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Cryptographic Token

February 16, 2018

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Cryptographic Token

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What is a Cryptographic Token?

A cryptographic token is a digital or physical item used for authentication, storing cryptographic keys, or representing assets on a blockchain, differing in function from a physical hardware security token to a digital blockchain token. The former, a physical security device, stores secret cryptographic information and performs operations like generating digital signatures to verify identity. The latter, a blockchain token, is a unit of value on a blockchain, used to grant access to products/services, represent digital or real-world assets like art, or function as an exchange token for goods and services. 

Types 

  • Physical/Hardware Tokens: These are portable devices like smart cards or USB security tokens that store cryptographic keys and perform cryptographic functions.
    • Functionality: They are used for multi-factor authentication and to generate secure digital signatures by performing cryptographic operations with their stored private keys, such as in PKI (Public Key Infrastructure) systems. 
    • Example: A bank card or a USB device containing a smart card chip, which can receive a random challenge from a server and then encrypt it with a secret key to verify the user’s identity.
  • Blockchain/Digital Tokens: These are digital assets built on top of existing blockchain networks to represent various items or functionalities. 
  • Utility Tokens: Grant holders access to a specific product or service within a blockchain ecosystem, often used during Initial Coin Offerings (ICOs) to raise funds. 
  • Non-Fungible Tokens (NFTs): Unique, non-replicable tokens that represent ownership of digital or real-world assets, such as artwork, collectibles, or property rights. 
  • Exchange Tokens: Tokens specific to a cryptocurrency exchange, offering benefits like discounted trading fees to the holder, according to Corporate Finance Institute. 

Key Differences

  • Purpose:
    A hardware token is for securely storing cryptographic information and authenticating identity. A blockchain token is primarily for representing digital value, ownership, or utility within a blockchain ecosystem. 

  • Environment:
    Hardware tokens operate outside the blockchain, providing a secure physical interface. Blockchain tokens exist on a blockchain network. 

Legacy Definition

A token where the secret is a cryptographic key.
SOURCE: SP 800-63

A portable, user-controlled physical device (e.g., smart card or PCMCIA card) used to store cryptographic information and possibly also perform cryptographic functions.
SOURCE: CNSSI-4009

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