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Understanding the various types of Crypto Tokens in DeFi

What are Alt Coins?

Bitcoin was the coin that introduced us to the world of cryptocurrencies. At the time, it was the only peer-to-peer transaction system for currencies. Eventually, other types of coins came into existence which were called altcoins, as they were created as an alternative to Bitcoin.

StableCoins

Stablecoins are pegged to a currency like the U.S. dollar or to a commodity’s price such as gold. They achieve their price stability via collateralization (backing) or through algorithmic mechanisms of buying and selling the reference asset or its derivatives. Ex- USDT , USDC , DAI

Exchange Tokens

These are a type of digital assets that are unique to that exchange. Most exchanges boost an exchange’s liquidity, incentivise trading activity or simplify an exchange’s community governance process in general. Ex- BNB, UNI, SUSHI

Mining Based

These altcoins get their moniker from the fact that they are mined. Proof of Work is a process by which systems generate tokens by solving challenging puzzles in order to build blocks, which is used by the majority of mining-based altcoins.

Ex- Litecoin , ZCash

Meme Coins

As the name suggests, they are based on a joke or parody of other well known cryptocurrencies. They usually gain popularity in a short period of time, with renowned crypto influencers and ordinary investors aiming to profit from short-term gains generally helping them online. Ex- DogeCoin , Shiba Inu

Utility Tokens

These tokens are designed to be used for a particular purpose, usually within the application/platform for which they are developed. The most common use of a utility token is as a payment option for purchases within the platform. Ex- BitTorrent (BTT) , Holo (HOT)

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