What are tokens?
Imagine you’re at a fair. You have won tokens while throwing cans, which you exchange for an oversized teddy bear. Tokens follow this principle of transaction. A token symbolises a value that can be converted into an equivalent value. Tokens can thus take on a task — like money in the economy. The decisive difference: they are generated electronically alone. They are created, exist and function in digital space. To create a token, you need a blockchain (see our blog post on blockchains).
On the blockchain, tokens can be programmed as so-called “smart contracts” to take on many different roles. They can not only be a means of exchange and payment, but also represent social values. For example, a community could distribute tokens that give the holders co-determination rights. Such tokens are called “utility” tokens because they serve a purpose tied to an explicit system. Within this framework, there are no limits to the possible applications. Theoretically, a teacher could distribute a “Homework” token to his students to organise their homework.
Important: According to the law, utility tokens may not be used for profit. This is what a second, often used type of token is for — “security” tokens. As the name suggests, they embody securities or shares in financial projects. A property, for example, can be broken down into numerous assets for investors with the help of security tokens. No matter what the investment object, tokens can translate it, simplify it and make it available to enable more people to access the financial market.
Tokens can be divided into “fungible” and “non-fungible”. Fungible tokens have identical properties. They are interchangeable with something of the same value and can serve as currency in the form of coins. Non-fungible tokens, also called “NFTs”, have no unique countervalue. They represent unique values. You cannot exchange them 1 for 1. A painting by Leonardo da Vinci would be a tangible NFT, a video game skin a digital one. Data on NFTs, such as information on the creator of a product or artwork, can be stored on a blockchain and help protect copyrights.
Advantages and disadvantages of tokens
Since tokens are based on blockchain technology, they inherit its strengths and weaknesses. They are organised in a decentralised way. The blockchain network with its democratically managed data ensures transparency and security. External service providers, such as a bank in the case of a financial transaction, remain outside. This simplifies the process and saves fees. The direct path promotes cooperation between users and providers or between consumers and producers. A community can develop around a project. The more participants a community has, the more secure and influential its tokens become.If the blockchain runs on the “proof of work” principle, the energy required by the servers to host the tokens becomes a disadvantage. The blockchain grows with each transaction and with it the records produced and their consumption of resources. A high user frequency also throttles the speed of the processes.
How does Wattify use tokens?
With Wattify, the tokens are an indicator of the status of your investment. As soon as you have invested indirectly in a project and this is realised, your “asset token” is created. This represents your investment amount in the form of digital securities (crypto securities) and is more or less the first token on your way. Once enough capital has been raised, the project can start. We store the return on your investment in “return tokens”. When you request a payout by pressing a button in the Wattify app, you receive the pro-rata distribution of the profits. Depending on the security and the deposited contract, your investment is repaid in parts or as a one-off payment at the end of the term. Here, your asset tokens are converted back into euros and transferred to you. As you can see, tokens help you keep track of every step in your investment process.
You get a wallet to store your tokens. This is the access software — your digital wallet. This is where your crypto securities are stored as asset tokens, as well as the returns already accrued on them as return tokens. With token-based crowdinvesting, you save on unnecessary fees when processing transactions and end up with more for yourself.
Tokenising processes, as mentioned, costs energy. The good thing about Wattify is that the servers for storing the tokens are powered exclusively by renewable energy. We generate the tokens for your indirect investments on our own climate-neutral blockchain. So you can be sure that they come from a sustainable source that meets security standards.
Convinced by token technology? Then get started! Thanks to the scalability of tokens, your medium-term investment can start from as little as €1. No matter what your financial strength, with Wattify tokens you can make a return and create impact — quickly, easily and in a climate-friendly way.