Tokens: know all about them!

Charlie Taylor


Tokenization has been gaining more and more popularity in the crypto world, becoming the big trend in the market, especially with NFTs becoming the darlings of the moment. But what are tokens? Find out below!

What are tokens?

A token can be defined as the digital representation of a fraction of some real asset and has the objective of simplifying the negotiations of the most diverse types of goods around the world. Assets are any types of resources that have commercial value. We can separate them into two categories: tangible (such as ventures, equipment, artwork, and more) and intangible (such as copyrights, trademarks, credit card receivables, avatars, and game items, among others).Passfolio
As you can see from the examples above, pretty much anything can be tokenized!

main types of tokens

What are the top 5 types of tokens?

There are different tokens and they are categorized based on the asset they represent. The 5 main types are: Payment TokensUtility Tokens Security Tokens Equity TokensNFTs

Payment Tokens

Payment Tokens are probably the most famous because they are associated with cryptocurrencies. They work like money, however, in this case, we are talking about digital currencies, such as Bitcoin, for example. This modality is used as a form of payment, mostly in online environments, for any purpose that aims to transfer capital. Because of security, they are extremely unlikely to be scammed.

Utility Tokens

As the name implies, Utility Tokens have a purpose. This means that, although it is also a type of currency, it will only be used for specific applications. These applications can be early access to a service or product (either physical or digital), pre-sale coupons, employee benefits, voting rights and more! An important difference of this type of token in relation to the previous one is that it usually has a predetermined amount. This contributes to a shortage and, consequently, an increase in its value due to the growth in demand. Therefore, the Utility Token usually generates good profits for its holders.

Security Tokens

To get to know them better, we first need to understand what a security is. Securities are tradable assets (bonds, debts, shares, guarantees, etc.). In practical terms, a security is like having something or part of something without having to own it. Taking gold as an example: a gold security means that you own quantities of it without the need to buy karats or keep it in a safe. Investing in securities is a very common action, carried out mainly by large companies and governments with the objective of collecting values ​​from investors. These, in turn, receive their dividends, fees generated by interest or part of the profit of the company or project. When the entire process is carried out through a Blockchain, using tokens, the security is called a Security Token. Therefore, Security Tokens are cryptographic securities purchased by investors and which generate dividends, share profits and pay interest to these investors in the future.

Equity Tokens

We can understand Equity Tokens as a kind of traditional stock assets, which represent a stake in certain companies. With them, you have the right to share in the profits and the right to vote when making decisions in the company. The difference between Equity Tokens and traditional shares lies in the fact that shares are registered in a database along with a paper certificate, even if scanned. The tokens are registered on the Blockchain. Equity Tokens can be divided into classes. We have “common stock”, in which, generally, voting power and profits are divided equally. For example: if the company releases 100 tokens, each one entitles 1% of the company’s earnings and 1 vote out of 100. There are also Class A and B Equity Tokens, which can change voting rights and earnings. Equity Tokens can be publicly offered to investors, just like Security Tokens, through an STO (Security Token Offering), which are similar to IPO (Initial Public Offering), but have their own advantages:

NFTs

NFT is an acronym for “Non-fungible Tokens”, which means that it is unique and cannot be replaced by another. For example, a Bitcoin is replaceable (fungible) because you can exchange it for another cryptocurrency and still have exactly the same value. A collector’s item, on the other hand, cannot be replaced (non-fungible). If you had access, for example, to Monalisa’s painting and exchanged it for another work of art, you would have something completely different. This is one of the fastest growing types of tokens, including the fact that many assets can be operated by the NFT. Currently, the biggest engagement with this model comes from using technology to sell digital art, but we already see, for example, movies being released, albums, concerts, luxury clothing, artist items and more becoming NFTs. Have you noticed how tokenization is present in your life and maybe you haven’t even noticed? Tokens present a very democratic way of making investments, since it is possible to buy tokens for low values, diversifying your investment portfolio by exploring beyond the traditional market! At Liqi, you can buy different types of tokens and other crypto assets, such as Bitcoin and Ether. How about being part of the revolution in the way of investing now?
Passfolio

Click to rate this post!
[Total: 0 Average: 0]
Next Post

Learn what staking is and how to earn income by investing in blockchain projects

You may have heard of the stake, but perhaps you have not understood what this type of investment means. Here we will explain exactly what staking is and how you can get interesting returns by investing in blockchain projects. What is Staking? Staking is a verb borrowed from English that […]

Subscribe US Now