Cryptoassets And its Types

Bitcoin was introduced in 2009, as an alternative to centralised fiat currencies and a new era was of crypto assets was unleashed. But what exactly are crypto assets? How are they different from cryptocurrency? How do crypto assets and cryptocurrencies work? This article seeks to give you an insight into crypto assets and their types

What are crypto assets? How do they work?

Crypto assets or cryptographic assets are virtual assets created, bought, owned, and transferred on a digital platform, i.e. blockchain. Crypto assets are designed in a way that doesn't allow their duplication. They are digital representations of real-world assets like gold, real estate, equities, and digital art. Being decentralized means they aren't issued or regulated by a single entity, public or private.

Types of Crypto Assets

Crypto assets are of different types— cryptocurrencies, stablecoins, utility coins, security tokens, crypto collectables, and NFTs. Let's see them in detail.

Cryptocurrencies

Cryptocurrencies are digital currencies that work on blockchain technology to encrypt, regulate, and verify payment transfers between people. Bitcoin (BTC), the quintessential cryptographic asset, was the first cryptocurrency. Thanks to Satoshi Nakamoto, today, the world has used his open-source code to build more than 5000 cryptocurrencies. They are called 'altcoins'. Cryptocurrencies are often used as a substitution for standard currency.

Stablecoins

Stablecoins are also digital currencies like cryptocurrencies, but unlike the former, they are pegged to a stable currency or hard assets, such as gold or silver. This reduces the volatility in value that comes with free-floating cryptocurrencies. Tether (USDT) is a stablecoin that claims to be backed by the U.S. dollar. Whereas other stablecoins like DigixGlobal (DGX) and Tether Gold (XAUT) are backed by gold.

Utility Tokens

Generally, tokens are created as a representation of something in a particular ecosystem. Utility tokens are created as tools to use a blockchain service. The key thing to know about Utility tokens is that they are not intended as an investment but as digital coupons to give users access to particular services or applications. The Binance exchange BNB token, for example, was created to handle transaction fees on the exchange, and today it can be used to pay for other services like hotels, flights, and entertainment.

Security Tokens

Security tokens differ from utility tokens in one crucial way. They represent ownership of an asset- either physical or digital. Such ownership is verified on blockchains. Sometimes, a security token represents a stake in a project like a piece of real estate and often comes with prospects of future profits. Security Token holders are often given benefits such as voting rights and a share in profits.

Crypto Collectibles

Crypto collectables are an excellent example of improvisation. It is the digital ownership of rare collectables. For instance, 'crypto kitties' are digital cats collected and bred on the Ethereum blockchain and today's most well-known crypto-collectables.

NFTs

NFTs or Non Fungible Tokens are best used to create a "digital scarcity" of collectables and verify ownership. Unlike other tokens, NFTs are not interchangeable and merely represent an asset. It uses blockchain technology to prevent duplication and identify imposters.

Bitcoin may not be the next gold or silver but crypto assets are definitely here to stay. Most of the crypto assets we know today are still in the evolutionary phase. Many more are still in the pipeline and promise a lot.

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