This post is part of a series on how everyday investors can understand the word token in the context of blockchain networks.
The word "token" is most widely used to reference a type of crypto asset, or asset issued on a blockchain network. You might have heard someone talk about the "DOGE token," a "token for this new project," or a non-fungible token (NFT).
In general, ledgers are a record of accounts and associated transactions. This is a complex way of saying "a list of things that happened." When accurate, one should be able to use that list to understand who owns what in a financial context. Ledgers are used by almost every financial institution. They are the backbone of modern finance.
Tokens are a ledger system leveraging blockchains to make ledgers more powerful than before. Tokens take ledgers from being an append-only record of transactions to a programmable primitive for any system you can imagine. Tokens make ledgers natively 24/7 and openly accessible.
In the rest of this article, we will unpack how tokens function as a new ledger system and how they are better than the systems we already have.
Tokens are good ledgers
Tokens are good ledgers because they have three qualities: triple-entry, immutable, and auditable by default.
Triple-entry by default
When you make a token transfer on a blockchain, three things happen at once: the sender's account is debited, the receiver's account is credited, and the overall transaction is recorded on the blockchain. This is triple-entry accounting, and it simplifies the typical reconciliation step in traditional accounting. Rather than looking at each party's account state independently, you can step through all the transactions onchain to see the state of the entire system at any time.
To understand why this matters, consider how accounting has traditionally worked. Double-entry accounting, the practice of recording every transaction as both a debit and a credit, originated in the 15th century with Luca Pacioli. If Alice sends Bob $100, there are two records in the ledger: Alice's balance reduced by $100 and Bob's increased by $100. This innovation made ledgers robust enough to model the complex financial systems we have now. Tokens take this a step further by adding the third entry, the onchain record, which makes the full transaction history verifiable without needing to reconcile separate books.
Immutable by design
Tokens on blockchains are always immutable. Blockchains at their core are already ledgers, a record of transactions that can't be tampered with. Tokens built on them inherit this property. This immutability is enforced cryptographically and economically. Blockchains are designed so that it is very clear when someone is tampering with the chain state, and most other participants are financially incentivized to identify this and punish the bad actor. This means there are a large number of people at all times watching the state of the chain, making sure it is maintained correctly.
Why does this matter? Because immutability is one of the most important properties a ledger can have. For a ledger to be reliable, once transactions are recorded, they should never be changed. In the case of a mistake, you append new transactions to fix it rather than altering the ledger. If you are instead able to delete entries from the ledger to fix a mistake, the flow of funds instantly becomes unclear. This opens the door to fraud, missing money, and general operational headaches.
With traditional ledgers, immutability is enforced by how the ledger is created by the given institution. The implementation details are left to them, which means you have to trust that they have constructed their ledger well. There have been a fair number of cases like Synapse where that trust led to massive amounts of missing money for end consumers. Tokens remove this trust requirement entirely.
Auditable by anyone
Token-based ledgers can always be audited, not just by a single auditor but by anyone at any time. Every action on a blockchain is public, including all actions with tokens. A great example of this transparency is PayPal's stablecoin partner Paxos minting $300 trillion of their stablecoin. Because the ledger is open, the error was immediately visible. With tokens as a ledger system, opaque mistakes and hidden fraud simply aren't possible in the same way.
This is a meaningful departure from how auditing typically works. In traditional finance, auditing is permissioned. The auditor has to ask for the "books" of a given entity and then reason about its health. Typically this works. However, there are notable examples of it failing catastrophically.
Enron hid massive amounts of debt using Special Purpose Entities and aggressive mark-to-market accounting, making their balance sheets look far healthier than they were. Their auditor, Arthur Andersen, had a major conflict of interest since a majority of their consulting revenue came from Enron, and they were caught destroying auditing documents. Lehman Brothers used a maneuver called "Repo 105" to temporarily remove assets from their books just before audit windows, disguising how exposed they were to mortgage-backed securities during a housing bubble. Their auditor, Ernst & Young, was aware of the treatment but didn't flag it. Both failures had devastating consequences for investors and the broader financial system.
It is likely that mistakes and obfuscations like these are happening all the time in traditional finance. With token-based ledgers, the books are always open.
Tokens are also programmable
Tokens are triple-entry, immutable, and auditable by default. They are also programmable. Typically, connecting a ledger to external systems requires permission to access the ledger. This usually means developers must write their own ledger for a given use case. However, with tokens, the ledger is open and accessible. You can use tokens on blockchains like the Solana network right now. These token ledgers can be infinitely programmed, only constrained by the rules of the blockchain.
Conclusion
Ledgers have been a cornerstone of financial systems for centuries, but they have always been limited by the institutions that maintain them. Trust, permissions, and opaque processes have introduced vulnerabilities that, as Enron and Lehman Brothers showed, can have devastating consequences.
Tokens represent a meaningful step forward. By building on blockchains, they inherit properties that traditional ledgers have always aspired to but struggled to guarantee: triple-entry accounting that simplifies reconciliation, cryptographic immutability that removes the need for blind trust, and open auditability that anyone can verify at any time.
This doesn't mean tokens are a perfect solution for every use case. However, for systems where transparency, reliability, and accessibility matter, tokens offer a foundation that is fundamentally stronger than what came before. As more financial infrastructure moves onchain, understanding tokens as a ledger system will be essential for any investor looking to navigate what comes next.