What are tokens and what types there are?
ICO fever has been turning heads across the world for months. Perhaps, every businessman had time to think about the fact that choosing ICO token market could be a very good way to raise money for the implementation of his project. Moreover, issuing your own cryptocurrency or tokens does not require legal agreements or regulation from the authorities.
Although it is worth noting that in some countries, cryptocurrency is banned in principle. In the minds of laypersons these two concepts - tokens and cryptocurrency - are most often mixed. But they are not even close to the same thing.
Tokens are the basis for project's financing, a new type of financial instrument. At the pre-ICO or ICO (token sale) stages, tokens are issued and after ICO token distribution they can be exchanged for a new cryptocurrency. A token may be a coin, however a coin may not always be a token.
The world's most famous cryptocurrency, bitcoin, also performs the function of a coin as a way of rewarding the main players. Bitcoins and similar digital currencies can be produced only by mining. But tokens can be obtained in other ways. Steemit fills up token wallet for publishing content and improving service, just like the Russian analogue of the project - Golos media platform. In this case, tokens act as a referral reward, which can then be exchanged for another cryptocurrency.
Classification of tokens
Depending on the needs and desires of the company, their tokens may have different functions. Such crypto assets can be classified into the following types: built-in tokens, appcoins, credit tokens, token-shares, token-bonds, hybrid tokens. All these models of tokens fit within the framework of the classical economic schemes. A specific cryptocurrency network can use several types of tokens at once.
These tokens are an essential part of blockchain network. The main functions of built-in tokens are rewarding miners and prevention of spam in transactions. In fact, basically, these tokens do not have any security or obligation, although they have their own monetary equivalent. Such features - the absence of the issuer and liabilities - are the differences inherent only to built-in tokens. These are the tokens that we use to call cryptocurrency. The most famous built-in tokens are bitcoin and ethereum.
Appcoins are quite comparable to traditional money, but they are used mainly within a single application. The more features or services this service can offer, the more interesting its tokens will be to the user and it will resulted in their price. Application and cryptocurrency tokens are far from being the same thing, not all the tokens can be used as a universal means of payment.
Appcoins are similar to national currencies of different countries - only one coin circulates within such a "digital state". Golem can be taken as an example of such coin: tokens are used as payment for the rental of computing capacities. This project enables users to buy and sell unused computer resources. Golem tokens are used as a means of payment between users, providers and software developers.
Tokens-shares are almost the same as ordinary shares - securities that are the property of the enterprise. They give their holder the right to dividends and participation in solving important management issues. Unlike real shares, tokens are not nominal. The user who buys these tokens gets the right to manage the company, for example, to vote on investment proposals, as well as to receive dividends. Tokens-shares are issued at the pre-ICO or ICO stages, and the funds raised from their sale go to the development of the project.
The Digix project, which developed a system for proving the assets of the protocol, uses tokens-shares that are backed by physical gold. The platform allows to tokenize any asset, which makes it possible to transfer digital gold with the help of blockchain. The owner of Digix assets receives the right to submit a business proposal and vote on existing Digix DAO offers, as well as the right to reward in the form of part of commissions from transactions within the company's network. The same type of tokens is also used by the closed-end TaaS fund, intended for investment in blockchain projects. The project has built an innovative system of cryptographic audit, which allowed it to become the first truly transparent fund, focused on the cryptocurrency. Half of the quarterly profits earned by TaaS is distributed among the tokens owners.
A bond is a security, whose owner is entitled to receive the value of the asset in the form of money or a property equivalent from the issuer. There was a time when almost every citizen of the Soviet Union had government bonds. Today securities of hundreds of companies and even government savings bonds are presented on the market. Tokens-bonds have basically the same principles with respect to blockchain-projects.
Credit tokens are considered a loan. By selling tokens, the company receives funds to realize its idea, but after some time after the project is launched, the buyback of assets is purchased. However, the user may not wait for this period and sell such tokens at any time, but, their price will be significantly lower. It is assumed that after the successful launch of the project the price of such tokens will grow, and the company will buy them back with interest. Simply put, these are debt obligations in the world of cryptocurrency.
This kind of crypto assets allows to attract funds and companies from the real economy. So, BananaCoin, in its essence, is a banana plantation, which attracts funds to expand its own territory and establish sales mechanisms. The creators of the "banana token" say that this will be the first ecotourism in South-East Asia. Another example is SandCoin. The company collects money for the creation of a sand pit near Moscow. It is designed to supply sand construction companies involved in the renovation program.
This coin can be especially relevant. Looking at such projects, it is obvious that credit tokens work well, even in the case of local projects that are not intended to make revolution in this or that sphere.
Hybrid types of tokens
There are also hybrid tokens that combine functions of other kinds to some extent. The ZRCoin project is a blockchain-option for investing in the production of a unique industrial material, a synthetic zirconium concentrate. Its token, ZRCoin, combines all three properties of tokens: share option, certificate and credit obligation. The owners of the token can repay it at any time by returning the invested funds, based on the increase of its value, to exchange it for zirconia dioxide (the underlying asset), or to exchange for shares of the company that produces this material.
Hybrid tokens can also often be discounts, that is, to provide a certain discount on the purchase of another product. Thus, ICOS tokens from the ICOBox platform not only give the right to vote when choosing an interesting ICO project, but also provide the opportunity to purchase tokens of selected projects for half the cost and lower. Thus, ICOBox makes the ICO process easier for a wide range of entrepreneurs. Although this project is not ideal, it serves as an excellent example of discounts in the digital world.
One of the largest Russia-based ICO projects, crowdfunding platform KICKICO, also uses hybrid tokens. Some platform services can be purchased for tokens, however there is a growing ecosystem around KickCoins, so in the future it can become a means of payment. At the same time, the advantages of KICKICO tokens were noted already at the state level - a number of urban blockchain projects in Innopolis, Tatarstan are planned to be developed with the help of the platform.