// GLOSSARY -- BLOCKCHAIN & CRYPTO FUNDAMENTALS

What is Token?

1 min read Updated

A token is a digital asset created on an existing blockchain through a smart contract — distinct from native coins (ETH, BTC) which are integral to the blockchain protocol itself.

WHY IT MATTERS

Tokens are the building blocks of crypto. Unlike native coins, tokens are created by deploying smart contracts. Anyone can create a token — both empowering and dangerous.

Standards define behavior: ERC-20 for fungible tokens (USDC, UNI), ERC-721 for NFTs, ERC-1155 for mixed collections. These ensure interoperability across wallets and exchanges.

Tokens represent everything from stablecoins and governance rights to real-world assets and gaming items.

HOW POLICYLAYER USES THIS

PolicyLayer operates at the token level. Policies specify which tokens an agent can transact with, maximum amounts per token, and approved token-recipient combinations — granular control across different assets.

FREQUENTLY ASKED QUESTIONS

Coin vs token?
Coins (ETH, BTC) are native to their protocol. Tokens (USDC, UNI) are created by smart contracts on top of a blockchain. Both are tradeable digital assets.
How are tokens created?
By deploying a smart contract implementing a standard like ERC-20. The contract defines supply, transfer rules, and custom logic. Creation is permissionless.
What are governance tokens?
Tokens granting voting rights in protocol governance. UNI holders vote on Uniswap changes, AAVE holders on Aave parameters. They align stakeholders with protocol development.

FURTHER READING

Enforce policies on every tool call

Intercept is the open-source MCP proxy that enforces YAML policies on AI agent tool calls. No code changes needed.

npx -y @policylayer/intercept
github.com/policylayer/intercept →
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