The Dissection of Crypto

    Bitcoin the pioneer in the race of digital currency and digital assets was launched by Satoshi Nakamoto at the start of 2009. With the aim of providing a better alternative for the highly divided cash economy, the code for Bitcoin was written as open-source so as to allow people across the globe to see, replicate and make their own form of digital currency.

WHY IS THE DIVISION OF COINS NECESSARY?

 As of today, more than 5000 different digital coins are being traded. The coins that followed the bitcoin were termed as ‘Alt-coins’. Crypto is a broad term currently prevalent for all the alt-coins but, these coins were formulated keeping a specific interest for the use of the currency. This helps us to break them into two main types: Coins and Tokens.

 Let’s have a look at each of them.

A] COINS

      Coins have their own native blockchain and act as medium for transferring monetary funds. Certain projects even serve as a host blockchain platform for tokens.

1)    Currency coins: Although this type of digital assets are for full filling the basic motto of digital payments, their considerably high volatility makes them more suited for investment causes. Still, these can directly be used for transactions wherever they are approved.

They have their own native blockchain for the decentralized ledger of the transactions. The basic ‘trendy’ coins come under this category like the bitcoin cash, Ethereum, and all the meme-coins like doge, baby-doge, Shiba Inu, etc. These coins can act as payment alternatives for offline payments should they be approved by the acceptors. Some of them are:

§  Overstock.com accepts bitcoin (BTC).

§  Travala.com accepts Cardano (ADA), Ethereum (ETH), Dogecoin (DOGE), and many more.

§  Paypal accepts Bitcoin cash (BCH), litecoin (LTC).

§  AT&T, Starbucks also take Bit-payments.

2)    Stable coins: These are the types of coins that are backed up by a strong economic entity already in use like gold, silver, oil or even the U.S dollar. They mainly consider national currencies and precious metals. They are mined to follow the crypto transparency and security without considerable fluctuations. Although being dependent on such entities the basic idea for digital assets is preserved by keeping a decentralized system for monitoring the transactions.

    The basic working is that for every coin you buy the brokers or trading platforms buy a certain amount of the backup entity and store it as your property. So, basically, people will be investing in entities of the large market cap without direct physical investment. As these coins depend on their backups, their volatility risk could be considered less than the currency coins discussed above. The price majorly depends on the current rate and market performance of the backup entity, they accordingly rise or fall. Some examples of stable coins are:

§  Pax gold (PAXG) and Tether gold (XAUT) are gold-backed coins.


§  Tether (USDT), DAI are backed by US dollar

3) Tokens: Tokens don’t actually have an individually developed blockchain. They operate on blockchains of other considerably large projects’ for example

§  Solana (SOL) can be used as payment for buying NFTs because having a blockchain helps the digital transactions to be performed without a central hub.

§  Other example is the Ether which works on the blockchain platform of Ethereum. Chain link and Uniswap also thrive on the Ethereum blockchain.

There are 3 subtypes of tokens:

  1] Equity Tokens and Security Tokens: As the word equity indicates these tokens have stocks and shares in their integral functioning. Buying equity tokens can be seen as buying certain equity for instance shares, however here the traditional centralized management does not work like the NSE or the BSE. The monitoring is open to all and the trading platform gives these tokens as proof for the bought equity. Similarly, for security tokens, various assets like precious metals, real estate, etc. can be used as collateral. The tokens represent proof of ownership.

Some examples of equity tokens are:

·      Slice

·      The DAO

·      BF token

Some examples of security tokens are:

·      EOS

·      Augur

·      TRON

 2] Utility Tokens: These tokens are minted for a particular role in a specific ecosystem wherein their functions remain limited. Utility tokens get their range and areas of usage and by the developers, they can be developed to do almost any task. In simpler terms, they provide access to a specific task with the advantage of a blockchain ecosystem. They can also be used to transfer value like coins but generally, that’s not on their major use.  These tokens are widely being used for transforming prevalent social media platforms to a more decentralized and secure form.

·      A good example is ‘Basic attention Tokens’ (BAT) given to users on ‘Brave browser’. Users get them as Brave rewards and can use them as compliments for the browser services.



·      Chainlink (LINK) functions as an oracle, i.e. gathers data from sources and uploads it on the blockchain.

·      Binance coin (BNB) is specifically an exchange token that is native to a specific crypto-exchange and acts as a reward. Holders get 25% off on trading fees.

 

3] Non-Fungible tokens:

 NFTs are a hot-burning topic in today’s digital world. Fetching amazingly crazy prizes these tokens are art forms of the crypto world. People own the NFTs the same way they buy an art piece.



 People are intrigued by the unique work and like to own what can’t be made two of. Mostly NFTs started out for gamers to own in a particular simulation however when the prices soared up by the involvement of a few public figures they became a sensation. Read more about the astonishing digital art world in our blog: ‘NFT-Digital ownership for the digital world’:

https://techtuesday23.blogspot.com/2022/02/nft-digital-ownership-for-digital-era.html

Understanding the different purposes and volatility of the available options is of utmost importance to make a good investment. Deciding what are the parameters of investment (i.e. owning digital assets or commodity-backed coins, etc.) helps one to back the future.


Credits and References: Prathviraj Chavan(Fy Mechanical) & Prathamesh kale(Fy Manufacturing) -(Team Tech Tuesday)

1} https://www.fool.com/the-ascent/cryptocurrency/articles/7-companies-where-you-can-pay-with-crypto/

2}https://www.nerdwallet.com/article/investing/stablecoin

3}https://www.sofi.com/learn/content/what-is-a-utility-token/#:~:text=A%20utility%20token%20is%20a,is%20unique%20to%20its%20ecosystem.

4}https://www.investopedia.com/terms/s/security-token.asp

NOTE:-

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