Cryptographic or crypto tokens are usually created, distributed, sold and circulated starting with an ICO (Initial Coin Offering) to various people or companies. Once in someones possession they can keep it, use it or resell it to another person or company and gain a potential profit.
There are different groups of tokens which are used for different purposes, they generally all have the potential to increase or decrease in value.
The NFT token represents ownership of a unique asset that exist in a digitial and or real world form. There might be similar items existing out there, but the holder of a specific NFT owns that specific item or goods. They are can be used in Metaverse to represent ownership virtual land or other objects.
A security token, sometimes referred to as a “investment token” or “equity token”, represents a form of ownership in a company or organisation. It can be looked as similary to the share in a traditional company, if you one that share you are part owner of the company. The value of the security token increases if the company or organization increse in value.
A ulitility token as the name implies serve a specific function or utility. The utility of the tokens vary, it can be redeeming special treatment when using a specific platform or get access to functionality that you cannot without the token. Most of the ICOs (Initial Coin Offerings) that are done with the utility token often tied to a service where this token will be used. The value of the token increase with the popularity of the usage of the token.
DeFi (or “decentralized finance”) token work similarly to how interactions with a bank would, but it is not owned by a bank. You can do similar things you would with a bank like borrow, earn interest, lend, trade derivatives, trade assets buy insurance and more. Bitcoin is the precursor for this concept, but it has much more built in to it than bitcoin has at the moment.
Governance tokens is a subset of the DeFi tokens with the added functionality which gives the holders of the tokens a say in the future of the protocol or the app. Usualluy these decisions are made by the few leaders of an organization, but in this case it centralized amongst the holders of the token.