2021/09/20 by Aldar C.-F. Chan, Chan, Aldar C-F. · 1 citation
Computer Science · #Advanced Data Storage Technologies #Algorithm #Artificial intelligence #Blockchain Technology Applications and Security #Computer science #Computer security #Computers and Society (cs.CY) #Cryptocurrency #Distributed systems and fault tolerance #Economics #FOS: Computer and information sciences #FOS: Economics and business #Order (exchange) #Representation (politics) #Security token #State (computer science) #Theoretical Economics (econ.TH) #Theoretical computer science #Token passing #Token ring
paper · pdf · doi:10.48550/arxiv.2109.09294
openalex publication_date 2021/09/20 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
There are different interpretations of the terms "tokens" and "token-based systems" in the literature around blockchain and digital currencies although the distinction between token-based and account-based systems is well entrenched in economics. Despite the wide use of the terminologies of tokens and tokenisation in the cryptocurrency community, the underlying concept sometimes does not square well with the economic notions, or is even contrary to them. The UTXO design of Bitcoin exhibits partially characteristics of a token-based system and partially characteristics of an account-based system. A discussion on the difficulty to implement the economic notion of tokens in the digital domain, along with an exposition of the design of UTXO, is given in order to discuss why UTXO-based systems should be viewed as account-based according to the classical economic notion. Besides, a detailed comparison between UTXO-based systems and account-based systems is presented. Using the data structure of the system state representation as the defining feature to distinguish digital token-based and account-based systems is therefore suggested. This extended definition of token-based systems covers both physical and digital tokens while neatly distinguishing token-based and account-based systems.