Crypto tokens are cryptocurrencies that have been issued on a blockchain network, serving various purposes within their ecosystem. Usually, crypto tokens and coins are referred to by different terms: a coin is a cryptocurrency that has its own blockchain while a token is usually issued on another blockchain, like Ethereum or Cardano, and doesn’t have its own blockchain system.
ERC-20 is a token standard on the Ethereum blockchain, meaning each token that is labeled as an ERC-20 token is following a specific set of specifications. Ethereum blockchain provides a platform for different companies and projects to issue their own cryptocurrency for their business purposes.
ERC-20 tokens are usually issued for different applications that run on the Ethereum blockchain, called Decentralized Applications (DApps). Through these tokens, applications can offer various services and interact with blockchain technology.
ERC-721 is another token standard on the Ethereum blockchain that is used for issuing Non-Fungible Tokens or NFTs. NFTs can be issued as the unique digital representation of anything, from artwork to luxury items, fan cards, or digital files.
Crypto tokens can be used for different purposes. Many applications issue their own crypto tokens to serve their users, an alternative to conventional royalty points. These tokens allow users to enjoy discounts and other benefits while using the services within the application.
Crypto tokens can also be used for governance, meaning token holders can participate in decision-making processes through voting. They can also be used for the digitalization of financial assets or other real-life items, bringing them to the blockchain system.
Based on their utility and features, crypto tokens may fall under different categories. Here is a list of different coin and token types:
Stablecoins are cryptocurrencies whose price is tied to the price of another asset, like fiat currencies (e.g. US dollar) or precious metals (e.g. gold). For this reason, stablecoins are less volatile than other cryptocurrencies.
As one of the top stablecoins on the market, Tether (USDT) has been pegged to the US dollar for quite some time. If you check its price history, it’s always been close to $1.
Alternative Coin (Altcoin)
Bitcoin lead to the creation of many other crypto assets. An altcoin is any cryptocurrency other than Bitcoin, such as Ethereum or DIFX Token.
In privacy coins, like Monero, transaction information is hidden from everyone except the parties involved by using privacy-preserving techniques. Bitcoin and Ethereum, which run on a public blockchain, let you view a network’s transaction history just by knowing its address.
For example, Vitalik Buterin, the founder of Ethereum, revealed his address in a tweet. If you know it, you can see the balance and history of transactions.
Central Bank Digital Currency (CBDC)
The CBDC is a kind of digital money that is issued by a central bank or government. Although it’s not a cryptocurrency, it attracted a lot of attention from governments and central banks after the cryptocurrency boom.
The European Central Bank is planning to introduce its own CBDC, the Digital Euro.
Generally, utility tokens serve a variety of purposes within a specific application or platform. For instance, the DIFX token is a utility token for the DIFX exchange and offers discounts and stakes.
It’s a cryptocurrency that lets users vote on platform governance. Token holders gain the right to vote based on how much they invest.
For instance, DOT holders can participate in protocols’ special events.
A cryptocurrency that doesn’t provide any specific function and has little or no value.
In a blockchain network, security tokens are like real-life securities. Blockchain Capital (BCap) is a good example.
Securities are tradable financial instruments, like stocks or bonds. Blockchain technology has led some companies to issue their stakes on the blockchain as well.
In the same way that stablecoins are pegged to a fiat currency like the dollar, wrapped tokens are pegged to another cryptocurrency.
For example, Wrapped Bitcoin (WBTC) runs on Ethereum and tracks Bitcoin’s price.
It’s a cryptocurrency based on internet memes and is mostly community-driven. Dogecoin and Shina Inu are two examples.
It’s a good idea to seek professional advice before investing in meme coins because their prices may fluctuate sharply.