17. April 2025 | Medienmitteilung
The different functions of blocks and tokens on the blockchain
When discussing crypto securities, the term blockchain is often used, but in practice, the focus is primarily on the tokenisation of assets. This involves converting assets into a digital representation, which can then be stored, transferred and managed on a blockchain. To fully understand how blockchain technology works, it is essential to differentiate between blocks and tokens, as they serve distinct purposes within the system.
Block: A block is the fundamental unit of a blockchain. It acts as a self-contained data structure where transactions or other forms of information are collected and secured cryptographically. Blocks are linked together in a sequential and immutable manner according to predefined rules, forming what is known as a blockchain.
Each block in a blockchain contains a reference to the previous block, creating a continuous, tamper-proof chain. This mechanism ensures both the integrity and security of the data, preventing any alterations or fraudulent activities.
Token: A token is a digital asset created and issued on a blockchain. It serves as a representation of value, allowing assets to be exchanged, stored and programmed with specific functionalities.
Tokens can fulfil different roles within blockchain ecosystems, with three primary types dominating the financial sector: utility tokens, security tokens and payment tokens (including Stablecoins). Security tokens represent ownership shares in assets and function similarly to traditional securities, making them highly relevant in finance, acting as digital securities. Stablecoins, in turn, are considered a type of cryptocurrency, pegged to stable assets such as fiat currencies or commodities.
In summary: Blocks serve as the building blocks of a blockchain containing transactions and data, whereas tokens represent digital assets within a blockchain and may be used for specific financial or functional purposes While a block provides the structural foundation of a blockchain, a token acts as the digital representation of ownership or rights to an asset.