In the course of discussions about blockchain-based digital currencies, the term “programmable money,” also known as “tokens,” is often used. But what exactly is a token and how do they differ from “traditional money”? What forms of tokens are there? What advantage do they offer over “programmable money”? What are multi-signatures? In this blog post, we’ll answer these and other basic questions about tokens.

What is a token?

Before we go into more detail about the function and possibilities of tokens or programmable money and understand what programmable money actually means, let’s first define what a token actually is. The term token is derived from the Latin term “Täcen”, which means symbol. Tokens are nothing more than a blockchain-based abstraction that can be owned and represent assets, currencies and right of use. Examples of a token can be voting access or ownership rights to a resource. 

What are the forms of programmable money?

Let’s now take a look at the different types of tokens or programmable money and define them: 

Equity token: An equity token is a special form of security token. With an equity token, you acquire a share in an asset and equally voting rights. There are some rights and obligations associated with such a token. These are mainly directed to the disclosure and registration by the issuers. In this context, especially the financing form ETO (equity token offering) plays a major role. Compared to an ICO, the ETO is to be classified as a security and is accompanied by applicable rights of the financial authority. Thus, one the holder of such a token certain rights he can legally enforce. 

  • Asset token: Ace tokens are most comparable to a traditional security and are linked to real economic assets. These could be company shares, for example, but precious metals such as gold or silver can also represent asset tokens. 
  • Utility token: A utility token is similar to a voucher, whereby holders acquire the right to use a certain service or functionality. This is quite distinct from security tokens, as the issuer does not receive a profit or company share. 
  • Security token: Security tokens, also known as investment tokens serve as a form of participation for investors. This can be a company or profit share. There is still uncertainty about the legal, as well as regulatory, classification. A security token is most comparable to a classic security. An investor acquires a security in the expectation that it will increase in value.
  • Currency tokens: Cryptocurrencies in the narrower sense refer to currency tokens. These are primarily intended for use as a means of payment or money substitute. Currency tokens represent a decentralized alternative to traditional payment transactions that is free of banks and central banks. Probably the best-known currency token is Bitcoin. 
  • Stable coins: A stable coin is a cryptocurrency whose price is linked to that of a fiat currency, i.e. a medium of exchange without intrinsic value, such as the euro or the U.S. dollar.

Traditional money on the blockchain

There are four known ways to map a FIAT currency on blockchain technology. These options are gaining more and more relevance in several countries at the moment. We have listed these here for you as well.

  1. CBDC = Digital Central Bank Currency: This form of currency is issued by central banks as legal tender. Read more about CBDC here.
  2. sCBDC = Synthetic Central Bank Digital Currency: This currency is issued by commercial banks or e-money institutions. This currency is not legal tender, but is 100% backed by central bank reserves-. 
  3. DLT-based commercial bank money: This is also issued by commercial banks, but is only partially backed by central bank reserves compared to sCBDC.(Fractional reserve system).
  4. DLT-based commercial bank money: This currency is issued by e-money institutions and is fully backed by e-money in accounts.

As we can see, there are a variety of different applications of money in the world of blockchain technology. Which cryptocurrency or CBDC is the right one, everyone has to decide individually and depends on the application that one wants to use the “money” or “token”. Here it becomes clear how digital money differs from physical money. 

Programmable Payments , Smart Contracts & Decentralized Autonomous Organizations

The difference between digital and physical money becomes particularly clear with programmable payments. You probably already use such a solution at your traditional bank, for example in the form of direct debits and standing orders. Compared to traditional payment options, blockchain technology offers significantly more freedom in the design of complex logics. So-called smart contracts enable conditions to be defined under which circumstances a payment, for example, is to be triggered. The basis of such a “smart contract!” is a computer protocol and basically represents a kind of digital contract based on blockchain technology. In such a smart contract, for example, the terms between a “buyer” and “seller” are defined. 

In addition to individual payments, it is also possible to “program” an entire organization – the Decentralized Autonomous Organization, or DAO for short, is basically nothing more than a complex smart contract. Associated network tokens create incentive systems to automate decentralized networks even without the control of a traditional organization. The benefits of such a DAO come from reducing the principal-agent dilemma of organizations and the associated moral hazard.

The difference between Programmable Money and Programmable Payments

Programmable money and programmable payments can be clearly differentiated. Programmable money can be endowed with inherent logic, i.e., complex conditions can be programmed. Programmable payments are automated payments that are triggered by blockchain-based systems or smart contracts. The major advantage of this new “money” is mainly on the side of network effects, similar to a platform. The success of these currencies will depend heavily on interoperability solutions that enable exchanges between different currencies within one infrastructure. 

With the help of programmable money for example auxiliary payments could be made and over the conditions programmed in the money could be ensured that this money can be used only for the things, for which it is intended. This could be, for example, the purchase of food.


Another development that gives crypto payments more control and security is multi-signatures. We can find these, for example, in Bitcoin. What problem does a multi-signature solve and why is this feature quite important. To illustrate this, let’s take a look at an example: Let’s assume you want to buy something on the Internet, let’s say a bicycle. You look around on the Internet and find a nice bike on Ebay, which corresponds exactly to your ideas. Now you do not know the seller, who is also not from your city. The payment should be made in advance, so that the seller can be sure that he gets his money as soon as he sends the bike. In order for the buyer to be sure that he will get the bike he bought and that it will be in the condition he expects, we use a multi-signature. With such a multi-signature, the e.g. amount that has to be paid for the purchase of the bike in the form of Bitcoin is quasi parked and only released by the third and neutral party as soon as the buyer has confirmed that he has received the goods that he ordered. Once this info is sent to the third party, the payment is released to the seller, otherwise the buyer gets his money back once the bike is back with the seller. Thus, a multi-signature is nothing more than a kind of payment protection. 

he mining process, computing power is provided to process transactions, secure and synchronize network participants. The goal of this process is to combine the individual blocks into a blockchain via a decentralized peer-to-peer network. In the process, all blocks have a so-called “hash value”, which contains a kind of check number for all transactions.

Traditionally, the term “mining” comes from the mining industry and refers to the search for, development, extraction and processing of mineral resources from the upper earth’s crust using machines and tools. Unlike traditional mining, a Bitcoin miner receives a reward in the form of Bitcoins for providing computing power. The reward that each miner receives for solving complex cryptographic tasks is halved after each “halving”. Thus, over time, fewer and fewer newly generated Bitcoins come onto the market. It is important to understand that the actual purpose of mining is not to issue new Bitcoins; this is merely the incentive for securing the network. Rather, mining is a decentralized security mechanism. 

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