Tokens play a pivotal role in DeFi smart contract development by serving as digital representations of assets, currencies, or utility within the decentralized finance ecosystem. They enable seamless value transfer, governance participation, staking and rewards, liquidity provision, utility and access to specific features, interoperability between protocols, and token sales/fundraising. Tokens are created and managed through smart contracts on blockchain platforms like Ethereum, providing a standardized and programmable way to represent and interact with various assets and functionalities. They empower users to engage in decentralized financial activities, democratizing access to financial services and unlocking new possibilities for innovation in the DeFi space.