 A token is a generic, quantified unit of value that is registered on a blockchain network. Today, tokens are understood to come in two different kinds, utility tokens and security tokens. Security tokens represent fixed assets of some kind. It may be a piece of property, such as a house or a share in a company. A utility token is a more liquid medium of exchange that gives one access to the value created by a blockchain network. Utility tokens really represent access to a service delivered by a blockchain-based economy. To understand token economies, it's best to think in terms of services and not so much products. Utility tokens represent the service delivered by a network. The utility tokens are quantified units of services that can be accessed within a given network. Tokens are generic units of value. This means they can represent any kind of value. Wherever there is a network delivering a service, a token can be created to define that value. We can create a token for any different type of network and service. For example, if we have a community watch scheme where people look out for each other's houses to make sure there are no trespasses or burglars, this is a community or network that is delivering a valued service of securing people's homes. We can then define an economy around that community by creating a token that quantifies the service delivered and a blockchain system that keeps track of who is delivering the service and who is using it. This utility token is then used as a medium for the exchange of that service. Those who consume the service have to give tokens to those who provide it. In this example, we can see how token economies work to formalize what was previously informal and merge economics and social communities in new ways. The services on these blockchains can be of many different kinds. Healthcare services, for which we might have a health coin. It could be cleaning services, a clean coin, a transportation service. For example, the DAV token is a form of utility token. The DAV network is a blockchain platform currently under development that connects transport and logistics service providers with those who need those services. In particular, it focuses on connecting autonomous vehicles. Members of the ecosystem can earn DAV tokens by providing transport services by say letting your self-driving car give rides to passengers when you're not using it or having your drone help out with the delivery. While users of the service pay tokens to be transported anywhere or to send and receive packages through the network. A unit token such as that of the DAV token should then reflect the quality and quantity of the service that the network can deliver. The better the quality, the more people will want it and the greater the quantity of the service delivered, the more tokens will be needed. Some people classify digital currencies as a third type of token but they can just as easily be understood as a utility token. For example, we might think of Bitcoin. Ultimately, Bitcoin's value comes from its capacity to be exchanged for some service or exchanged for some other currency that can be used within a national economy. Currencies like the dollar or remnant B have value because we believe they have value. But ultimately they rest upon the fact that they are supported by the massive real economy of the US and China. Really, they are utility tokens that give you access to the services delivered by those economies. If the Japanese real economy disappeared tomorrow the currency would crash because people would stop being able to buy things with it. Currencies are just mediums of exchange and agreements about what we value but they are supported by real economies and governments that make sure those currencies can be used to access the goods and services within their economies. Bitcoin may not be directly linked to any one national economy but at the end of the day it is linked to the global economy in one's capacity to exchange it for other fiat currencies that are linked to national economies. Thus we can see how currencies are a form of utility token that provides access to the services created by a given economy. Whereas fiat currencies provide access to a national economy tokens provide access to a blockchain based networked economy. Because tokens have a price they can be issued and sold at the creation of a new network to fund its development. Similar to the way startups have used crowdfunding platforms like Kickstarter to fund their future development. The money is typically received in digital currency form and goes to the founding organization that is developing the network and issuing the tokens. In the same way that a company increasing sales is an alternative to raising money. Token launches can be an alternative to traditional equity based financing and as we'll discuss in a future module can be an effective way to fund previously unfunded shared infrastructure like open source projects. Utility tokens also called app coins or user tokens represent future access to an organization's product or service. The defining characteristic of utility tokens is that they are not designed as investments. If properly structured this feature exempts utility tokens from legal regulation covering traditional forms of securities. By creating utility tokens a startup can sell digital coupons for the services that it's currently developing much like retailers may accept pre-orders for a good that may only be available weeks later. Filecoin for example raised over $200 million by selling tokens that will provide users with access to its decentralized cloud storage platform. Thus we can see the traditional defines that defined the industrial age financial system become blurred and redefined within this new model of token economics. Question is though, why do we need hundreds of thousands of different types of tokens? Why don't we just pay for everything in dollars that we used to or even in bitcoins? Wouldn't this be simpler? Answering that question goes to the heart of the distinction between token economics and the traditional industrial age economic system. We'll talk about this in the coming module.