What is a Token? Discover the Latest Types of Tokens in 2024

What is a Token?

A token is an encrypted electronic device that generates random numbers (digital signatures) for each online transaction. These codes are similar to OTP – they are used only once and are randomly generated.

Although they are just numbers, token codes are considered mandatory passwords to carry out online transactions, replacing traditional signatures and having similar legal value.

There are two main types of tokens:

• Hard Token: A physical device like a USB, convenient to carry around.
• Soft Token: Software installed on electronic devices like phones, computers.

Nowadays, not only banks but many businesses also use tokens to enhance the security of online transactions. The compact, portable design allows users to carry them when needed.

How do tokens work?

When logging into a software/website using digital signatures, users can apply a token code for authentication:

1. Log in using the registered username and password.
2. After successful login, the system requires entering the token code – this is the digital signature verification step.
3. The token code is generated as a 4-6 digit random number, depending on the issuing organization (e.g. Facebook usually uses 6 digits).
4. If logging in from a non-computer/smartphone device, the user will need to confirm with the token code.
5. The token code is only valid for a certain time period (e.g. 10 minutes), after which it will no longer be accepted.

For Hard Token devices (like USBs), they create a public/private key pair and store user information, used for official online transactions.

Using token digital signatures helps minimize costs and enables transactions to be faster and more efficient.

How to use Tokens?

Tokens are recognized as a smart device with advanced encryption technology, helping ensure high security for online services. Specifically, the process of using a token to perform online banking transactions consists of 3 steps:

Step 1: Log in to the official bank website using the registered username and password.

Step 2: Select the transaction type you want to perform.

Step 3: Enter the OTP (One-Time Password) generated by the token device.

After completing these 3 steps, the internet banking transaction will be executed quickly and securely, with a high level of security. This helps users feel confident about the safety of their online transactions.

Thanks to advanced encryption technology, tokens have become a smart solution and are highly valued in protecting the safety of online services.

Some Key Token Terminology

After understanding the concept of Token, you need to grasp some basic and common terms related to using Tokens. Here are a few definitions:

What is a Token Key?

A Token Key is a security device provided by the bank for customers when using internet banking or mobile banking services. It is a device similar to a USB drive, containing a randomly distributed OTP (One-Time Password).

The OTP in the Token Key plays an important role in authenticating the user’s identity when performing online transactions with the bank. Using the Token Key helps enhance the security of internet banking and mobile banking transactions.

What is an Access Token?

An Access Token, also known as a “Facebook Token”, is a string of characters used to verify a user’s identity.

Applications or application pages (such as Facebook Fanpages) can use this Access Token to make API (Application Programming Interface) calls.

This means that the Access Token acts as a “key” for the application to access and interact with features and data on the Facebook platform on behalf of the user.

Using the Access Token helps securely authenticate the user, ensuring privacy and security when using applications related to Facebook.

What is an Invalid Token?

“Invalid Token” means that the token (code) is not valid.

This often happens when the user enters the wrong token code when making online transactions, such as online banking.

Remembering the term “Invalid Token” is very important, as it will help the user quickly identify and resolve the problem when encountering this error. They can then re-enter the token code correctly.

Advantages and Disadvantages of Tokens

Advantages of Tokens:

• High Security: Tokens provide high security, ensuring the safety of online transactions. The OTP can only be accessed by the account holder, eliminating concerns about password leaks.
• Compact Size: Token devices are usually designed to be compact and easy to carry around.
• Simple to Use: The process of using a Token is very simple, only requiring a single step to use it easily.

Disadvantages of Tokens:

• Short OTP Validity: The OTP is only valid for a short time period (usually 60 seconds), which can be inconvenient but also improves security.
• Dependence on the Device: For Hard Tokens, the user must carry the device to perform transactions, otherwise they will face difficulties.

What is a Token in Blockchain?

A token in the blockchain is a type of digital asset that is issued and operates on the blockchain platforms of existing projects, without requiring ownership of a separate blockchain. They play an important role in identifying and interacting with the project’s systems.

A notable point is that tokens can be used as a payment method within the ecosystem of the project they belong to.

Although tokens and coins are often used interchangeably to refer to cryptocurrencies, they have an important distinction:

• Holders of tokens have the right to participate in the network and activities of the project system.
• Coins usually represent a unit of currency and do not require the right to participate in the network.

In the current cryptocurrency ecosystem, the use of tokens has become very common. Some blockchain platforms like Ethereum, NEO, Tron, etc. have the ability to create tokens that conform to different token standards.

Related: What is Blockchain? How does Blockchain Work?

Conclusion

Through the article “What is a Token? Distinguish the latest token types in 2024“, we have provided you with the concept of tokens and the various types of tokens available today. If you still have any questions, please leave a comment below and we will be happy to assist you.