Good day readers and my fellow blurt fans, Rasheed is here again bringing you back to back blockbuster content. Today we would be looking at the various categories of tokens since most people generalize and don't know of such. sit back and enjoy.
The crypto space is very huge and there are many people using numerous terms both the ignorant and the experienced. Some people choose to differentiate a crypto coin from a crypto token while the new lot just call everything a crypto coin although they are all cryptocurrencies. I personally believe that this distinction is necessary so I would go ahead to define what a crypto token is so we don't miss it up with the meaning of a coin. Cryptocurrency Tokens are virtual currencies that don't have their own blockchain and hence they are built untop an existing blockchain network with the aid of smart contracts. It is really hard, expensive and complicated to build your own blockchain network so those with ideas for new tokens can build them on an already existing blockchain through smart contracts. This has made token creation relatively easy and this has brought about numerous new tokens both the serious ones and those used to pull off scams and even meme tokens. Crypto coins on the other hand are native currencies of the blockchain network. Let me give a very comprehensive example. Tronix (TRX) is the native currency of the Tron blockchain so it is a coin and BitTorrent (BTT) is a token built on the Tron blockchain so it is a crypto token. There are different types of virtual tokens and they include
Unity tokens
Funds are need in businesses for various reasons. Companies would need to raise these funds so they issue utility tokens which investors buy at ICOs giving the investor some rights in the company's affairs. Utility tokens can also be used to purchase products and services from the company. Some examples of utility tokens include funfair, Basic Attention Token (BAT) etc
Governance tokens
As the name implies, governance tokens are cryptocurrencies that give it's users/holders exclusive governing rights in a particular decentralized finance or decentralized application. It's holders have kind of like a partial ownership and get a say in the decision making of the said DeFi or dApp like the changes that are to be made. They normally have no intrinsic value on their own. Examples of governance tokens include UniSwap's UNI token and PancakeSwap' s Cake.
Non-Fungible Tokens
These are digital assets that represent actual real life objects. Its really amazing. Imagine wanting to sell of an artwork, a song, a game skin even a tweet so you digitalize them and sell them once sold, the buyer has the right to do whatever they want with it since it's officially his. Non-fungible as the name implies meaning it can't be exchanged with another NFT of it's kind. On Twitter today, you see so many cryptocurrency enthusiasts HODLing many expensive NFTs and giving them out to their fans and so on.
Exchange tokens
These are currencies issued and sold by the exchange that own it in order to raise funds. For example, the Binance exchange token (BNB) is used to carryout various transactions on the Binance platform and it is a widely used platform, they must have raised alot of funds. Now so many transactions require gas fees in BNB and even airdrops. Numerous crypto exchanges are present in the world today and many of them have their own tokens under them. Examples of other exchange tokens include Huobi token, Kucoin token, Probit token.
Security tokens
For easier understanding of these tokens, I will use an instance where a company issues shares or stocks to the public for interested investors to buy that way the investors get a say in the company's affairs while the company gets the needed funds but imagine instead of having to use stocks they use tokens. Security tokens are just like digital assets. Due to past scam events in ICOs, security tokens are sold to the public through STOs (Security token offerings) which make them more secure. They are backed by the law.
I hope I have been able to expand the knowledge of my readers. There are numerous types of tokens and generalizing them would only make us seem ignorant so it's good we know how to identify, classify and differentiate between the various tokens. I believe I was able to explain it very well to the understanding of my readers. Thanks for reading