As leading business leaders worldwide are accepting payments through cryptocurrencies, it is imperative to understand how the digital economy market functions.
You may encounter different terms like crypto tokens, coins, and blockchains as you step inside the cryptocurrency world. Before investing in this unique option, it is advisable to understand the difference between different tokens and currencies.
Purchasing crypto tokens and coins have their benefits and drawbacks. Read more to understand how these digital payments work.
What is a Crypto Token?
According to a recent report, New Zealand's investors are increasingly considering investing in crypto-assets and non-fungible tokens (NFTs).
Crypto tokens usually represent digital, tradable assets that reside on their blockchains. Digital assets, utilities, and services are stored as binary data that are encrypted with security algorithms.
Some of the common blockchaintoken platforms are Ethereum, NEO, Lisk, and Stratis. Ethereum tokens are called ERC-20, and NEO tokens are called NEP-5.
Crypto tokens have been widely chosen by many small-scale and large-scale organisations to enhance the security of their business transactions.
Uses of Tokens
Crypto tokens and coins have their uses and benefits. Here are some areas where tokens are helpful.
Crowdfunding: Initial Coin Offering (ICO) can be used in crowdfunding for new business ideas. Investors can put in their money for a new project and get digital tokens in return. They can later utilise the tokens to claim a share in the profit or the future business.
Used as Digital Payment Method: Crypto tokens offer faster transactions for multiple currencies. Hence, they are commonly used as payment methods for many online transactions.
To Sell Artwork as Digital Assets: Many art forms like dance videos, music albums, and games are tokenised and displayed for sale on online platforms.
Online Trading: Crypto equity can be used for lending as an online mortgage in business transactions. People also sell or purchase digitally stored assets like company shares, properties, and real estate lands.
Types of Tokens
The four main types of crypto tokens are:
Security: These tokens hold the ownership rights of a stakeholder in a company.
Non-fungible or Equity: The tokens are used for storing non-exchangeable data with specific authentication and ownership rights.
Utility: These are also called application tokens that provide access to a specific product or a service.
Payment: These are the most usual types of digital assets used for buying or selling goods and services.
Benefits of Using Tokens
Here are a few benefits of using digital tokens.
Faster and Flexible Trading: The token system eliminates the middlemen involved in online business trades. Hence, it is a better option compared to using crypto coins.
Interconnectivity: Online cryptocurrency traders can quickly communicate by sharing and buying tokenised assets across the vast blockchain network. Hence, it offers direct trading opportunities between multiple business people by overcoming geographical barriers.
Advanced Security: Trading crypto tokens is a safer option. You can use advanced encoding protocols and algorithms for a centralisedblockchain of information.
What are Crypto Coins?
A crypto coin is a virtual currency stored on secured digital blockchain networks. Coins can be used to transfer money, stored for value, or as payment for buying online goods and services. There are over 900 crypto coins available in the market today.
Types of Coins
There are two major types of electronic coins.
Bitcoins: Commonly known as digital gold, it is one of the most prominent variants of cryptocurrencies available in the market. A bitcoin network can have only 21 million units of coins circulating at a particular time.
The limited supply of bitcoins is the main reason for its increasing market value in the electronic currency world.
Altcoins: These are customised or alternative versions of bitcoins. Some common altcoins are DOGE, Ethereum, NEO, Factom, Ripple, Dash, and Monero. These altcoins use various storage and security techniques in the blockchain.
Benefits of Using Crypto Coins
Electronic currencies have various benefits as follows.
Low-cost Money Transfers: Cryptocurrency transfers with Litecoin, Bitcoin, and Stellar can happen within minutes, at minimum transactional costs.
Easy Way to Earn Profits: Expert trading options using crypto coins can help you earn profits faster. Yield farming is one way to invest digital coins in the best exchange platforms with the highest interest rates.
Make Private Transactions: You can use cryptocurrencies like Zcash and PIVX to make private transactions between your friends and relatives.
Get Online Services: You can use electronic money debit cards to shop from e-commerce websites. You can also use Bitcoins or ether to book hotels, flights, and accommodation via travel agents.
Crypto tokens and coins have their pros and cons. You should use the right exchange platform to invest in digital assets or electronic money for your needs.