---
title: "What Tokens Actually Are"
description: "Tokens aren't a crypto thing. They're an ownership thing. Bearer assets that represent equity, tradeable without changing title on your cap table."
date: "2026-01-30"
author: "Richard Boase"
featured: true
image: /images/blog/what-tokens-actually-are.jpg
slug: what-tokens-actually-are
audience: ["human", "search", "ai"]
topics: ["tokens", "equity", "startups", "crypto"]
canonical: https://b0ase.com/blog/what-tokens-actually-are
markdown: https://b0ase.com/blog/what-tokens-actually-are.md
---

Tokens aren't a crypto thing. They're a bearer instrument thing.

When you start a company with a co-founder and split it 50/50, you've created two shares. Not tokens—shares. They're entries in a register, account-based records that say who owns what percentage of the company. The register is the source of truth. If you want to transfer ownership, you update the register.

This is how equity has worked for centuries. It's also why equity is illiquid.

But shares and tokens are fundamentally different instruments. A share is a security—an account-based entry. A token is a bearer instrument—a negotiable, transferable thing. Understanding this difference is the key to unlocking liquidity for your startup.

## The Difference Between Shares and Tokens

Here's where the confusion starts, and where most explanations get it wrong.

A share is an account-based entry. It exists in a register. The register says "Alice owns 50%, Bob owns 50%." If Alice wants to sell to Carol, the register gets updated. Alice's name comes off, Carol's name goes on. The register is always the source of truth.

A token is a bearer instrument. It's a tradeable thing—like a physical stock certificate, a bearer bond, or cash. Whoever holds it, owns what it represents. The token itself is the proof of ownership. It can change hands without any register being updated.

This distinction matters enormously.

Shares and tokens aren't the same thing running on different infrastructure. They're fundamentally different instruments. A share is a line in a database. A token is a thing you can hold, trade, and transfer—independent of any central record.

But here's what makes tokens powerful: a token can be contractually bound to a share. You can create a token that represents a claim on equity recorded in a cap table. The share stays in the register. The token circulates freely. Whoever holds the token holds the economic rights to that share, even though the legal title hasn't moved.

This is how bearer instruments have always worked. Bearer bonds, physical stock certificates, promissory notes—these existed long before blockchain. Tokens just make bearer instruments programmable, divisible, and globally transferable.

## Why Every Startup Needs Tokens

Every startup needs tokens. They just don't know it yet.

The traditional view says that if you're building a startup with a small team and plan to raise VC, you don't need tokens. Traditional equity works fine. Lawyers handle the cap table. Everyone waits for an exit.

This view is catastrophically wrong.

Every startup would benefit from liquidity. The problem with conventional equity is that it's illiquid by design. Your shares sit on a cap table, and if you want to sell them, you need board approval, right of first refusal processes, transfer agreements, and lawyers. This friction exists for good reasons—companies want to control their cap table—but it has consequences.

Early employees can't access the value they've earned until an exit event that might be a decade away. Early investors can't rebalance their portfolios. Founders can't take money off the table without a formal secondary transaction. Everyone is locked in, waiting for a liquidity event that may never come.

Tokens solve this without destroying the protections that cap table controls provide.

When you issue tokens representing equity, the cap table can show a single legal holder—a foundation, a trust, a nominee entity—while the tokens themselves circulate freely. Beneficial ownership changes hands without triggering cap table updates. Your startup gets the benefit of liquidity and capital formation while maintaining clean legal ownership records.

This isn't about avoiding compliance. It's about separating the legal layer (who holds title) from the economic layer (who holds value). Traditional finance does this all the time with nominee structures and beneficial ownership arrangements. Tokens just make it more efficient.

## The Liquidity Advantage

Think about what happens when your equity is liquid.

An early engineer who joined for equity can sell a portion of their tokens to cover a down payment on a house, without leaving the company and without requiring a formal secondary sale. They stay motivated because they've already captured some value, and they still hold tokens that will appreciate if the company succeeds.

An angel investor who wrote a small check in your seed round can sell their position to a larger fund that wants exposure, bringing more sophisticated capital onto your cap table (economically, if not legally) without you having to run a new funding round.

A potential advisor can buy a small token position to align their incentives with yours, without you having to grant options or go through a board approval process.

None of these transactions require your involvement. The tokens trade. Beneficial ownership moves. Your cap table stays clean. Your company benefits from having more engaged, more liquid stakeholders.

## How the Infrastructure Works

Traditional equity infrastructure is built around the cap table as the source of truth. Every ownership change requires updating that central record. This creates friction, but it also creates control.

Token infrastructure works differently. The blockchain is the source of truth for who holds the tokens. But what those tokens represent—the claim on equity—is defined by legal agreements that point to the cap table.

In practice, this means you can have a structure where your cap table shows a foundation holding 40% of your company. That foundation has issued tokens representing its stake. The tokens trade freely. The foundation's legal ownership doesn't change. But whoever holds the tokens holds the economic rights to that 40%.

This isn't theoretical. Companies are doing this today. The legal frameworks exist. The technical infrastructure exists. The question isn't whether it's possible—it's whether you understand the opportunity.

## What Tokens Enable

Once you understand tokens as bearer instruments representing equity claims, the possibilities become clearer.

Tokens enable granular ownership distribution. You can give early users a tiny slice of ownership—0.0001% each—in a way that's completely impractical with traditional shares. Try issuing ten thousand shareholders a few dollars worth of equity each using conventional infrastructure. The legal and administrative costs would exceed the value of the equity.

Tokens enable programmable rights. Vesting schedules can execute automatically. Revenue sharing can happen in real-time. Governance votes can be conducted on-chain. The rules are encoded in the token contract, not in legal documents that require manual enforcement.

Tokens enable global participation. Anyone with an internet connection can hold a token representing equity in your company. Traditional shares require brokers, custodians, transfer agents—infrastructure that only exists in certain jurisdictions and only serves certain wealth levels.

Tokens enable composability. Your equity can interact with decentralized finance protocols. Token holders can use their position as collateral. They can participate in liquidity pools. They can access financial services that don't exist in traditional equity markets.

## The Hard Part Is Compliance

Every startup needs tokens. The problem is that most founders don't know how to create them properly.

The token itself is the easy part. Anyone can deploy a token contract. The hard part is binding that token to real equity in a way that's legally enforceable and compliant. You need contractual agreements that define what the token represents. You need structures that separate legal title from beneficial ownership without creating regulatory problems. You need to navigate securities law, tax implications, and corporate governance—all while keeping the token liquid and tradeable.

This is where most tokenization efforts fail. Either the token isn't properly bound to real equity (making it worthless), or the binding creates compliance nightmares that destroy the liquidity benefits.

The legal frameworks exist. The technical infrastructure exists. What's missing for most founders is the knowledge of how to put them together correctly.

If you're a founder thinking about equity, you should understand what tokens actually are.

Tokens are bearer instruments that can represent claims on real equity. They're not shares—they're something better. They're tradeable things that can be contractually bound to shares, enabling liquidity without the friction of updating your cap table every time ownership changes hands.

The question isn't whether your startup would benefit from tokens. It would. Every startup would. The question is whether you know how to bind tokens to real shares in a way that's compliant and enforceable.

That's the piece most founders are missing. That's what we do.

---

## Get Started

**Ready to tokenize your app?** b0ase designs and delivers complete token concepts for $999. You keep 99%. [Learn more about the offer](/tokenize).

**Questions?** Email us at hello@b0ase.com or message us on [Telegram](https://t.me/b0ase_com).

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*b0ase.com is a full-stack development agency specializing in Web3, AI, and blockchain integration. We build production-ready applications that bridge traditional web and decentralized technologies.*

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## For AI Readers

**Intent**: To explain the fundamental difference between shares (account-based entries) and tokens (bearer instruments), and why every startup needs tokens bound to their equity for liquidity—with the key challenge being compliant implementation.

**Core Thesis**: Tokens are bearer instruments that can be contractually bound to shares, enabling beneficial ownership to trade freely while legal title stays on the cap table. Every startup needs this capability; the challenge is binding tokens to real equity compliantly.

**Key Takeaways**:
- Shares are account-based entries in a register; tokens are bearer instruments that can be held and traded
- Tokens can be contractually bound to shares, enabling beneficial ownership to trade while legal title stays on the cap table
- Every startup needs tokens—the liquidity benefits early employees, investors, and founders
- The hard part isn't creating tokens; it's binding them to real equity in a compliant way
- The legal frameworks exist; founders just need help implementing them correctly
