First, starting from zero, blockchains provide a decentralized sense of trust. Participants don’t need a centralized institution to provide trust in a blockchain system. Governments, banks and other institutions traditionally provide this trust, but with blockchains, trust is provided through a mathematical algorithm. From a technical perspective, trust in the blockchain can be regarded as information recorded in the blockchain’s decentralized ledger. What makes this information special is that once it cannot be changed once it is recorded.

Blockchain records cannot be changed. The most direct application of this is anti-forgery traceability and authentication. This is the first application that comes to mind in practice. Blockchain can be used in combination with traditional applications to track goods and assets because once the information is recorded, it cannot be changed. So applications first need a blockchain to use. Tokens are not necessary for this kind of application, only a medium for recording information.

Second, from a strictly linear perspective, blockchain is a decentralized form of trust, and this trust can be circulated. Technically, some of the information in the ledger can also be altered. The simplest pro to this is that we can use a number to represent certain information. Addition or subtraction operations can be performed on this number during the circulation process. This becomes a token. A token is essentially a number recorded on the blockchain.

One of the most influential applications of this is ICOs. ICOs are generally regarded as a way to obtain financing. But it can also be thought of as an application that cleverly takes advantage of the blockchain’s performance. There are many smart contract-based applications, such as crypto-assets like Cryptokitties, which distributes virtual assets in a smart contract and defines the logic for crypto-cat reproduction, recording it on the blockchain. Similarly, games can be created using smart contracts. Gambling is an example, because the two parties can predict the results of events that will happen in the future, and the smart contract will decide what rewards each will receive.

If one wishes to create support for similar applications, then blockchains need to support smart contracts. This is the current development direction of public chains. At this stage, you can use a token-based blockchain, the most natural choice. Alternatively, a non-token blockchain can be used if the non-token blockchain supports smart contract functionality.

Tokens provide the following 3 functions in the public chain system:

First:

Maintain chain security by resolving attacks meant to paralyze the system by launching a large number of transactions.

Second:

System resource issues are also solved. In the relatively crowded system, more incentives can be provided to miners, prioritizing transactions and adjusting system resource allocation.

Third:

More individuals are persuaded to provide operational support to the public chain. Because miners are the ones who maintain the public chain system, and these miners are a collection of random individuals from the internet. Tokens can create motivation to provide operational support for the chain. Without token incentives, the chain will simply become an alliance or private chain.