What are native tokens?

Cardano’s security and decentralization are related to ADA coins. ADA is the cryptocurrency of the Cardano network and you can stake it. You can also send ADA coins from address to address. Besides ADA coins, it will be possible to issue other tokens that will have similar properties as ADA coins. It will be possible to send them from address to address. The whole history will be stored in the blockchain and nobody will be able to change it. Regarding decentralization, sending ADA coins or tokens is basically the same process with the same properties. It will be possible to create a transaction that will transfer more assets at once. For example ADA coins and a few tokens.

Issuing tokens is a centralized process since it is a decision of a single entity or a group of people. Once tokens are issued, operations with tokens will be decentralized in the same way as it is with ADA coins. It means that once you hold a token it is only yours and nobody including the issuer can take it from you. The issuer of tokens needs to provide a token name, token symbol, icon, and amount. In addition, Cardano’s wallet address must be specified since the protocol needs to know where to insert coins.

For example, Gene Simmons could issue tokens for fans of the rock band KISS. The name of the tokens can be “KISS coin”, symbol “KISS”, and the amount 666,000. He can use his address hence he will be the owner of all KISS coins in the beginning. He can then send coins to other addresses. For example, he can sell them directly to people or use a decentralized exchange to sell them on the open market.

What will be the value of the KISS tokens on the market? The Cardano network does not care about the value of tokens. It is the responsibility of the issuer to provide some value to tokens. The value can be high or very low. It can even be zero but in this case, the question is why would people pay transaction fees. It makes sense to provide some value to issued tokens but it is not a necessity. For example, Gene Simmons can guarantee free entrance to his concert or party to all holders that have 666 tokens. In addition, he can promise to meet with coin holders personally or prepare a surprise for them.

How difficult it is to issue new tokens

You have probably heard about ERC-20 tokens that can be issued on Ethereum. To issue and use them, you need to use smart contracts. In the Cardano ecosystem, tokens do not need smart contracts. Cardano supports tokens natively. It means that you do not need to use a smart contract for transferring tokens from address to address. It works exactly as it is with ADA coins. Users will be able to issue, send, receive and burn their tokens.

New tokens can be issued via the Cardano command-line interface or a special graphical interface that isolates users from the command line. Both official Cardano wallets Daedalus and Yoroi will support tokens. Users will be able to receive and send tokens.