The six types of crypto tokens.

Understanding the blockchain technology might be quite confusing for some people who are new to it, but in reality it is simple to understand everything about the blockchain technology.

You can contemplate that blockchain technology is a distributed ledger that records origin of digital assets.

The most common words people come across in cryptocurrency are “Tokens” and “coins”.Those words carry different usefulness or functionality that is where most people get confused while making use of those terms.

Let me elaborate on what a coin is before diving into the six (6) types of crypto tokens.

Coin:is the native token of a blockchain technology we have lot’s of coins for example,ETH,SOL and others just to mention a few they run on their particular smart chain transactions.

Let’s move on to tokens,we have six (6) types of token classes which are;

• coin

• Payment/utility token

• security token

• Governance token

• DeFi which is known as (Decentralized Finance)Token

• NFT(Non-Fungible) Token

Those are the six types of token classes,let me elaborate what each stands for.

Coin

We make use of metal coins over the past years to make payments which are also known as fiat currency and is controlled by the government.

But later on….

In the year 2008,Satoshi nakamoto created Bitcoin the first digital currency in the world. “Coin” in terms of cryptocurrency doesn’t refer to physical coin,it represents a decentralized or digital coin which can be used to make payments online and serve as a payment method.

Digital coin has the same utility as fiat currency.Moreover,digital coins is more secured,stable and durable that fiat currencies.

Payment/utility token.

For better understanding of what a payment/utility token is we need to first of all understand what token is.

Token;are programmable assets managed through a smart contract and a distributed ledger.

Utility tokens has value but can’t be used as money the way we do we coins it’s totally different from coins,to be able to use utility token’s you need to first swap it first to coin before you can make use of it.

Security token.

Security token are programmed assets that get their worth from another external resources that can be exchanged.

Security tokens are enrolled with a particular monetary market government, they add some extra security to it to make it free from intruders.

Governance token.

Governance tokens allows the community to engage in the decision making and road map of the project.

There’s no unified party to decide everything so this token help to build and honest government in the framework.

DeFi (Decentralized Finance) token.

As the word implies it works on a decentralized ledger where users can perform transactions without any conflict from banks or exchanges.

DeFi tokens can be stored and traded just like cryptocurrencies and also perform numerous of functions.

NFT (Non-Fungible Token)

Many of us might have come across the word Nft but we seem to not understand what it is,let me give a brief explanation on what Nfts are.

NFT means something unique and irreplaceable by anything else,they represent real-life being like art,music,videos and so on.

Anyone can mint and create a collection of Nft through smart contract which gives ownership to individuals.

Nft can be traded easily online with cryptocurrency involved, it is an act of showcasing one’s talent to people and selling it online without just placing it in a store to sell.

Closing thought.

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Thanks for reading and have a wonderful Tuesday full of fun 🤩 💚.