Do you know that crypto tokens come in different types and serve different functions?
It’s true! Before investing in a cryptocurrency you’ll want to do some research and find out what it’s for.
If you’re into investing, Bitcoin and other currency tokens should be your point of interest. If you’re new to the crypto investment industry then it’s best to visit this site so you can be up to speed and make money online.
Let’s take a look at the different types of tokens below.
Asset Token
An asset token is usually tied to a tangible asset, such as bonds, gold or real estate and represent the asset they’re in. Furthermore, these tokens may be used to sell or purchase the asset they’re connected with.
Think of an asset token as a representative of the asset but in digital form. They can also be exchanged to obtain their real-life counterparts should the need arise.
Reward Token
A reward token is a digital reputation for a Blockchain application. Like its namesake, reward tokens are usually given for free as appreciation or for participation.
Think of a reward token as a ‘cashback’, for those who excel or have participated in an event or met the goal, for example. They don’t necessarily need to have a price value, and most are considered as novelties.
Utility Token
A utility token will have a function usually integrated within an application or platform. They can be a payment option within an ecosystem, kind of like a shop that can accept tokens to access healthcare services, for example.
A company usually creates utility tokens for their employees or customers. It’s mostly powered by Blockchain and are held in ICOs. In some cases the public can purchase a utility token if they wish to participate in the ecosystem.
Currency Token
Bitcoin is a classic example of a currency token. That said, they are compared to fiat currency and have a value. They’re mainly used to trade, e.g., buy and sell other cryptocurrencies, tokens or real-life goods and services.
Adaption is the key for a currency token to succeed. For a token to become useful a lot of merchants, both online and offline will have to recognize it and accept that token as a form of payment.
Equity Token
Sometimes called a security token, they share similarities with a company’s share or stock. After an ICO the buyers are given these and thus gain certain rights as well as stock options.
An equity token is much more limited in terms of rules and federal laws. The project’s performance determines the token’s value.
Knowing which token to invest in can mean the difference between a loss and a significant profit. You should always keep an eye on new crypto tokens and find out what their use is before committing to a set capital.
Also, it makes sense in an investor’s point of view to spread out your assets to several tokens instead of putting them in one basket. You stay in the game for longer and build up on the skills and experience needed to succeed.