eCommerce is a booming sector of the business world, and with it has come a major shift in the perception and application of the industry. One of the intriguing facets of eCommerce has been the emergence of digital tokens, which are an alternative payment method being enforced by some companies. The entire system revolves around using electronic payments that are easier and more comprehensive than e-checks or e-cash. These electronic or digital tokens are the ingenious development of certain banks and financial institutions, to be used in the stead of aforementioned alternative online payment options. Thought they have been relatively slow to catch on, more and more people are taking an interest in utilizing digital tokens for online currency.
What Types of Digital Tokens Are There?
When you take the first step into the wonderful world of web currency, you need to be aware that there are different kinds of digital tokens available. Some digital tokens are backed by nothing and are merely concepts, which renders them ultimately negligible. The digital tokens that matter are the ones that have assets backing their worth, which makes them usable as a monetary substitute. When you are working with asset-oriented digital tokens, there are separate categories that emulate the way most physical transactions work in this day and age. You can utilize one of three different categories per purchase, and each category presents unique advantages and disadvantages in the online medium of monetary exchange.
Cash Substitute/Real Time Payment
With the cash substitute option of digital tokens, you use the electronic tokens for each transaction. These transactions take place through the exchange of the electronic currency, which is the most comparable to buying an item in a store with cash. It is easy and quick, but not long-lasting.
Debit Card Substitute/Prepaid Payment
By utilizing the debt card substitute method of digital currency, you are paying in advance for an item or service. The transactions still use digital tokens, but they have to be in your account before you can complete any transaction.
Credit Card Substitute/Postpaid Payment
When you take advantage of the credit card substitute alternative of digital token usage, you are authenticated by a third party and then subsequently verified after the act. The verification has to happen before the transaction is approved and successful.
How Do Digital Tokens Actually Work?
Digital tokens are far more complicated than they sound, which is reassuring since they represent real actual monetary value. You own tokens by way of a key or series of keys that allow you to access the tokens themselves. The tokens are not stored on your computer or in some real, physical space. They are concepts that symbolize a specific amount of money, and you can transfer these ideas of money to other people or businesses in exchange for goods or services.
The historical perception of money was originally developed in the form of an IOU, which was a simple slip of paper. You could leave your gold with a goldsmith, who would inscribe the value of the gold onto an IOU sheet. Then, you could take that sheet with you to purchase goods or services. In turn, when someone wanted to turn that piece of paper back into gold, they would simply have to visit the goldsmith and claim it. Digital tokens work in exactly the same way, without the physical movement of a piece of paper. They enable individuals to purchase goods or services in the online world the same way that money enables people to purchase goods in the real world.
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