Cryptocurrencies are not just a medium of exchange anymore. They’ve come a long way since the creation of Bitcoin in 2009 and offer many different functionalities. In this episode of the “Do You Speak Crypto?” series we want to take a quick look at various types of crypto tokens and the features they offer.
Alternative Coin (Altcoin)
Any cryptocurrency other than Bitcoin, like Ethereum or DIFX Token, is called an altcoin.
Type of cryptocurrency that follows the price of another financial instrument or asset. A stablecoin may be pegged to the price of fiat currencies like the US dollar or commodities like precious metals. Unlike other cryptocurrencies, stablecoins are less volatile and tend to keep their price within a close range of the underlying asset.
Tether (USDT) is currently one of the top stablecoins in the market and is pegged to the US dollar. Based on its price history, it has stayed close to $1 at all times.
Privacy coins, like Monero, use privacy-preserving techniques to obscure transaction information from anyone except the two parties involved. With cryptocurrencies that run on a public blockchain, like Bitcoin or Ethereum, you can view the transaction history of the network by just knowing an address.
For example, in 2018, Vitalik Buterin, the co-founder of the Ethereum blockchain, disclosed his crypto address in a tweet. By just knowing this address, you can see its balance and transaction history.
A kind of cryptocurrency that has little or no value as it doesn’t provide any specific functionality.
Central Bank Digital Currency (CBDC)
Unlike cryptocurrencies, CBDC does have an owner: a central bank or government. For this, they are not considered cryptocurrencies, however, the boom of cryptocurrencies pushed many financial authorities around the globe to consider issuing their own CBDC.
European Central Bank, for instance, is planning to launch the Digital Euro, its own CBDC.
Utility tokens are usually issued for multiple purposes and are native to an application or platform. For example, DIFX Token is a utility token within the DIFX exchange and offers multiple benefits such as discounts and staking opportunities.
Kind of cryptocurrency that allows users to take part in the platform governance by voting. Token holders gain the right to vote based on the amount their willing to invest.
For example, if you are a DOT holder, you can participate in the events and decisions within the protocols, such as upgrades.
A security on a blockchain network is called a security token and acts exactly like its real-life counterpart. Blockchain Capital (BCap), for instance, is a security token.
A security is a tradable financial instrument, like stocks or bonds. With the growth of blockchain technology, some companies decided to issue their stakes on a blockchain as well.
Just like stablecoins that are pegged to another currency like the US dollar, wrapped tokens are pegged to another currency as well, but fiat, not crypto.
Wrapped Bitcoin (WBTC), for instance, was issued on the Ethereum blockchain and follows the price of Bitcoin.
Meme tokens come from internet memes and function mostly on their community’s support. Dogecoin and Shina Inu are two well-known meme coins in today’s crypto market.
Memecoins may experience sharp price movements so it’s recommended to seek professional advice before any investment.
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