4 Classes of Crypto Finance Investments

4 Classes of Crypto Finance Investments

The crypto finance ecosystem presents investors with a host of exciting market opportunities, but many investors struggle to understand the distinctions between the different asset classes present within this space. This is why Strategic Coin offers educational information and in-depth market research reports that prepare investors to recognize and take advantage of opportunities as they arise.

Below, this article explains the four main classes of crypto finance investments:

Cryptocurrencies

Cryptocurrencies are digital currencies that secure their networks using cryptography. Most cryptocurrencies utilize a distributed public ledger called a blockchain to record all transactions made on the network, eliminating the need for a central authority to facilitate transactions and prevent counterfeiting. Cryptocurrencies derive their value from their utility, either as a currency or a store of value.

The world’s first cryptocurrency was Bitcoin (BTC), which was released in 2009 and remains the most prominent and valuable. Hundreds of developers have copied and modified the Bitcoin software to create their own cryptocurrencies, known as altcoins. Popular altcoins include Litecoin (LTC) and Dash (DASH).

Platforms

Crypto platforms are blockchain-based networks that allow software developers to write smart contracts, which are applications that run on the blockchain and always operate as programmed without the risk of downtime or censorship. Ethereum is the most prominent crypto platform, and it has served as the foundation for most initial coin offerings (ICOs). The ICO funding model allows startups to raise capital by issuing and selling digital tokens that represent equity or another type of digital asset.

Crypto platforms often have a native cryptocurrency. Ether (ETH), for instance, is the native currency of Ethereum. These native currencies derive their value in part from the fact that smart contract participants must use them to pay to run their applications.

Tokens

A crypto token is like a cryptocurrency, except its network is secured by another coin or platform’s blockchain. Tokens are created through smart contracts and often distributed through initial coin offerings. Tokens may be classified as asset or utility coins.

Utility tokens–sometimes called app coins–provide users with access to a product or service and derive their value from the demand for that service. For example, Golem held an ICO to raise capital to develop a decentralized supercomputing network that harnesses excess computing power. ICO participants received Golem Network Tokens (GNT) that they will be able to use to rent computing power once the network launches.

Assets

A crypto asset is a blockchain-based coin or token that signifies and derives its value from something that does not exist on the blockchain. For example, Tether (USDT) is a crypto asset whose value is pegged to USD. The developers of Tether back each token with $1 of fiat assets stored in reserve accounts, enabling users to trade fiat currency on the blockchain. One particularly promising type of asset token is the equity token, which allows company stock to be issued and traded on the blockchain.

Strategic Coin is your go-to source for cryptocurrency investment research and education. Whether you need help understanding the basics of blockchain technology or desire to read an in-depth analysis of the latest initial coin offering, Strategic Coin will provide you with the information and resources you need to understand the crypto finance industry.