Kedavra Lestrange

31.05.2018 05:09

Main types of tokens for novice investors

People who want to make an investment and receive a return on it, make a lot of requests for advice about the current ICOs to professionals. They want to know what they should buy and what shouldn’t, whereas they might be considering the purchase from the wrong perspective.

There are different types of tokens

There are different types of tokens

If you are planning to invest into something, you should know at least the essentials of what you’re dealing with, as it’s impossible to evaluate the potential forthcoming value without it. This article can help you with that - we don’t give investment , but we provide information on different token types as sometimes organizations are not being clear about what their tokens really are. However, it is worth mentioning that many tokens can suit multiple categories.

Currency tokens

This token type has become the first one due to bitcoin who gave the start to all the other. This token is most accessible to understand and use, what they really are - is a medium of value exchange. Just like every other currency or other forms of fiat, their price is chosen by people since they decide whether this token is worth buying or not. It is simply based on supply and demand, no governments force people to use it, and the only thing that matters is speculation.

The difficulty with currency token entering the market lies in generating demand. Value and liquidity require a significant quantity of users and, ironically, vice versa. It took years for bitcoin and ethereum to spread and, as competition has increased, we expect this period to be prolonged.

Utility tokens

Utility tokens provide users with future access to products or services. Ethereum was the first major utility token, and it allowed users to run smart contracts and code on the global blockchain. It is also a currency token and it is used to exchange value. Although utility tokens aren’t designed as an investment, many people use them this way hoping that the value of the token will increase as demand for the product or service to which it gives access increases.

Sometimes utility tokens are called “Network access tokens” since they give you access to something the network allows you to do. Utility tokens can be used by startups to raise capital for the development of their blockchain projects, and users can purchase future access to this service.

Asset tokens

These represent a kind of asset or product. It is a dynamically developing area since they enable distributed P2P ecosystems on the blockchain. On the other side, being represented honestly they are not as popular with investors and if the underlying asset depreciates, so does the token. Basically, asset tokens when offered to the public are part of an ICO and here lies one of their main differences from currency tokens since those are publicly offered as a part of ITO.

Equity tokens

Equity tokens, also known as security tokens, are very controversial since this is the type that most people would prefer to buy, yet it is very unattractive because of SEC. They imply ownership and control and, to some extent, they can even be seen as having properties.

DAO, based on ethereum, is considered to be the first major equity token, as owners of DAO tokens had control over the actions of the organization. Requirements for equity tokens are pretty complicated. A token might be an equity if it gives distant owners a reward off the actions or if it considers making money exclusively off the actions of others.

Reputation/reward tokens

These are given as rewards or as a marker of reputation to users on a platform. They can symbolize a client’s status or simply be a reward for being active on a specific blockchain platform. These tokens are pretty tricky to value, so they aren’t very popular with investors. Basically, they’re just symbols. Although their value is hard to evaluate, the meaning can be immense to a person holding them.

On our website you can get block-chain tokens by signing up, signing in once a day, sending news or filling information about yourself. You can spend them on advertising on the website, promoting you and your project or on several other things.

Cryptocollect coins

These are the coins obtainable by specific actions in virtual universes which reside inside the blockchain. Now they are gaining popularity extremely fast and rapidly developing. For example, a game on the Ethereum blockchain called CryptoKitties has become pretty popular with cryptocurrency community because of its unique idea.

It is a game in which players can sell, buy and breed digital cats any of which is unique in some way and this makes CryptoKittes extraordinarily collectible and attractive. It’s possible to emulate rare collectible items with Ethereum tokens any of which follows a novel standard called ERC721. It is an ethereum proposed improved unique tokens that are non-fungible and would allow smart contracts to operate as tradeable tokens like ERC20

Stablecoins

Basically, stablecoins are cryptocurrencies meant to hold stable value. They provide increased security to the investor’s funds from volatility and feature all traditional advantages including blockchain technology, a decentralized network, and a distributed ledger. But there is one significant difference as they imply asset backing. Each stable coin has a unique mechanism, but in general, the essentials are the same, as they are “pegged” to another asset.

Tether (USDT) is one of the significant stablecoins, and its circulation is backed by an equivalent amount of traditional fiat currencies like dollar or euro. Moreover, sometimes the currency is backed by a product - ZrCoin claims to be the first commodity-backed blockchain tool for investing in the production of industrial material.

In conclusion, before investing into tokens, it is necessary to understand its nature and to know basic principles of demand, supply and utility. Evaluating the long-term value, which is a key to success, demands deep understanding and you should definitely have it to avoid money loss.

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