You’ve learned in Lesson: Coins vs Tokens on the differences between a coin and a token, in the context of cryptocurrencies.

To recap, a coin that is a cryptocurrency is built on top of its OWN blockchain, while a token representing a cryptocurrency is built on top of ANOTHER/OTHER blockchain(s).

You’ll notice, however, that I said that a token “representing a cryptocurrency”. This means that a token can also represent some OTHER thing that is not a cryptocurrency.

In fact, tokens can represent a wide range of assets or utilities, including commodities, securities, digital assets like art collectibles (NFTs), game items, your identity, and more. These assets or utilities can be physical in nature, like a house, or a car.

How can a token represent your identity?

Simply by recording your name, date of birth and other identifying details about you as a token on a smart contract of a blockchain. The blockchain’s network will then record and verify its validity after which it is permanently shown in the blockchain’s records.

Of course, someone or some system that is in charge of verifying your identity needs to enter the data onto the token’s smart contract and sign it with their “Private Key”. Once it’s recorded and verified on the blockchain, the data cannot be tampered with and anyone can check the blockchain for the details about you, if they know your token’s smart contract address (which is the smart contract’s “Public Key”).

(“Public Keys” and “Private Keys” also apply to crypto wallets — see Lesson: Crypto Wallets)

(“Smart contracts” is Lesson #5 above.)

Anyone who wants to check your identity can look at your token’s smart contract address (which you will give to him – it’s the smart contract’s “Public Key”) and check its details on the blockchain.

At its core, a token is just information or data recorded on the smart contract of a blockchain. This data can be anything that is IMPORTANT.

For example, you can record your ownership of any book, or any chair, on a blockchain, but there’s no real benefit to you in doing this unless the book or chair is an asset and worth a lot of money.

We can create tokens to represent ownership of a house, for example. The data we need to show in the token’s smart contract should include the following:

1. 
   
   1. Property address
   2. Property description
   3. Owner information
   4. Transfer history
   5. Rights and restrictions

As you can see, tokens on a blockchain can be very useful, as they can apply to ANYTHING.

They can also replace paper and legacy recording systems completely and have none of the disadvantages in those older systems.

There will be another lesson on tokens in the form of NFTs, which is coming up soon.

In the meantime, ensure you understand the above as it’ll be easier for you to understand NFTs then.