schedule
Distribution Who gets how much
Utility Why the token is needed

Token Risks

Technical

  • Smart contract bugs
  • No audit

Economic

  • Unlock → price pressure
  • No real demand
  • Inflation (new token emission)

Regulatory

  • Many tokens may be classified as securities
  • SEC actively pursues projects

DCA and Tokens

When using DCA for tokens:

  • Choose proven projects from top-100
  • Consider gas — can eat into profits
  • Diversify — one token = high risk
  • Study tokenomics before buying

Important: 90%+ of tokens lose value long-term. Focus on Bitcoin and Ethereum — a safer choice for DCA.