In the blockchain world, tokens are digital assets built on existing blockchain platforms (like Ethereum, Solana, BNB Chain, etc.). Tokens can represent anything from currency and property to voting rights and in-game items. Here’s a more detailed breakdown of the main types of tokens on the blockchain:
1. Utility Tokens
Purpose: Provide access to a product or service within a blockchain ecosystem. Example: Buying computing power, storage space, or transaction fees.
Examples:
Ethereum (ETH) – Used to pay for smart contract execution on the Ethereum network.
Chainlink (LINK) – Used to pay for oracle services.
Notes: Not designed for investment, though often traded.
2. Security Tokens
Purpose: Represent ownership in real-world assets like stocks, bonds, or real estate. Example: A token that gives you shares in a company or dividends.
tZERO, Securitize platforms issue these.
Notes: These are regulated by financial authorities (like the SEC in the U.S.).
3. Governance Tokens
Purpose: Give holders the right to vote on project decisions, protocol changes, or treasury usage. Example: Voting on which features to develop next in a DeFi project.
Uniswap (UNI)
MakerDAO (MKR)
Notes: The more tokens you hold, the more voting power you have.
4. Stablecoins
Purpose: Maintain a stable value, usually pegged to fiat currencies (like the US dollar). Example: Used for trading, savings, and remittances without volatility.
Fiat-backed: USDT, USDC
Crypto-backed: DAI (backed by Ethereum)
Algorithmic: Use supply algorithms instead of collateral (some have failed, like Terra/LUNA)
5. Non-Fungible Tokens (NFTs)
Purpose: Represent ownership of a unique digital asset (art, music, game items, etc.). Example: Owning a unique piece of digital art or a game character.
Examples:CryptoPunks, Bored Ape Yacht Club (BAYC)
Notes: Built using standards like ERC-721 or ERC-1155 on Ethereum.
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