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5 Types of Tokens You Need to Familiarize Yourself With Today

The market for digital tokens has grown significantly in the past few years. Unlike the stock market which only offers basic shares in companies, the broad range of investing potential makes digital tokens incredibly attractive to shareholders. Here are a few types to be aware of.

Digital Currencies

These make up the most well-known and inclusive category of digital tokens. Also known as cryptocurrencies, digital currencies utilize blockchains to provide fast peer-to-peer transactions and function similarly to real currencies.

Different types of cryptocurrencies have emerged, each catering to different user needs.

  • Bitcoin (BTC) is the most widely recognized.
  • Litecoin (LTC) offers faster and cheaper transfers than BTC.
  • Monero (XMR) is a privacy-centric alternative to BTC.

While success stories of making millions and billions off of Bitcoin have hit the news recently, cryptocurrencies are still incredibly volatile, and the lack of government regulation on the currencies makes adoption rather risky.

Utility Tokens

Also known as app coins or user coins, utility tokens can be thought of as tickets for users to access specific platforms. For instance, a startup project might give these out to users who then have permission to use the product and possibly provide suggestions on its development.

Utility tokens provide a convenient method for startups to raise initial funds and receive consumer feedback quickly.

Basic Attention Tokens (BAT) is one example. BAT is the internal currency for the Brave browser and is used for exchanging products, images, and articles amongst its users.

Equity Tokens

Equity tokens are also called security tokens or tokenized securities. They can be seen as digital shares in a company. Each owner of an equity token has a right to a portion of a company or project.

Equity tokens enable startups to thrive by lowering the barrier of entry for investing in new projects. Also, security tokens are becoming more government-regulated over time, which may lead to more adoption in the future. Overstock is one example of an equity token distributor.

Asset Tokens

Asset-backed tokens are exactly what they sound like. They take the place of physical items in digital markets. However, asset tokens aren’t too popular since the price of the token generally stays in line with the price of the associated item.

Tiberius Coin, for example, is a new type of asset-backed token that is linked directly to physical metals.

Reputation/ Reward Tokens

Finally, we have reputation tokens that are rewarded to users for participating in certain blockchain platforms. By interacting with other members, users will gain more of these types of tokens.

Having more reputation tokens is an indication that you are trustworthy in that particular platform. Further, reputation tokens can sometimes be exchanged for cryptocurrencies.

STEEM, for instance, is issued in the Steemit social media and content creation platform.

Choosing the Right Token

There’s no easy answer when it comes to choosing the right token. It really depends on your investment strategy, your risk tolerance, and the quality of the tokens that you are investing in.

Hopefully this article has provided you with a basic understanding of the different types of tokens.

Eric Carriere

3 Reasons Why Bitcoin May Never See $20,000 Again

In its earliest years, cryptocurrencies found an appeal amongst strong libertarians who sought a type of currency that was not under the control of centralized governments or major financial institutions. Just recently, it’s found an appeal amongst almost everyone who noticed its recent surges in value and massive media coverage.

But while cryptocurrency, and Bitcoin in particular, has risen in price considerably, there are good reasons why mass adoption hasn’t occurred. Before you go out and chase after the Bitcoin dream, keep in mind that the currency is still:

  • Highly volatile and thus not a recommended candidate for a stable income.
  • Not accepted everywhere. You can’t pay your taxes with it yet for example.
  • Heavily regulated and sometimes outright banned in various nations.
  • Possibly unsafe to use, as its security has not been thoroughly tested

And in recent months, the price of Bitcoin has taken a general fall from its peak in late 2017.

But why?

The Huge Influx of Bandwagon Adopters

Bitcoin has become so popular that the term has been embedded in the minds of the general public. News of various individuals earning billions off of the currency transpired, and, as a result, tons of investors driven by positive sentiment flooded the market in late 2017. This had a few major consequences:

  • Those same investors driven by emotion were also incredibly sensitive to fluctuations. Whenever the price fell greatly, they scattered.
  • The influx of December 2017 resulted in more Bitcoin deposits than withdrawal, which drives supply up much higher than demand. Consequently, the price became unsustainable.
  • Mining Bitcoin is now more expensive than ever. Even an $800 GPU struggles to produce a nontrivial profit nowadays when you factor in the power bill.

The Lack of Security

Since Bitcoin isn’t controlled by a central agency and trader identities are completely anonymous, very little can be done whenever a security issue does rise up. Just recently, popular South Korean cryptocurrency exchange service Bithumb was hacked, resulting in over $30 million dollars being stolen.

The price of the currency in the market fell accordingly, and since this incident wasn’t the first of its kind in recent months, it seems the issue of security will continue to be an obstacle in Bitcoin’s adoption.

The Scandals

Well before its heyday, Bitcoin held a notorious reputation as a popular tool for illicit online activities such as drug trades and the exchange of certain materials on the Deep Web.

But now, the Bitcoin scandals have shifted towards white-collar crime. Among other incidents:

  • In mid-2018, the U.S. Justice Department launched a criminal investigation into Bitcoin price manipulation by various traders. The threat of further regulation being placed on the cryptocurrency brought down its price.
  • Various rumors emerged when Tether, or specifically the Bitfinex Corporation that owns it, was alleged to have been artificially raising the price of Bitcoin. The ensuing scandal was dubbed a “bloodbath on the cryptocurrency prices” by UC Berkeley Computer Science professor Nicholas Weaver.

Advice for the Road

Investing in cryptocurrencies is exciting, but like anything in life, you need to take the time to learn the pros and cons of getting involved in such a volatile industry. There is a solid chance Bitcoin will continue to appreciate in the long-term. Still, that doesn’t mean it won’t experience violent drops over the short-term.

Whatever you decide, treat your crypto investments like any other investment. You need to go in with a plan and stick to it.

Eric Carriere