As we explore the world of crypto assets, we take a look at the different types of crypto assets on the market and at the wide range of diversity in the new-age industry. As more people enter the market and start exchanging digital assets, the industry grows and expands to allow new variations.
Below we explore the vast diversity in the industry, from crypto assets used as money to ones that reward users for viewing a website. Each business offers a unique solution, and to navigate this we offer you guidance below.
What Are Crypto Assets?
The terms "crypto asset" and "cryptocurrency" can be used interchangeably. They both refer to a digital asset built using blockchain that can be transferred in a direct peer-to-peer manner. The first crypto asset to launch is Bitcoin, which entered (and created) the scene in 2009. Since then thousands of crypto assets have been created, each one with its own unique use case.
The Different Types Of Crypto Assets
While crypto assets might fall into one or more categories, each has its own set of rules and use cases.
Payment-Focused
These crypto assets can be used to pay for everyday goods and services or as a store of value (in some cases). These include the likes of Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), Bitcoin Cash (BCH), etc.
Stablecoins
Stablecoins are crypto assets that have their value pegged to a fiat currency or commodity. These crypto assets are designed to bypass the volatility synonymous with the crypto market. These include the likes of Tether (USDT) and USD Coin (USDC).
Privacy Coins
Privacy coins are digital assets that hide details of the transaction, such as the origin, destination and amount. These crypto assets offer untraceable monetary transfers. These include the likes of Monero (XMR) and ZCash (ZEC).
CBDCs
Central Bank Digital Currencies (CBDCs) are crypto assets built and maintained by banks. Used as digital currencies alongside the traditional currency, CBDCs are designed to provide a digital version of the local fiat to which the value is pegged.
Governance Tokens
Common among decentralized finance (DeFi) protocols, governance tokens provide holders with a say in the platform and in future updates.
Utility Tokens
Utility tokens will typically provide a service to the holder on the platform on which it was created. Commonly created using the ERC-20 token standard, utility tokens might represent a subscription on a platform or a use case specific to that ecosystem.
Non-Fungible Tokens
Non-fungible tokens, also known as NFTs, are crypto assets that cannot be used interchangeably and instead hold unique and rare properties. Each NFT represents a singular function that cannot be changed.
How Are Crypto Assets Created And Distributed?
Before crypto assets are created the project's intentions are generally circulated through a white paper. In this white paper, the asset's tokenomics will be outlined which will cover how the asset is created and distributed.
Bitcoin, for example, uses a Proof of Work consensus which means that new coins are entered into circulation through miners solving complex mathematical problems. The network was designed to only ever have 21 million coins created, and new coins are slowly entered into the system each time a miner verifies and adds a new block to the blockchain.
Ethereum on the other hand has no limit to the number of ETH that can be created. The platform is currently moving from a PoW to a Proof of Stake consensus, which alters the way in which transactions are verified, however, new coins still enter circulation through verifying transactions.
XRP minted all its coins prelaunch and slowly release them into the system through a central authority while Tether creates USDT on demand. For each $1 sent, 1 USDT is created, which can later be removed from circulation should it be sold.
The Future Of Crypto Assets
From the ICO surge of 2017 to the DeFi explosion of 2020, and more recently, the fervor over NFTs, it's evident that cryptocurrency assets are an enduring presence. Continual innovation and escalating adoption have seamlessly woven crypto assets into the fabric of today's financial landscape.
Though mainstream acceptance is on an upward trajectory, a few challenges still require resolution. On one hand, global regulatory bodies are diligently crafting legal frameworks to accommodate the existence of these crypto assets. On the other, central banks are delving into the feasibility of Central Bank Digital Currencies (CBDCs) coexisting alongside traditional physical currencies. As the world navigates the path forward, one certainty remains: crypto assets are undeniably here to stay, fueling an expanding industry day by day.
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