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Tokens and Accounts in the Context of Digital Currencies

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  • Alexander Lee
  • Brendan Malone
  • Paul Wong

Abstract

This report provides an overview of two concepts that come up frequently in discussions of digital currencies: tokens and accounts. The meaning of each concept differs depending on context. For cryptocurrencies, the term "token" has a relatively straightforward, technology-specific definition. For central bank digital currencies (CBDC), the term "token" takes on more of a conceptual or analytical meaning. To further complicate matters, "tokens" and "accounts" are not always mutually exclusive ideas. This paper identifies areas where this terminology has caused confusion and explains why the terminology is problematic in an effort to improve the technical and conceptual discourse on digital currencies and the "tokenization" of financial assets.

Suggested Citation

  • Alexander Lee & Brendan Malone & Paul Wong, 2020. "Tokens and Accounts in the Context of Digital Currencies," FEDS Notes 2020-12-23, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfn:2020-12-23
    DOI: 10.17016/2380-7172.2822
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    File URL: https://www.federalreserve.gov/econres/notes/feds-notes/tokens-and-accounts-in-the-context-of-digital-currencies-122320.htm
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    Cited by:

    1. Aldar C-F. Chan, 2021. "UTXO in Digital Currencies: Account-based or Token-based? Or Both?," Papers 2109.09294, arXiv.org.
    2. Xin, Baogui & Jiang, Kai, 2023. "Central bank digital currency and the effectiveness of negative interest rate policy: A DSGE analysis," Research in International Business and Finance, Elsevier, vol. 64(C).

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