So many times I come across terms that are misused. In The field of cryptocurrency and blockchain we find a lot of mix up in terminologies. I am usually not worried about these mix ups, as long as I get the sense. However, I am obliged to highlight some issues and concepts whenever I have time. By doing that I also learn a lot. One term that is often misused is crypto asset and cryptocurrency. In some cases, these two are used interchangeably. Today, I want to highlight the differences by looking at the range of crypto assets or digital assets. I will start by looking at what an asset is.
An asset is popularly defined as a resource that has value to an individual or an organisation. There are various types of assets. Some of the assets are tangible yet some are intangible. Some examples of intangible assets are goodwill and patents. Our focus today is on crypto assets. These are defined as types of templates that are used in various situations, within some criteria. These digital assets are classified in many ways such as cryptocurrency, utility tokens and cryptocollectibles among others. We will explain these in simple terms so that many people understand them.
Cryptocurrency
A cryptocurrency is a digital asset whose main use is as a medium of exchange. Yes, they have other uses such as store of value, but these are secondary uses. Each type of cryptocurrency such as bitcoin is identical. This means that bitcoins are exactly the same.
Tokens
There are various types of tokens. Tokens represent certain assets, which are found in another blockchain. Tokens can represent a variety of assets, such as other tradeable crypto coins, normally used as medium of exchange. They represent some assets which are usually scarce and fungible. Fungible means that they have exactly the same properties, one can be exchanged for another. One example is that of platform tokens, like ethereum. Platform tokens exist to put an end to intermediaries in some operations.
Utility tokens
Apart from platform tokens we also have utility tokens. These are tokens that are used with applications. Some people simply call these app coins. They are responsible for enabling individuals or organisations to access the products and services of certain companies.
Security tokens
The other type of tokens are security tokens. Security tokens are linked to outside assets which can be traded. As can be noted, security tokens are used for investment, since they are backed by external assets such as gold. Security tokens indicate ownership of an organisation since the holders have the power to make decisions on the running of the company.
Asset tokens
These are sometimes called natural asset tokens because they stand in for important natural resources such as gold or crude oil. These tokens can be easily converted into fiat currency within a short period of time.
Cryptocollectibles
These are a unique type of tokens because they have a lot of variations among themselves. They are not fungible. One coin is not identical to the other.
This discussion has shown that we have various digital assets. Cryptocurrencies are just an example of digital assets. Using cryptocurrency interchangeable with tokens is incorrect. The good thing about these various crypto assets is that they can be acquired and stored. This is an emerging type of assets enabled by the internet, innovation and blockchain technology.
