$XRP One common use of tokens is stablecoins. You may work for a bank’s stablecoin initiative that will create USD tokens on XRPL backed by customers’ deposits.

In order to have an easier time checking how many tokens exist at all times, instead of just having the issuer account and the recipient account, you may want to use an in-between account often called a hot account. Tokens would be created through a payment between 2 accounts under your control. These two accounts are often called ‘cold’ and ‘hot.’

The cold account will issue tokens by sending them through a payment transaction to the hot account. The created tokens will be sitting in the hot account as a reserve.

The hot account will be in charge of sending the tokenized dollars to fiat depositors’ accounts as deposits occur.

If the system is hacked, the real issuer of the tokens remains unaffected (that’s why it’s called a cold account). One thing to note here is that token holders need to establish a trustline with the issuing (cold) account in order to be able to receive, hold, and use