Cryptocurrencies

Cryptos 101

A cryptocurrency (or crypto for short) is a digital asset designed to work as a medium of exchange wherein individual coin ownership records are stored in a ledger existing in a form of computerised database using strong cryptography to secure transaction records, to control the creation of additional coins, and to verify the transfer of coin ownership. 

It typically does not exist in physical form (like paper money) and is not issued by a central authority. Cryptocurrencies usually use decentralised control as opposed to centralised digital currency and central banking systems.

 

Types of Cryptocurrencies

  • Payment tokens - are another type of token that represents the most purest form of cryptocurrencies. This type of token has its own Blockchain and is often considered as a medium of payment. Many exchanges offers Visa and MasterCard credit and debit cards where in this category biggest names are (BTC), Ethereum (ETH), Monero (XMR) amongst many others.

  • Utility tokens - this category provides access to the goods & services that the project will launch in the future. Also, they can be used as a type of discount or premium access to the goods & services of the project. In this category we have tokens like Maker (MKR), Binance Coin (BNB), Chainlink (LINK) or Basic Attention Token (BAT).

  • Security tokens / asset tokens - this category of tokens represents assets such as participation in real physical underlying, companies, or earnings streams, or an entitlement to dividends or interest payments. In terms of their economic function, the tokens are analogous to equities, bonds or derivatives. Asset backed tokens like USD Tether (USDT), USD Coin (USDC), PAX Gold (PAXG) carry an actual value, because they are correlated with an external, real-world asset’s value. Asset-backed and security tokens offer secure, rapid and minimal cost trading of traditional assets via blockchain technology, and increase liquidity for traditional securities.

  • NFTs - from art to sports trading cards, people are spending millions of dollars on digital collector’s items. These crypto collectibles, known as NFTs, have exploded in popularity lately.What is a NFT?Non-fungible token but that doesn’t make it any clearer. “Non-fungible” more or less means that it’s unique and can’t be replaced with something else. For example, a bitcoin is fungible — trade one for another bitcoin, and you’ll have exactly the same thing. A one-of-a-kind trading card, however, is non-fungible. If you traded it for a different card, you’d have something completely different. At a very high level, most NFTs are part of the Ethereum blockchain. Ethereum is a cryptocurrency, like bitcoin, but it blockchain also supports these NFTs, which store extra information that makes them work differently from, say, an ETH coin. It is worth noting that other blockchains can implement their own versions of NFTs and some already have. NFTs can really be anything digital (such as drawings, paintings, music, animations amongst many others), but a lot of the current excitement is around using the tech to sell digital art.

 

Other Characteristics of NFTs

  • Non-interoperable - a CryptoPunk cannot be used as a character on the CryptoKitties game or vice versa. This goes for collectibles such as trading cards, too; a Blockchain Heroes card cannot be played in the Gods Unchained trading-card game. 

  • Indivisible - NFTs cannot be divided into smaller denominations like bitcoin satoshi. They exist exclusively as a whole item. 

  • Indestructible - because all NFT data is stored on the blockchain via smart contracts, each token cannot be destroyed, removed or replicated. Ownership of these tokens is also immutable, which means gamers and collectors actually possess their NFTs, not the companies that create them. This contrasts with buying things like music from the iTunes store where users don't actually own what they’re buying, they just purchase the license to listen to the music. 

  • Verifiable - another benefit of storing historical ownership data on the blockchain is that items such as digital artwork can be traced back to the original creator, which allows pieces to be authenticated without the need for third-party verification.