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The functioning of cryptocurrencies aims to ease global trading operations. Many cryptocurrencies were formulated, developed, and adapted by several platforms including the Bitcoin Circuit platform.
Today, thousands of digital currencies exist, and each has its unique specifications, which makes it a helpful utilization. Otherwise, what was the point of developing numerous cryptocurrencies if every other cryptocurrency functioned in an identical direction?
This blog will look through the different kinds of cryptocurrencies, categorized by their usage, application, and utilities.
Cryptocurrency is a broad label that incorporates various coins and tokens with different functions like coins, utility tokens, payment tokens, non-fungible tokens (NFTs), and others.
To further understand these types, learning about these tokens and coins is vital primarily.
What is the main difference between coins and tokens?
Even though both terms –coins and tokens- coexist underneath the umbrella of cryptocurrencies, they are both different. A crypto token indicates an intangible asset that offers rights like special entry to specific products and voting privileges. However, a coin is permanently pegged to a currency that helps transfer money. Tokens only hold value, but they do not relocate that value.
Different kinds of Cryptocurrencies
Payment Tokens
The most helpful digital token known globally is a token used for payments. It is clear from its title but to brief it out; these tokens are utilized in purchasing merchandise and amenities digitally. Most of them are consumed in trading businesses, but not every currency can be used as payment, like how utility tokens are utilized in promotion and advertisement.
Even though payment tokens fulfill obtaining trades, they do not fulfill the role in reserves or securities. There is a bit of uncertainty concerning the guarantee of lifetime contact with any facility or merchandise purchased through these digital tokens.
Unlike old-fashioned dealings, the benefit of this kind of remittance is done without any intermediary firm or a bank. Bitcoin, Monero, and Ethereum are some of the prime exchanges offering payment facilities.
Utility Tokens
Utility tokens function in a way that denotes a certain amount of cost or worth on the blockchain network, which is merchandised and used further for several purposes. They are among the popular categories of cryptocurrency.
Utility tokens are used as marketing and advertising aids. But they don’t offer any proprietorship. These tokens are not used as investments but as coupons and golden tickets that offer several facilities and provide admittance to many services. Some examples of these tokens are Filecoin, Funfair, Basic Attention Token, Siacoin, and Golem (GNT).
Security Tokens
Unlike the above-mentioned tokens, these security tokens indicate and portray the corresponding value of assets, shares, and other rights. These tokens somehow ensure the owners’ right to have a say in decision-making in any aspect of the company that presented the tokens. The owners become shareholders, and at every performance in the firm, they are delivered their rightful profits.
Globally, Security Token Offerings STOs is an organization that facilitates the provision and governance of these tokens to their desired customers.
Moreover, in such tokens, the investment is wholly affected by the company’s value (A company where you have a certain percentage of ownership). However, in crypto coins, the value of any currency is directly proportional to its demand in the global market.
Science Blockchain, Sia Funds, and tZERO are a few models of security tokens.
Exchange Tokens
As the label recommends, these tokens are utilized in exchange platforms. An exchange token is a virtual commodity intrinsic to cryptocurrency exchanges, but it can also work outside its atmosphere. These tokens assist in swapping among other digital currencies or they can also be used as expenditures.
The benefit of these tokes is that they offer increased liquidity and exchange activities. Some examples are BNB, Shushi, CRO, and KuCoin.
Non-fungible Tokens
A unique and innovative invention in the crypto world is non-fungible tokens. This token means that this is a virtual ownership certificate that offers rights to exclusive non-tradable assets and commodities. Generally, these tokens are used to signify artwork, pictures, videos, GIFs, audios, memes, and other digital data and files.
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The world witnessed the initial NFT in 2015, developed by Ethereum. The greatest feature of NFTs is to own an original first copy of any artwork due to its limitation on exchanges. This feature helps the artists to promote and trade their artworks quickly on NFT platforms like Rarible Foundation, Decentraland, and OpenSea.
