What Exactly ARE Crypto Assets?
People often use the term “Bitcoin”, “cryptocurrencies”, “altcoins”, “blockchain”,and “distributed ledger technology” interchangeably. However there are differences between them. This is especially true with the cryptocurrencies.
It’s important to understand that there are many types of “cryptocurrencies”, which is actually a misnomer for most of these; that is why I prefer using “crypto assets”.
As described by Don and Alex Tapscott in their book BLOCKCHAIN REVOLUTION, there are presently seven different types of crypto assets:
These are units of exchange and/or stores of value.
These are set up as decentralized applications that eliminate the need for a middleman or central authority to verify transactions. Thus they are trustless “smart” contracts.
Similar to fuel or electricity, these tokens are used within a blockchain protocol to allow transactions of almost anything imaginable, as well as rewards for those using the tokens.
These are blockchain-based tokens that are backed by some form of asset with value (stocks, bonds, real estate, artwork, etc.), and can be bought, sold, and traded to anyone anywhere.
Natural Asset Tokens:
These are tokens representing real-world commodities such as oil, precious metals, or agricultural products, allowing peer-to-peer trades without the costly middlemen and time-consuming trade settlements.
These digital assets are created, traded, and collected entirely on the blockchain. For example, many online gamers use unique, highly collectible assets in their games that are played by millions. These crypto collectibles will be able to be exchanged for real-world money.
Crypto – Fiat Currencies:
These are issued by central banks in various countries as a means of creating a digital form of that country’s fiat currency. The idea is to make transactions using these tokens more efficient, transparent, and cost-effective.