What Are Tokens?
Key Concept
A token is the basic unit of text that AI models use to understand and process language. Think of tokens as the "words" that AI models read, though they don't always match human words exactly.
When you send text to an AI model like GPT-4, Claude, or Gemini, the model doesn't read your text the same way humans do. Instead, it breaks your text down into smaller pieces called tokens.
Tokens can be:
- Whole words like "hello", "world", "amazing"
- Parts of words like "un-", "-ing", "-tion"
- Punctuation like ".", "!", "?"
- Spaces and special characters
Example: Token Breakdown
Text: "Hello, world! How are you?"
Tokens: ["Hello", ",", " world", "!", " How", " are", " you", "?"]
Total: 8 tokens
How Tokenization Works
Different AI providers use different tokenization methods:
OpenAI (GPT-4, GPT-3.5)
Uses tiktoken library
- • ~4 characters per token
- • ~0.75 words per token
- • Efficient for English text
DeepSeek
Optimized for Chinese & English
- • Efficient Chinese tokenization
- • Lower token counts for Chinese
- • Cost-effective processing
Important Note
The same text will have different token counts across different models. This is why you need model-specific calculators for accurate cost estimation.
Why Token Count Matters for Costs
AI providers charge based on the number of tokens processed, not the number of words or characters. This means:
Cost Calculation Formula
Total Cost = (Input Tokens × Input Price) + (Output Tokens × Output Price)
GPT-3.5 Turbo
$0.0015
per 1K input tokens
Claude 3 Haiku
$0.25
per 1M input tokens
GPT-4
$30
per 1M input tokens
Real-World Examples
Example 1: Simple Question
Input: "What is machine learning?"
GPT-4 Tokens: 5 tokens
Cost: 5 × $0.00003 = $0.00015
A simple 4-word question uses 5 tokens and costs less than a penny to process.
Example 2: Long Document Analysis
Input: 2,000-word document
Estimated Tokens: ~2,667 tokens
GPT-4 Cost: 2,667 × $0.00003 = $0.08
Analyzing a substantial document costs about 8 cents with GPT-4.
Token Optimization Tips
✅ Do This
- • Use concise, clear language
- • Remove unnecessary words
- • Use bullet points instead of paragraphs
- • Choose the right model for your task
❌ Avoid This
- • Repetitive instructions
- • Overly verbose prompts
- • Including unnecessary examples
- • Using expensive models for simple tasks
Tools for Token Calculation
Our Free Token Calculator
Use our free token calculator to get accurate token counts and cost estimates for all major AI models:
Key Takeaways
- Tokens are the basic units AI models use to process text
- Different models use different tokenization methods
- AI costs are directly tied to token count
- Optimizing prompts can significantly reduce costs