List the different types of crypto tokens
After the surge of cryptocurrencies and their impact on the market, there has been a steady rise in the demand for cryptocurrencies. Their mass adoption has led to the surge of many projects seeking the application of Blockchain technology.
After Bitcoin, there were other cryptocurrencies that made their way into the market, and the next in the league was Ethereum. It gave rise to the term token; there are different types of tokens based on their utility and applications.
Cryptocurrency tokens are fungible digital assets that can be traded inside of the issuing Blockchain project network. As mentioned above, there are different types of tokens, and they serve various purposes. Here we have enlisted some of the types of tokens:
Platform tokens
Security tokens
Currency tokens
Utility tokens
Asset tokens
Elaborating on the different types of tokens
Platform tokens- These tokens are used in Blockchain infrastructure to provide decentralized applications for different uses. One of the examples of this is Dai. You can put this as a stable coin because it is soft-pegged to the US Dollar, and to maintain the pricing, it uses smart contractors. You can put it as a platform token because it is built on Ethereum Blockchain. Platform tokens find a multitude of applications like their used in gaming and global digital collectibles platform.
Security tokens- These work the same way as traditional securities like debentures, stocks, or shares. When you invest in security tokens, you get the rights and share in the company’s stocks. Federal laws and stock trading rules limit security tokens.
Reward tokens- These are designed as reputation tokens for a specific Blockchain application. They are given for free in exchange for appreciation. These may not hold the same value as that of a standard token. One of the examples of reward tokens is Medipedia Point Rewards which is given to the service providers present on the platform for their performance review.
Asset token- I’m sure you would have heard about the tokenization of assets. The asset tokens are backed by a real asset like gold, real estate, or bonds. These tokens hold the value of the asset and hence are used for buying and selling. With the help of asset tokens, it becomes easier to trade the physical asset on digital platforms.
Currency token- These tokens work in the same manner as the real currency and are used for transactions. The classic example of this is Bitcoin.
What’s next?
These are some of the popular crypto tokens. In recent years, crypto tokens and Blockchain have garnered a lot of attention. It has paved the way for new developments, which make business operations more scalable and digitally secured.
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