Types of Crypto
Cryptocurrencies
Cryptocurrencies are the most well-known type of crypto-asset, and can be broadly defined as digital units that originate on blockchain.
Examples include BTC, ETH, and UMEE.
Stablecoins
Stablecoins are a form of crypto-asset that are intended to allow users to enjoy the benefits of crypto and web3 without having to deal with the volatility commonly associated with other cryptos. Stablecoins achieve their price stability by being pegged to or backed by a commodity or fiat currency, or by using algorithmic economics to regulate supply and demand. Many popular stablecoins are pegged to the US dollar, meaning that in theory they can always be redeemed by a user for $1 or $1 worth of another asset. There are several different types of stablecoins that can be classified based on their stability mechanisms.
Utility Tokens
In the real world people often purchase or receive gift cards which can be used to pay for various products or services offered by the organization that issued them. While a giftcard is considered a cash equivalent, a gift card issued by one organization cannot be used to pay for a product or service offered by another organization; therefore a giftcard only has value if the product or service it can be redeemed for is considered valuable.
In crypto, people must purchase or earn utility tokens to be able to access a specific product or service within a web3 application or blockchain ecosystem. The value of utility tokens generally fluctuate in relation to the perceived value of the products or services they can be redeemed for. This allows a free market to determine the fair price associated with different products and services. Unlike gift cards which are limited by various terms and conditions, utility tokens are fungible and can be freely lent, borrowed, or traded thanks to the accessibility and trustless nature of blockchains.
Examples include LINK, BAT, and UMEE.
Governance Tokens
In traditional organizations all decision making power often lies in the hands of a small group of individuals known as the board of directors. While investors, employees, and customers are all stakeholders, they generally have minimal say in the decision making processes.
In crypto, governance tokens are often issued to users, contributors, and investors of a specific project in order to help distribute the decision making power and align the interests of all stakeholders. Governance tokens grant holders the ability to vote on issues related to the specific application or network they represent - usually one token equals one vote, and a specific amount of governance tokens are required in order for an individual to submit a governance proposal to be voted on by other token holders.
Examples include YFI, SNX, and UMEE.
