Different Types of Crypto Assets Beyond Coins

The world of cryptocurrency encompasses far more than just digital coins like Bitcoin and Ethereum. There are numerous types of crypto assets that serve different purposes and provide unique value propositions within the broader blockchain ecosystem. In this article, we will explore some of the most common crypto asset categories beyond coins.

Utility Tokens

Utility tokens represent access to a specific product or service that is typically provided by the issuing startup or project. They are not designed as investments, but rather to enable holders to interact with a blockchain-based application.

For example, Filecoin is a utility token that allows holders to purchase cloud storage on the Filecoin decentralized network. The Basic Attention Token can be used to access premium features on the privacy-focused Brave browser. Utility tokens grant holders the right to use the issuing platform, similar to how arcade tokens allow you to play games at an arcade.

Security Tokens

Security tokens represent an investment contract into an underlying asset or enterprise. They provide holders with financial rights such as dividends, revenue share, voting rights, and more.

Think of security tokens as a more liquid, blockchain-based version of traditional securities like stocks and bonds. Polymath, Securitize, and Harbor are examples of platforms that allow companies to launch compliant security tokens.

The key benefit of security tokens is bringing blockchain's advantages of transparency, efficiency, and liquidity to traditional financial securities. They open up investment opportunities to a wider pool of global contributors.

Stablecoins

As the name suggests, stablecoins are designed to maintain a stable value pegged to an external asset like the US dollar or gold. This makes them useful for transacting or preserving capital without exposure to cryptocurrency's high volatility.

Some examples include Tether (USDT), USD Coin (USDC), and Binance USD (BUSD) which peg their value to $1 USD per token. Algorithmic stablecoins like TerraUSD use complex incentives and trading mechanisms to algorithmically maintain their peg.

Stablecoins provide a critical function within the crypto economy by giving users a way to hedge against volatility without leaving the crypto ecosystem. They provide the price stability necessary for everyday transactions.

Non-Fungible Tokens (NFTs)

Non-fungible tokens are unique blockchain-based assets that represent ownership of digital items like art, music, videos, collectibles, virtual land, and more. Data is permanently recorded on-chain proving an NFT's authenticity and scarcity.

Some major NFT projects include CryptoPunks, Bored Ape Yacht Club, Axie Infinity, Decentraland, and NBA Top Shot. NFTs have enabled creators to monetize digital content directly with buyers in novel ways. The space is blowing up, with NFT sales volume surging into the billions in 2021.

Governance Tokens

Many decentralized blockchain projects depend on community governance to make key decisions and steer development. Governance tokens allow holders to vote on proposals that influence a project's future.

For example, the MakerDAO platform issues MKR tokens to users who can vote on risk management and other critical decisions for the stablecoin DAI. UNI, the governance token for Uniswap, allows holders to vote on adding new token pairs and how protocol fees are allocated.

Governance tokens help build communal ownership and align incentives between stakeholders and developers. They bring coordination benefits of traditional equity voting to decentralized networks.

Wrapped Tokens

Wrapped or tokenized tokens are blockchain assets that represent the value of other coins pegged 1:1 to the underlying asset. Most commonly, cryptocurrencies are wrapped on the Ethereum network as ERC-20 compatible tokens.

For instance, Wrapped Bitcoin (WBTC) mirrors the price of Bitcoin on Ethereum. This allows users to access Bitcoin's value within Ethereum's vast DeFi ecosystem. Ether can be wrapped into WETH, while other cross-chain bridges allow assets like Monero and Dogecoin to be wrapped.

Wrapping gives users more flexibility in how they transfer value across different blockchains and utilize decentralized apps. It bridges together various crypto economies.

Participation Tokens

Participation tokens give holders the right to contribute resources and participate in a network to receive rewards. Often participation involves providing computing power, storage space, or other utilities.

For example, with the Golem Network, GLM tokens let users lend computing power and earn rewards for rendering 3D animations and CGI. THETA tokens enable users to relay video streams and earn TFuel for supporting the Theta video delivery network.

Participation tokens incentivize users to actively contribute resources that strengthen a network. They align incentives between service providers and consumers.

More Evolution on Cryptocurrencies Assets

This overview shows that crypto-assets now go far beyond just digital currencies and coins. Unique types of tokens serve specialized functions within the broader blockchain ecosystem from facilitating transactions, governance, and business models.

As blockchain technology matures and becomes more mainstream, expect the realm of crypto assets to continue evolving in exciting new directions. The possibilities are vast when programmable money and contracts meet digital scarcity and network incentives. The above asset classes are just the beginning of the tokenization revolution.