Crypto assets are a great way of investing in the cryptocurrency economy, but finding the ones you are looking for can be challenging. To help you out, this guide includes descriptions of different types of crypto assets, including utility tokens, Non-Fungible Tokens (NFTs), security tokens, and Decentralised Finance (DeFi).
Utility tokens are a type of crypto asset typically used during an ICO. These tokens allow the holder to perform a specific function on the network. For example, you can use them to buy services or products from business owners who accept them as payment.
These tokens are pre-mined and created by a developer at a cryptocurrency network. They serve a specific purpose within a platform’s ecosystem and are later distributed to investors during ICO to generate interest in a product or service.
The main purpose of utility tokens is to allow users to access certain services on a platform or network. However, these tokens do not have monetary value and can only be used for trading goods or services with other network users where they were issued as payment for using their platform.
Investors can purchase and use these tokens, like Swerri, as a form of payment on the network to redeem or gain access to a particular service. The value of utility tokens is not intended for investment purposes but to access a service or platform.
Non-Fungible Tokens (NFTs)
The term “non-fungible token” (NFT) refers to a type of crypto asset that can be traded on a blockchain. NFTs are special because they are unique and cannot be exchanged with another token — they’re individualized.
NFTs can represent real-world or virtual items, including plots of virtual real estate in games, digital artwork and images, and even the intellectual property that makes up a song or book. The information stored inside an NFT says: “the person in control of this crypto wallet address is the owner of a computer file.”
As cryptocurrency has grown in popularity, there has been a growing need for new digital assets similar to securities people can purchase at brokerage houses.
Security tokens look to bridge the gap between blockchain and standard financial services by offering an alternative for retail investors interested in diversifying their portfolios with digital assets.
Security tokens are similar to securities because they offer more financial options for retail investors. The SEC considers all token sales security offerings, meaning these assets must be registered before selling them.
Decentralized Finance (DeFi)
DeFi, decentralized finance, is a subset of the larger crypto space. It aims to change the financial sector by making it decentralized and non-custodial. Smart contracts are self-executing, digital, code-based contracts containing an agreement’s terms. They are built on top of blockchain technology, a decentralized ledger that stores record in an unalterable fashion. This means that once data has been entered into the blockchain, anyone cannot change it.
Decentralization happens when the developers who create a protocol or app hand over ownership of the smart contracts to their users, turning them into community-controlled assets.DeFi coins are digital versions of fiat coins, and they can be used to transfer value during a length of a financial transaction.
Stablecoins are crypto assets that are pegged to a fiat currency. A reserve of that same currency backs them and typically has low volatility.This feature makes them attractive to investors who want to hedge against the volatility of other cryptocurrencies and those looking to move money into crypto without taking on too much risk.
Stablecoins can be used for payments because they can be easily converted into fiat currency. The problem with stablecoins is that they’re not completely decentralized, which means they aren’t as secure or private as other crypto assets.
Privacy coins are cryptocurrencies that offer privacy or anonymity to their users. These currencies use cryptography to ensure that all transactions are secure and they are difficult to trace or identify. Before buying a privacy coin, it’s important to understand what it offers and where it falls on the anonymity spectrum.
Some coins allow users to remain anonymous in every transaction, while others only offer anonymity for certain transactions. Many types of privacy coins are available today, each with its unique features and benefits.
The various types of crypto assets are very different in their usage. The networks that support these assets are also very different, with some focusing on the next technological breakthrough. In contrast, others focus on changing the mindset to do more with the many cryptocurrencies already in the market.