Bitcoin and Ethereum are the big two in crypto, but there are plenty of other alternatives out there. Here's a quick guide on tokens and the different types.
What is a Token?
A token is simply any cryptocurrency besides popular cryptocurrencies like Bitcoin, and Ethereum.
However, the word token means something completely different depending on the context.
Tokens are digital assets that operate on an existing blockchain network.
They have a wide range of functionalities within a specific project's ecosystem, but they can also be held or traded like any other cryptocurrency.
If you are diving into the world of DeFi, you will encounter this. Tokens like Shiba Inu and Solana run on separate blockchains.
Types of Tokens
DeFi tokens look to replace traditional financial-system functions (lending, trading, saving, etc.). These tokens have a large variety of functions but can also be traded or held.
Governance tokens allow investors to participate in on-chain governance for a crypto project.
These tokens are used to vote on proposals, make decisions, and influence future projects.
Non-fungible tokens (NFTs) are a special type of token because each token is unique, unlike regular crypto which is held to a specific amount.
NFTs are used to authenticate ownership for digital assets - artwork, music, virtual real estate, etc.
Security tokens are the crypto equivalent of stocks and bonds. The goal is to raise funds, generate returns, or pay dividends. These tokens, like stocks, must be registered with the Securities and Exchange Commission.
Wrapping Up
Do thorough research on all the tokens you're interested in.
If you have money in any of these coins, you should always keep up with price changes, updates, and security breaches.
Make sure to define your trading strategy. Set a goal, risk level, and time frame. Set stop losses to protect yourself if need to get out.
And stay vigilant when protecting your crypto! Use FLOW to support focus and concentration throughout your day.
