What is Smart Token?
Let's find out Smart Token meaning, definition in crypto, what is Smart Token, and all other detailed facts.
A smart token is just like a regular token except that it does more than just transmit the value of user-generated assets. Smart tokens have the capability to manipulate the value of the token by holding all of the necessary data required for a smooth transaction. Smart tokens make use of smart contracts to do this.
On the other hand, your regular tokens only represent the value of a certain asset that the holder owns without doing any extra leg work.
In order to understand this term better, let’s have a look at an example.
Smart tokens became popular in 2017 when the Bancor decentralized trading protocol released a standard for smart tokens. They also decided to launch their own smart tokens that are based on smart contracts. In this case, smart contracts allow the implementation of direct convertibility within their smart tokens.
How do their smart tokens work? Users can easily buy or sell smart tokens at their own time and without the help of an intermediary just by the use of smart contracts that are implemented within these smart tokens. This translates to a straightforward transaction process that happens entirely on-chain.
There are three layers of completing a transaction within a smart token. The first layer is the source of value which is usually the asset. The second layer is regulations that outline the ownership of the asset, accessibility, and the conditions of the authorization. These regulations are determined by the token issuer. While the third layer is a state that tracks the value of an asset that's based on regulations.
Smart tokens facilitate enhanced data. Including but not limited to invoicing information or counterpart identity.
The tokenization process replaces data with a token. Therefore, when the payment authorization information is intercepted by a third party, said data is not available so it loses its value. This means that this information can hide in plain sight.