New tokens are created every day. The one gives you the right to participate in the profit and with the other you can perform actions on the blockchain . Each token has its own function and these can be classified under five types of cryptocurrency tokens, namely the security, utility, equity, asset and reward / reputation token . Each shape has its own characteristics and let us understand them.
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Security token
Security tokens are seen as a way of investing . You buy the tokens in the expectation that you will get a dividend or price gain from this. Security tokens can be created on the Polymath platform , among other things . They can then be marketed by means of a Tokenized Security Offerings (TSOs) . This is a form of an ICO , but more secure since security tokens have 'real value' as collateral. They derive their value from, for example, the turnover or profit of the crypto project. This gives investors more certainty.
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There are also many crypto projects that do everything they can to prevent their token from being labeled as security. Namely, if it is a security, then they are bound by certain laws and regulations . They then fall in the street of shares, bonds and funds. Often this causes limitations on who can buy the tokens and how they can be traded. These barriers ensure that there is less trading in this currency and that the relevant crypto platform is less widely accepted. In some parts of the world it would be against the law. With utility tokens you will have less trouble with this.
Examples of security tokens
Sia
The crypto project Sia has several currencies, namely the Siacoin and Siafunds. Siacoin is used within the ecosystem of the network and Siafunds is a currency where investors can share in the profits of the project. The latter can therefore be seen as a tokenized security.
Property coin
This crypto project puts the real estate market on the blockchain. This market is seen as illiquid and by tokening it you can increase the tradability. They want to make money by trading in homes and lending money to investors. 50% of the profit will be distributed to the token holders.
Utility token?
Utility tokens are used to access a product or service from the relevant crypto project . You can compare it with a software license such as Microsoft Office or a gift card from the local clothing store. These coins are often referred to as 'App Coins' or 'User Tokens'. Ethereum is a well-known platform on which many utility tokens are made.
The utility token is not intended to be used as an investment . Yet we see that many investors only buy the token with the expectation of making a profit from it. Not entirely illogical if you look at the various price increases that we have experienced in recent years. For example, the BAT utility token rose in 2017 from $ 0.078 to $ 0.93. This is almost 1100%! You can therefore see a utility token as a good investment if you think the demand for it will rise (explosively).
If you notice that the crypto project does bring the utility token to the attention as an investment option, then you have to pay attention. There is a good chance that the American regulator, the SEC, will label this token as a security token and as a result, the project must suddenly comply with many different rules. If they do not comply, this can cause problems and investors will start to smell fear. It will not be the first time that a substantial price decrease has been initiated as a result.
Basic Attention Token
The Basic Attention Token project is launching a decentralized advertising platform. The BAT token is used on this platform to bring the various parties together. Advertisers can buy advertising space with the token and the publishers get paid in the form of the BAT token.
Filecoin
With its ICO, Filecoin has raised no less than 257 million dollars and with this money they want to start a decentralized cloud storage service. Everyone can make a portion of their hard drive available so that others can save their documents here. The token can be used to rent storage space on the hard disk and the person who makes his space available gets paid with this token. Quite a nice idea since we do not use all the disk space of our computer. This way you can generate a nice extra income!
Maker
Maker is a smart contract platform with a stable token. They have two coins, the DAI token and the MKR token . MKR is used to facilitate the platform, for example, transactions are funded with this token. The DAI token derives its value from the US dollar and represents this fiat money in the form of a crypto currency. The MKR token is a utility token and DAI token is an asset token.
Equity token
An equity token belongs to the security token subcategory. With an equity token you buy part ownership of the project . Equity tokens can be seen as digital shares of a crypto project. Since this judgment , these tokens have also been bound by laws and regulations of the Security and Exchange Commission (SEC). When an ICO is held where equity tokens are sold, investors should carefully check whether the process is being supervised by a lawyer who specializes in federal securities law. This will prevent potential problems with, for example, the US SEC in the future.
Examples of equity tokens
Ethereum DAO project
The former Ethereum DAO project was the first equity token we know. They wanted to create a decentralized organization that does not require personnel. They had raised 150 million dollars for the realization of this and the investors received DAO tokens for this. The token holders were allowed to participate in decisions about the direction of the decentralized company, just as we know this from shareholders. Unfortunately, due to a leak in the code, they failed to set up the decentralized autonomous organization (DAO) .
NEO
NEO is seen as the Chinese Ethereum and has grown strongly in popularity over the past year. Previously the project was called Antshares and the word 'shares' refers to shares. If you own Antshares or now NEO, you have a share in the blockchain. This gives you the right to vote for changes in, for example, the protocol of the blockchain. You also earn dividend in the form of GAS .
Asset Token
Asset tokens are used to represent a physical product. For example, you can have your investment property represented by a cryptocurrency and easily sell it via the blockchain. The coin then represents the value of your house. Other well-known examples are coins that represent, for example, the dollar or physical gold. Many of these asset-backed tokens are launched on the Waves platform. You can easily create your own cryptocurrency there.
Examples of asset tokens
Goldmint
Goldmint is a project that uses blockchain to make the physical gold tradable. They do this by having the value of the precious metal represented by a crypto coin.
Tether
Tether represents the value of the US dollar. If you look at the price of Tether then you also see that it remains almost equal to $ 1. You can use this coin to sometimes step out of the volatile crypto coins and opt for a more stable currency.
LAtoken
platform LAtoken makes it possible to easily trade with each other physical products. A crypto coin then represents such a physical product.
Reward / Reputation Token?
The words reward token and reputation token are used interchangeably and mean the same thing. This token is used within the ecosystem of a crypto project. The more of these tokens you own as a user, the better your status is within the network. Everyone sees you as a credible user when you have the right status. You earn this kind of tokens because you participate well within the network.
It shows that you are doing your best and that means a lot to the ecosystem. By completing tasks you get a reward in the form of this token, therefore it is called a reward token . By having many of these tokens you build up a reputation, hence the name reputation token.An example from the 'real world' would be the Golden Shoe, for example, in delivering excellent football performance. The more often someone has won the Golden Shoe, the better their reputation is within the football world.
Examples of a reward / reputation token
Steem
Steem is a social media platform on which you can publish articles yourself and also respond to other people's messages. Through this active participation you can earn the cryptocurrency STEEM . The better your input is, the more STEEM you will collect. Eventually you can convert these coins to euros via an exchange such as the well-known Binance
Augur
Augur is a platform that wants to decentralize the gambling market. By means of their REP token you can bet on, for example, football matches. When your prediction has come true you will receive a reward in the form of REP tokens. REP stands for, you won't expect it, reputation!