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Is the name “cryptocurrency” really appropriate?

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Current “encryption currency” or “cryptocurrency” that such as Bitcoin and ethereum in Japan, is called the Cryptocurrency or cryptocurrency, in English (encryption currency and cryptocurrency to be exact there is a difference).

Although it is collectively referred to as “currency”, in fact it is said that about 90% of tokens circulating in neighborhood belong to the type “utility token”.

There are different types of tokens, including “cryptocurrency” and “utility token” depending on purpose and mechanism .

This page explains the type of token, and explains the problem of enclosing all the tokens with “cryptocurrency” .

Introduction – On the generic term “token”

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Before explaining the type of token, I will explain the exact difference between ” coin ” and ” token “.

In a general definition, ” coin ” refers to what is the basis of unique platforms such as Bitcoins and ether symbols.

For example, Bitcoin / BTC is “coin” used in Bitcoin · block chain. Similarly, ETHERIUM / ETH is “coin” of the Ethiaryium block chains.

So what is called Binance Coin / BNB and OmiseGO / OMG that are made as DApps on the Ethernet network?

Generally referred to as ” token ” as the basis of block chains built on other platforms like BNB and OMG.

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From CoinMarketCap. You can also see the market capitalization rankings for coins only or non-native tokens on the site.

However, it is troublesome to check whether a project uses its own block chain, so both have a tendency to be called “cryptocurrency” or “token .”

On this page, we will call it all “token” after that.

There are seven kinds of tokens roughly divided

So, what kind of thing actually exists in the token?

Although the exact name and definition are often ambiguous, some belong to several types, but the roughly divided tokens are divided into the following seven types.

cryptocurrency

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A token created as a value storage, unit, or purpose used as a means of exchange and trading, such as a Japanese yen or a US dollar, is called a cryptocurrency .

The so-called ” digital currency ” that people often imagine people who are not familiar with block chains or virtual currencies often apply to this category.

For example, Bitcoin / BTC , light coin / LTC , Monero / XMR etc will apply to this type.

The part where the cryptocurrency is different from the legal currency lies in that the value, issue volume, transaction history, etc. can not be controlled in a centralized manner ( it is made up of code, not law ).

Therefore, there is a potential in the cryptocurrency that it is possible to construct an unregulated (economically uncontrolled) economic zone , facilitate micropayment , simplify international remittance, and secure anonymity .

However, as the block chain technology is complicated and the image as a high-risk financial product is deeply rooted, the cryptocurrency tends to be difficult to gain public understanding .

Platform token

Is the name "virtual currency" really appropriate?  - eth Projects such as Ether / ETH , Neo / NEO , Omni / OMNI, etc. are developing block chains designed to build DApps on distributed networks .

Tokens used on such platforms are called platform tokens .

Unlike the above cryptocurrency, these tokens do not exist as currency, they act as “fuel” to maintain a distributed network .

For example, the OmiseGO / OMG introduced in the section “Difference between coins and tokens” is DApp built on Ethernet.

The history of platform tokens dates back to the appearance of Bitcoins.

Technologies such as block chains, smart contracts, distributed networks, etc. became famous with the appearance of Bitcoins.

Besides the “cryptocurrency” defined above, these technologies began to be thought to be usable in various industrial fields .

Therefore, it is the Enterprise that developed a versatile platform that can give various uses to the token as well as the use as a currency.

Utility token

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As mentioned at the beginning, it is said that 90% of the tokens currently on the market (definition is ambiguous and there are duplicates, there are various opinions) is a utility token .

A utility token is a unit used to represent voting rights and membership or to enjoy a specific service .

The difference from the above “cryptocurrency” is that a utility token is a “means for accessing a specific service “.

For example, in a project called Golem / GNT, services are available that allow you to lend and borrow the computing power of smartphones around the world.

On this service, exchange and exchanges are performed using GNT tokens when providing / using computing capacity. GNT tokens can not be used basically for online payment etc. with other services.

On the other hand, Bitcoins which are ” virtual currencies ” can also be used to purchase GNT tokens at exchanges, and can also be used for shopping at shops accepting BTC payment. In other words, it can be used for services outside the ecosystem .

In this way, a utility token means a token intended for use within the ecosystem built up by the service that is the basis of that token .

Security token

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Security in the financial industry refers to financial products such as stocks and bonds. Issuing these financial products as tokens on the block chain is called security token .

In recent years, projects are now emerging that seek to secure higher security and transparency by issuing such financial products as tokens on the block chain.

For example, in a project called Polymath , we are developing a platform on which corporations can issue security tokens based on regulations.

Because security tokens differ in particular nature from other tokens, they are entering the gray zone in each country from the viewpoint of legal regulation .

What is STO (Security Token Offering)? Explain the difference with ICO thoroughly – CRYPTO TIMES

Asset-backed (asset-backed) token

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A token with its value supported by an existing asset is called an asset-backed (asset-backed) token .

In other words, one token and a certain unit of assets (real estate, commodity, legal currency, etc.) can theoretically be exchanged .

Some asset-backed tokens simply indicate ownership of assets (such as diamonds and real estate) tied to tokens, others secure the value of tokens with underlying assets (oil and money, There are also statutory currencies etc).

In particular, the token like the latter is sometimes called ” stable coin (stable coin) ” for the purpose of ” making the everyday easy-to-use currency by stabilizing the price “.

What is the asset-back currency? A thorough explanation of features and mechanism! – CRYPTO TIMES
Linked with legal currency! What? What is the peg currency in the cryptocurrency? – CRYPTO TIMES

Non-substitution type (nonfanzable) token

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A non-alternate type token or nonfangible token (NFT) is a type of token of which each piece has different value .

CryptoKitties that uses ERC-721 standard of Enterprise is always given as an example of non-substitution type token. With this service you can purchase digital cats in legal currency or cryptocurrency.

What is “ERC” by Ethereum (Etharium)? A thorough explanation of major standards! – CRYPTO TIMES

Each cat has different appearance and features, and these data are linked to each token .

Because Mr. A’s cat and Mr. B’s cat are different in appearance , the value of the two tokens with that data also differs .

A non-substitute token is an excellent token to represent an asset with different properties, such as art, cat, real estate and so on .

Legal cryptocurrency

Is the name "virtual currency" really appropriate?  - petro

Regular currencies such as Japanese yen and US dollars and the government issued currencies are called statutory currency or Fiat currency, and governments guarantee its value.

To guarantee the value ” means that “it is decided that in Japan any business must accept Japanese yen as a payment method “.

The legal currency is issued as a cryptocurrency using block chain and distributed ledger mechanism aslegal cryptocurrency “. This type of token is very special.

The best token as an example is ” Petro ” issued by the government of Venezuela, which is in hyper inflation.

Petro is also an asset-backed token backed up by oil. However, from a political point of view, there is a negative opinion on the reliability of this token.

What happened to Peter? Commentary on the cryptocurrency situation of Venezuela in chronological order! – CRYPTO TIMES

What is wrong with collectively “cryptocurrency”

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At the beginning of this article I claimed that ” Do not distinguish the type of token and call it all as a cryptocurrency “.

However, if you have some knowledge about the type of token introduced here, you personally think that you can collectively be referred to as Bukkake cryptocurrency .

I think that it is troublesome to check the type of token one by one and call it with an appropriate name together with putting “coin” and “token” together as “token”.

However, from a general public without expert knowledge, the term ” cryptocurrencymay strongly recollect images such as the digital version of the legal tender such as Japanese yen or US dollar.

People who have the image that ” cryptocurrency is all digital version currency ” without knowing anything about block chains and distributed ledgers are sure to say, ” Who guarantees the value, ” “It is some fraud, dangerous ” I will make misunderstandings.

In addition, news such as exchange hacking and ICO fraud spurs existing negative bias .

As explained above, the cryptocurrency in the real sense is limited to a handful of things like Bitcoins, light coins and Monero.

In other words, all tokens are collectively referred to as virtual “currency”, meaning that tokens that originally are not intended to be used as currencies get overwhelmed .

Summary

The definition of the type of token described in this article is constantly changing, there are some that overlap several types, and a new type may come out.

This concept of “There is absolutely no right” may also be one reason why it is difficult to gain public understanding.

However, as explained in this article, there is a misleading feature in the generic term “cryptocurrency”, it seems that elimination of this as a further step towards popularization of block chain technology I will.

Author: Yuya 【Coin Desk News】 – Source Post: https://crypto-times.jp/7-types-of-tokens/

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