What are Crypto Assets: Definition, Use Cases and Examples

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The world of digital assets is extensive and it is easy to get lost without a clear explanation. This is a short guide to introduce you to Crypto Asset – one of the types of digital assets in this constantly evolving realm.

What are crypto assets?

Crypto asset is a type of digital asset that uses encryption algorithms as a means of creating an alternative form of payment. Cryptocurrency earned its name due to its use of encryption to validate transactions. This involves the use of sophisticated coding to securely store and transmit cryptocurrency data between wallets and public ledgers. 

When it comes to crypto assets, you may frequently hear about the terms coin and token. The concepts of the two are quite essential in the crypto world.

Coin vs Token

Coins are native to their blockchains, while tokens are created on existing blockchains. For example, Bitcoin is a coin as it runs on the Bitcoin blockchain and Ether is a coin because it runs on the Ethereum blockchain. However, Tether is a token due to the reason that it runs on Ethereum blockchain, not on its “own” blockchain.

Knowing the difference between coin and token, then it’s time to deep dive into the types of crypto assets based on their purpose.

Different types of Crypto Assets

Transactional Crypto Asset

A transactional crypto asset is a type of crypto asset that is designed to be used primarily for transactions or payments. These assets are intended to be used as a means of exchange, much like traditional fiat currencies, but with the added benefits of being decentralised, borderless, and often more secure. 

Some common examples of transactional crypto assets include Ethereum (ETH), Litecoin (LTC), and Bitcoin Cash (BCH). These assets can be used to purchase goods and services, transfer funds internationally, and conduct other types of financial transactions.

Find more on this project on CFTE’s analysis of blockchain projects.

Stablecoin

A stablecoin is a type of crypto asset that is primarily designed to hold and retain value over a long period of time. It is often characterised by its ability to act as a hedge against inflation and other economic risks, as well as its scarcity and perceived value. 

There are two types of stablecoins: fiat-collateralised and crypto-collateralised. Fiat-collateralised stablecoins are backed by a reserve of fiat currency, pegged to its value, while crypto-collateralised stablecoins are backed by a reserve of cryptocurrency assets. The former type includes Tether, USDC, and TUSD, while the latter includes Dai, BitUSD, and BitCNY, among others.

Find more on this project on CFTE’s analysis of blockchain projects.

Utility tokens

Utility tokens are a type of crypto assets that provide access to a particular product or service, typically within a decentralised application (dApp) or blockchain ecosystem. 

These tokens are created by a company or project to raise funds through an initial coin offering (ICO) or initial token offering (ITO), with the promise of being able to use the tokens within the platform or network.

Utility tokens are designed to provide access to a specific utility or function. This can include access to a particular service, the ability to vote on proposals, or to receive discounts or rewards within the platform. An example of a utility token is the Basic Attention Token (BAT), which is used within the Brave browser ecosystem to reward users for viewing advertisements and content. Another example is the Golem Network Token (GNT), which is used within the Golem network to pay for access to computing power for tasks such as rendering graphics or processing data.

Find more on this project on CFTE’s analysis of blockchain projects.

Security Tokens

Security tokens are digital tokens that represent ownership in a real-world asset, such as a stock, bond, or real estate. They use blockchain technology to provide secure and transparent ownership and transfer of assets. An example of a security token is the tokenized stock of a company traded on a blockchain-based exchange.

This type of token represents ownership of an asset. Since they represent ownership of a financial security, these assets are regulated by the Securities and Exchange Commission (SEC). Examples of this kind of token are INX, launched as both a utility and security token, allowing token holders to receive an annual 40 percent distribution of any positive net operating cash flow; and $EXOD which acts as a digital representation of Class A common stock in the company.

Find more on this project on CFTE’s analysis of blockchain projects.

Non-Fungible Tokens (NFTs)

Non-Fungible Tokens (NFTs) are unique digital assets that use blockchain technology to verify their authenticity and ownership. Each NFT is one-of-a-kind, and cannot be replicated or exchanged for another asset on a one-to-one basis.

Examples of NFTs include digital art, music, videos, and other types of creative content. One famous example is the digital artwork “Everydays: The First 5000 Days” by artist Beeple, which sold for $69 million at auction. 

Another example is the Nyan Cat meme, which was turned into an NFT and sold for almost $600,000. NFTs have also been used in the sports industry, with NBA Top Shot selling digital collectible highlights of basketball games.

Find more on this project on CFTE’s analysis of blockchain projects.

Conclusion

In conclusion, crypto assets have emerged as a popular and innovative type of digital asset, offering decentralised and secure transactions through blockchain technology. From Bitcoin to utility tokens like Ether, the diversity of crypto assets continues to expand, creating new opportunities for investment and commerce in the digital age.

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