Trading Tokens

Transaction tokens are used for transactions, they serve as units of account and are used to exchange goods and services. These tokens generally function like traditional currencies, but in some cases offer additional benefits. For example, with decentralized cryptocurrencies such as Bitcoin and Dai, users can perform transactions without traditional intermediaries or central institutions, such as banks or payment gateways. In addition to its function as a currency, Dai also provides transactional capabilities to other networks. For example, POA Network created xDai, a Dai-like transaction token that exists on a sidechain and allows for fast, cheap transactions. Not all exchange tokens are currencies. Global supply chains and other industries leverage transaction tokens to apply the immutability of blockchain and the flexibility of smart contracts to their operations.

Bitcoin is the original transaction token, designed to be used as an exchange for goods or services. Its purpose is to create a digital, decentralized currency with all the advantages of blockchain, fast and secure transactions with low (or lower than banks and other financial institutions) fees, and no need for global fund transfers intermediary. The intention was (and still is) to transform the world from fiat, government-backed and centrally controlled currencies like the US dollar and the euro to a democratically controlled global digital currency owned and operated by the people. This type of coin can be used to purchase goods online, buy a cup of coffee in a store, pay a nanny or be sent to family members around the world. There are even ATMs where you can buy trading coins and exchange them for fiat currency.

Since Bitcoin was launched in 2009, many forks and new blockchains have created new coins, called altcoins. Basically, any coin that is not Bitcoin is an altcoin. They often have the word "coin" in their name, like Litecoin, although people are getting more creative with their names, so this isn't always correct. In 2011, Namecoin (see that?) was the result of the first fork, and since then, hundreds of forks have followed. Of course, not all are created equal, as they can be created by anyone with the necessary technical knowledge and a little time.

Another use for trading coins is called a store of value, where people buy and hold them in the hope that their value will increase over time. It's similar to buying gold bars themselves, a nugget won't do you much good, but selling it will net you a chunk of cash. Also in this analogy, the value of gold fluctuates much more than fiat currencies and is affected by supply and demand.