The token economy is growing and decentralizing, thanks to technology. Over the years, there’s been a significant rise in the number of digital assets, each with its peculiarities. While cryptocurrency value tokens remain the leading tokenized and decentralized assets, others are.
Thus, the type of tokens in cryptocurrency you hold is never the same as another. In fact, no two tokens work the same and have the same features. This means there are divisions and subdivisions even in digital assets.
Without mincing words, below are five digital assets you should know alongside their differences.
What Are Digital Assets?
Digital assets are simply any valuable goods and materials available and accessible on the internet space. These materials exist in many different formats, from portable document files, pictures, audio files, spreadsheets, applications to graphic designs.
Current usage of ‘digital assets’ can be traced to the trending and growing interests in leveraging investments to make more money in cryptocurrencies. In blockchain technology, digital assets sustain the whole essence of the decentralized market system. In short, an asset can be termed digital if it:
- Has an attached value
- Can be easily searched for
- Distributed digitally
- Owned by a verified identity, either an individual or a company.
Furthermore, such assets possess valuable features that entice potential investors while their value, on the other hand, is dependent on the number of the accumulated investor at a given time.
Types And Differences Of Assets
As earlier pointed out, there are many forms of digital assets, and they aren’t similar to each other. Although the most common type is a cryptocurrency, other digital assets are valuable. Based on different functions and features, here’s a rundown list of the top assets:
- Value Tokens
This is the most common among all available digital assets. Crypto value tokens are currencies used as an exchange in a decentralized autonomous organization (DAO). Often known as store-of-value tokens, they’re secured by cryptography, fungible, and powered by blockchain technology. They’re also distributed and sold through the initial coin offering (ICO) process.
Examples of value tokens are Bitcoin, Ethereum, and Dogecoin. Each of these coins is stored in digital wallets and utilizes a peer-to-peer measure to verify payments. More significantly, value coins are transactional, susceptible to market fluctuations due to the interplay of demand and supply.
- Crypto Commodities
These commodities can sometimes be mistaken as a by-product of cryptocurrencies. The truth is, they’re not because they have an independent value. They’re termed “crypto” because, like cryptocurrencies, they’re built on cryptography. Crypto commodities are simply a source from which other tokens in the blockchain can be created. In simple terms, they birth new tokens in the blockchain enterprise.
- Utility Tokens
Utility Tokens are tokens in the digital space given to gain full access to a service or product. Crypto brands or other secular organizations use these tokens to raise public interest and awareness of their product in the blockchain. This is why they consist of a significant part of initial coin offering (ICO) when introducing new offerings in the crypto space.
Unlike other digital assets, they have more functions than a digital coin due to their utility. Their inherent value doesn’t qualify them to be used as a coin-based means of transaction in the blockchain space. In addition, they serve a unique utility such as giving preferential treatment to loyal customers.
- Non-Fungible Tokens
The next in line is the non-fungible token, commonly referred to as NFTs. NFTs are a symbol of approval for owning a digital asset in the blockchain space. They offer the absolute right and certification of a product or service to an individual.
NFTs are used to refer to digital products bought from the blockchain. Such products could be animations, music, or rare images. A significant difference between NFTs and other digital assets is that they can’t be exchanged for another. Similarly, only the buyer dictates the value of NFTs.
- Hybrid Tokens
A hybrid token is quite similar to a crypto commodity. They contain two or more tickets and are rarely used for blockchain transactions. Instead, they’re used for practical purposes only. This is why traders worry less about them because they’re not precisely for transactions. Although the tokens allow traders to open multiple accounts while paying for other trades, they function less in cryptocurrency technology.
The digital economy surges with the help of the token economy. Transactions have become more decentralized than ever as digital assets keep increasing. Several digital tokens are pushing their ways into concentration, and more traders are getting into them. Therefore, it’s always advisable to know the assets and their differences before investing in them or using them.