Understanding types of token (ICO)
- Posted by
- Comments Off on Understanding types of token (ICO)
Coins are the equivalent of money, which defines value and functions as a transfer of value. Whereas a token is a symbol of a contract, its value is independent of mining, gold prices or any dynamic market criteria. It’s like a story, when I have a friend who tells me that he will always make me coffee as requested. Then, he’s still doing it, after 10 years. A contract that is still held without depending on anything.
Then, let’s look at the most common types of tokens.
Token – token (utility token), the most popular type of token. Remember the amusement park from childhood? At the entrance, you need a token to buy food and enter the attraction. So, suppose a company is an amusement park and with the token you can buy various services such as games and food in it.
Now, to make the analogy perfect, let’s say you can buy a lot of tokens before the park officially opens, or when the park just opens. If the park becomes popular, the tokens will cost a lot more. Like $10 for a hot dog. But the smart kid who bought the token before opening will still enjoy his meal for $1. Where you buy cryptocurrency tokens is ICO – Initial Coin Offering.
Token – shares (equity token). In this sense, an ICO is completely the same as an IPO. Typically, token shares are issued when a startup does not need crypto technology. In this case, the token holder will receive a fixed dividend or commission. They will also be able to take part in corporate decision making. All this honor to support the project in its early life.
Token – credit. This is a loan; the holder gives for the startup. This is another way to raise money. For example, suppose you invested X to get X + 10%.
Token – combo. If you’re not completely confused, sometimes a token can belong to more than one type. For example, Sia and Digix tokens are tokens and stocks. And Steemit has all three types of tokens (Steem, Steem Dollars (SBD) and Steem Power (VESTS denomination).