A token is a particular smart-contract that contains a ledger. The token generally provides a way to increment the amount of its account (mint operation) and ways to transfer amounts from accounts to accounts.
The person issuing the token has full power over the token.
On the contrary to cryptocurrency, tokens are simple smart-contract and not handled by the blockchain protocol itself.
The tokens are generally stored inside the blockchain, encrypted via the owner keypairs that are stored in cryptocurrency wallet or custody.
According to https://en.wikipedia.org/wiki/Cryptocurrency#Crypto_token,
A blockchain account can provide functions other than making payments, for example in decentralized applications or smart contracts. In this case, the units or coins are sometimes referred to as crypto tokens (or cryptotokens).
Notes linking here
- blockchain wallet
- hardware solutions to highly-adversarial environments
- misconceptions about wallets, tokens and keys
- non-fungible token
- wrapped token