Bitcoin Cash has one native token: BCH. Some people want the ability to create more tokens on Bitcoin Cash. There are many different ways to do this that have very different properties.

Motivation

It would be nice to be able to issue stocks, bonds and other financial assets on Bitcoin Cash, legal and illegal, moral and immoral, in a way that can be stored and transmitted without permission just like BCH. Furthermore, it would be nice if these assets could be traded atomically for each other and for BCH. And finally, it would be nice if we could execute smart contracts with these assets just as with BCH. We can see this done in practice on the Ethereum blockchain to great success, as well as on the Bitcoin (BTC) blockchain with Tether.

Legality

The law holds for people and companies in legal jurisdictions. Tokens can be legal or illegal or used in legal or illegal ways. People or companies who commit crimes can and often will be prosecuted and ultimately go to prison. Just as how people can commit crimes with money, they can also commit crimes with other financial instruments like stocks and bonds. However, this does not mean that the laws of any particular jurisdiction should be encoded in the protocols used to create or transmit financial instruments, similar to how SMTP (email) or HTTP (the web) do not ban message that are illegal in some jurisdictions. The law operates independently of these protocols.

Permissionlessness

Some people doubt the viability of permissionless tokens that still have a central point of failure. Consider a stock that can be freely traded amongst users, but where in order to retrieve the dividend, the owner must submit KYC information. The tokens can be traded without permission, but they cannot be redeemed without permission. That is a property of a particular token. Some tokens can be more permissioned than others. Some tokens can be completely permissionless just like BCH. That the market desires at least some fully permissionless tokens is readily seen on the Ethereum blockchain as well as with blockchains themselves such as Ethereum, Bitcoin, Bitcoin Cash, Monero, etc.

Incentives

There are good reasons to doubt the viability of tokens on Bitcoin Cash due to the incentives that keep the system secure. If miners are securing other assets but being paid in BCH, it is questionable whether the incentives are still correct to make Bitcoin Cash secure, especially if the assets become wildly more valuable than BCH itself. Should miners earn transaction fees paid in tokens as well as BCH? Whatever token system we choose, it should be convincing that miners incentives are still correct to secure the chain. Just because tokens are being used at present on Ethereum does not mean they have correct incentives - it could be that the system is doomed to failure, similar to how some insecure blockchains are not necessarily 51% attacked on launch day, but are 51% attacked some time later.

Colored Coins vs. Miner-Enforced

It is possible today to create tokens on Bitcoin Cash using colored coins protocols that are already used on Bitcoin. We do not need any protocol changes to use colored coins. In fact, colored coins on Bitcoin Cash are even easier than on Bitcoin both because the OP_RETURN data size is larger and because transaction fees are lower.

The colored coins protocols I am aware of are:

Another protocol that does not require any protocol changes to Bitcoin Cash but that isn't properly categorized as a colored coin is Tokeda . The Tokeda protocol is partially secured by miners because all transactions are normal on-chain Bitcoin Cash transactions, but the issuer must sign all transfers which means it is not fully permissionless.

GROUP is a proposal to change the consensus protocol of Bitcoin Cash to allow tokens that are fully permissionless and which can use the same smart contract system as BCH. GROUP was recently discussed by Bitcoin Cash protocol developers , but no consensus was reached about including GROUP in the next hard fork. The top criticisms of GROUP were that it was unclear whether permissionless tokens have value, whether they would be problematic for the incentives that secure the blockchain, or whether GROUP was any better than permissionless colored coins protocols that don't require changing the consensus protocol.

Money Button Inc.: A Use-Case for Tokens

We are considering making a token for the Money Button . This token would be different than most other tokens in the cryptocurrency world. If possible legally, we would like to issue our company equity in the form of a token. Technically, the company is called Yours Inc., but for marketing purposes we would rebrand to Money Button Inc.. We would issue our company equity on the Bitcoin Cash blockchain in order to raise our next round. We would give tokens in the correct amount to all existing shareholders. The token would map 1-to-1 to shares in the company. When we earned a profit, we would distribute a dividend to shareholders.

The token would satisfy these properties: The token itself could be stored and transmitted in a permissionless way that does not require a signature from the company. Dividends would be paid to all token holders. At issuance, we would probably need to do KYC, but not necessarily at transfer, and not necessarily at the time of dividend payment - these are questions for the lawyers.