What is a Token in AI?
Learn the fundamentals of AI tokens, how they work, and why they matter for API pricing and usage.
What is a Token in AI?
Tokens are the fundamental units that AI models use to process and understand text. Think of them as the building blocks of language that AI systems can work with.
How Tokens Work
When you send text to an AI model, it doesn't read words the way humans do. Instead, it breaks down your text into smaller pieces called tokens. These tokens can be:
- Whole words (like 'hello' or 'world')
- Parts of words (like 'un-' in 'unhappy')
- Punctuation marks
- Spaces and special characters
Why Tokens Matter for Pricing
AI API providers like OpenAI, Anthropic, and Google charge based on the number of tokens processed. This includes both:
- Input tokens: The text you send to the AI
- Output tokens: The text the AI generates in response
Understanding token counts helps you estimate costs and optimize your AI usage for better efficiency.
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