When the ERC 20 smart contract standard appeared, it gave Ethereum users a guideline to easily create a token. Although far from perfect, and rather buggy, this standard managed to boost the popularity of crypto tokens.
And since you could even use dedicated platforms to configure a token, without manually writing the contract, ERC 20 became, by far, the easiest token to create.
Furthermore, if you do a quick search on YouTube, you will certainly find yourself a nice tutorial that explains exactly how to write an ERC 20 smart contract and launch a token.
But if it were that simple to launch a successful cryptocurrency, we would find ourselves in a market where Bitcoin has an infinite number of legitimate rivals. But that’s not the case.
It’s hard to believe that anyone is still going forward with launching tokens without a real purpose right now, when the market is filled with lots of meaningful crypto projects. The dapps competition is fiercer than ever.
Nowadays, there are various types of tokens and, by far, the most known are the utility tokens, the security/equity tokens, and the currency tokens.
But as the crypto market is rapidly evolving, tokens find new uses in new environments. So, here are a few types of tokens you should really look out for.
The DeFi Tokens
Although for some, it’s a bubble ready to burst, 2020 certainly marks the age of DeFi.
The Decentralized Finances movement brings non-custodial financial services to the crypto market by leveraging interoperability and smart contracts. And this happens largely thanks to Ethereum’s capabilities to allow different tokens to communicate.
In essence, DeFi brings traditional financial products like payments, borrowing, or investing, to the crypto market. And although DeFi still has to get itself fully defined; it certainly helps the cryptocurrency world head into a direction where you could opt for an alternative to the current centralized financial system.
After some trimming and filtering, the crypto market will have another essential element that will turn it into a global, open alternative to every financial service you use today.
But as of right now, the DeFi tokens are getting attractive to crypto investors for their staking capabilities. Aside from incentivized governance, and vote rights, DeFi tokens can be used to earn interest from lending.
Just as you give your centralized bank money in an investment account so they can play with it around and give you interest, you are now able to choose from a long list of DeFis and do quite the same thing. The difference is that you have a smart contract at hand that the “bank” can’t unilaterally modify.
The Exchange Tokens
Cryptocurrency exchanges made it possible for anyone with an internet connection to access cryptos. But as the market is ‘growing up’, they had to come up with something new, to offer better services to traders.
So, as exchange platforms evolved with the market, they started improving on their services and managed to roll out exchange tokens.
Why would anyone buy an exchange token when you can trade or hold onto Bitcoin?
That’s a legit question. However, exchange tokens have a different purpose. They are meant to be used on the platform for trading because, in their most basic form, they give at least a commission fee discount.
For investors, it’s not a big deal, but for traders is. Lower commission means more profitable trading.
Yet, sticking to the old ways is never a good idea in such a progressive market. Therefore, exchange tokens needed to expand their perks.
So, a new crypto exchange, Scalpex, introduced in August 2020 their own exchange token, SXE, that doesn’t only offers a fee discount but also gives its holders access to the exclusive preview-version of the exchange, early access to the new experimental features, and trading strategies, payment of fees and other exchange services, and many more.
The Non-Fungible Tokens
Not all tokens are created to be equal. With the help of special smart contracts, like the ERC 721 standard, tokens can be created to be non-fungible, with each unit holding a unique value.
The most common non-fungible token is CryptoKitties, and up to today, people buy and sell CryptoKitties on different prices, based on their unique traits. All these kitties, with their special traits, are hosted on the Ethereum network and cannot be forged. But this goes beyond digital collectibles.
Through their nature, NFTs can be used even to represent real-world unique assets. And as some of the DeFi are meant for offering liquidity, there are already projects that offer loans to investors giving real-world assets as collaterals. The thing is those collaterals are registered to the blockchain as NFTs.
If things go on, NFTs might become the next big thing, and you could mortgage a house through a token, expanding further the facilities of the crypto economy.