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glossary

Definitions and terminology related to cryptoeconomics, blockchain and distributed ledger technology.
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Contribution Tokens

Contribution tokens are those that confer holders the right to play critical roles in the consensus process, contribute to network maintenance, or perform other types of work. This can include block creation or validation (as in all Proof of Stake mechanisms) but can also include many other roles that are important to the protocol, platform, or service.

The token functions as an official license to practice on the network, somewhat like taxi medallions enable holders to offer official taxi services or liquor licenses enable holders to sell liquor. In this case, however, tokens can be purchased and typically holding more tokens increases the ability to perform work and earn fees; in addition, services on the platform are rarely regulated in the way taxi fares and liquor prices are. Network popularity makes branded services more valuable and available services contribute to a network’s popularity: contribution tokens, in principle, enable holders to benefit from their labor’s contributions to network growth. The token is also almost always used as collateral to incentivize good behavior by those performing work, who could lose their tokens if they misbehave.