The Basic Units in Crypto 🪙
There are four main financial units in crypto: coins, tokens, stablecoins, and NFTs
-> Coins. Imagine a coin as the foundation. A coin has its own blockchain named after it, and everything on that blockchain relies on it because the coin is needed to pay the network's fees. Without the coin, the blockchain wouldn't function at all. Here are a few examples:
• BTC (Bitcoin network)
• ETH (Ethereum)
• SOL (Solana)
• TON (The Open Network/TON)
• APT (Aptos) and others
-> Tokens. Tokens are built on top of existing blockchains, unlike coins which have their own blockchains. Each token has a smart contract that gives it specific utility. There are different types of tokens based on their functionality:
• Governance (project management): Similar to stocks; the more tokens you have, the more influence you have over the project (e.g., MKR, ARB, OP)
• Payment: Some projects require payment in their tokens for specific functionality
• Utility Tokens: These provide benefits like reduced fees or participation in activities (e.g., KCS from the Kucoin exchange)
• Stablecoins and NFTs - these two are tokens as well, but they are so widely used that they deserve a separate category each⬇️
• and other functionality you can put into a smart contract
-> Stablecoins. Stablecoins are designed to make trading cryptocurrencies convenient by being pegged to fiat currencies, usually the US dollar. The major stablecoins are USDT, USDC, and BUSD. They need to be backed by something, and there are two main types of collateral:
1. Real dollars in a bank: The most common method
2. Overcollateralization: Backed by other cryptocurrencies whose value is higher than the stablecoins issued. For example, 1mil DAI (stablecoing) could be backed by $1.3mil in ETH
-> NFTs. Yes, the same NFTs that had an incredible run with pictures 🖼 being sold for $millions, only to see most of them drop heavily in price afterwards. NFTs are unique tokens that cannot be replaced or substituted
A non-fungible token (NFT) is a unique digital identifier that is recorded on a blockchain and is used to certify ownership and authenticity. It cannot be copied, substituted, or subdivided
This NFTs uniqueness means that you can't send or divide them like you would with cryptocurrencies. For example, if you owe someone 0.02 BTC for some work, you can easily send them that 0.02 BTC. But if someone asks you for 0.5 NFT from some collection, you can't just send them half an NFT, you won't rip this digital asset apart and that's exactly why they are non-fungible. NFTs are often associated with digital art (pictures), but they can also represent other digital or physical assets like videos, audio files, etc.
In fact, NFTs are a promising technology with potential future applications, such as creating digital contracts for property ownership. However, for the average user, they might currently have a 'bad aura,' so to speak. Each of you can easily create your own token or NFT in just a few minutes. If you're interested, just google how to do it 🧠