Crypto tokens are special kinds of virtual currency tokens that reside on their own blockchains and represent assets or utilities. For example, one can have a crypto token representing x number of customer loyalty points on a blockchain used to manage such details for a retail chain. Another crypto token gives entitlement to the token holder to view 10 hours of streaming content on a video-sharing blockchain. Another crypto token may even represent other cryptocurrencies, like one such token being equal to 15 bitcoins on a particular blockchain. Such crypto tokens are tradable and transferrable among the various participants of the blockchain.
Such crypto tokens often serve as the transaction units on the blockchains created using the standard templates like the Ethereum network that allows users to create their own tokens. Such blockchains work on the concept of smart contracts or decentralized applications, where the programmable, self-executing code is used to process and manage the various transactions occurring on the blockchain.
In essence, cryptocurrencies and altcoins are specific virtual currencies with their own dedicated blockchains and are primarily used as a medium for digital payments. On the other hand, the crypto tokens operate on top of a blockchain that acts as a medium for creating and executing decentralized apps and smart contracts. The tokens are used to facilitate the transactions.
Such crypto tokens are usually created, distributed, sold, and circulated through the standard initial coin offering (ICO) process that involves a crowdfunding exercise to fund project development.