In a previous article by Crypto Jargon, we explained the difference between a coin and a token. So now, let’s break down the types of coins and tokens that are currently most commonly used in crypto. In this post I’ll break down the following:
- VIRGIN COIN
- PRIVACY COIN
- EQUITY TOKEN
- UTILITY TOKEN
- SECURITY TOKEN
Starting with Stable Coins which were born in opposition to the very volatile nature of cryptocurrencies in general.
As you know, prices of most cryptocurrencies fluctuate in extremes, sometimes by more than 100% in a day or even in hours, so the necessity for traders to have alternatives gave birth to these so-called “Stable Coins”.
Typically, a stable coin is an asset (not a currency), which offers price stability characteristics. It is mainly designed to be used as a unit of account or as a store of value. Most stable coins today are cryptocurrencies that are pegged to another stable asset, like silver, gold or a fiat currency such as US dollar.
Some prominent examples of stable coins are USDT, PAX, TUSD and USDC.
Many exchanges that do not operate directly with fiat money, are using stable coins as alternatives to the fiat money these coins are pegged to. Stable is used in this case as a broad term of course, as the US Dollar itself is not 100% stable but as a world reserve currency, it is accepted as the standard for determining the Bitcoin value worldwide so most stable coins are fixed to be at 1:1 ratio with the US DOLLAR for that purpose.
Virgin Coin is simply a term referred to a brand-new coin acquired through mining that has not yet been used in a transaction and not being spent yet.
Privacy coin is, as the name suggests, a type of cryptocurrency that has privacy features, such as enhanced level of anonymity or masking layers that obfuscate the addresses of its sender and receiver. Since Bitcoin is not fully anonymous but all its transactions are traceable and publicly visible, some alt coins are focusing on providing anonymous features in order to compete with it. Such coins are Monero, Zcash, Dash, Zen and many others.
Now when we mention Scamcoin and Shitcoin, it becomes clear what we’re talking about – something that is not very legit or at least, not very trustworthy.
Shitcoin is a term typically given to those alts that have no use or potential value. It could be any new altcoin that is not mainstream or does not add innovation to the market. In the trading world, however, this is not necessarily a bad term. Traders don’t avoid a coin because it has weak fundamentals. They care mostly about TA and often would trade these for short term gains. However, if you see yourself as an investor rather than a speculator, you should not really touch these, simply because they don’t have a future in the long term.
A “Scamcoin” on the other hand, is a term referring to a cryptocurrency that is dubious in nature and doesn’t have any specific tech behind it. Its sole purpose is to make its “creators” rich and usually becomes a subject to Pump’n’Dump practices and market manipulation until it loses all value. Bitconnect and Onecoin are two such examples of Scamcoins – no real tech in them, no use-case and heavy MLM compensation plans to attract new investors. Stay away from any MLM crypto is my advice, I’ve never seen a decent cryptocurrency come out from this network marketing model. Ever.
Moving onto Tokens.
Tokens are different from coins due to the fact that they are created as smart contracts on an existing blockchain such as Ethereum, EOS, Stellar, NEO and others.
Tokens have various functions, they can be protocol tokens – those that act as a platform on which to build decentralized applications (DApps) such as Gnosis, Stellar.
Other types of tokens can be utility tokens.
A Utility token is a unit of currency consumed in a process, providing access to a product or service. For example, an arcade token that gets used when a videogame is played or a coin like Binance (BNB), which is used to pay exchange fees, hence the word “utility”, because it has used.
Security tokens are tokens on the blockchain that represent real assets. An example of a security token would be shared in a company-issued on the blockchain.
A token is considered a security if it fulfils the following criteria:
- It is an investment of money
- The investment is in a common enterprise
- There is an expectation of profit from the work of the promoters or the third party.
Because these tokens are deemed a security, they are subject to government regulations. Examples: Tezos and Polymath.
Commodity tokens – these are tokens backed by real-world commodities, whether it is gold, silver or oil. The rate of these tokens depends on the rate of the commodity backing it. For instance: Digix, El Petro and others.
Last but not least, collectible tokens (Cryptokitties, RarePepe).
These tokens represent a virtual collectible unit, like baseball cards, adorable kitties or memes. And they are built on the blockchain.
As you probably know I also post these definitions on my YouTube channel, here’s my episode with today’s terms:
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🏆Exchanges I use for trading crypto:
Where I buy crypto:
►Changelly (good for instant coins swaps)(Global)
►Payeer (Europe, Asia, alternative to paypal)
►Coinbase (USA, EU, Africa) Get $10 worth of Bitcoin on your first $100 crypto purchase with this link: http://bit.do/coinbase_join
Where I store my crypto: