What’s the first thing that pops into your head when I say “tokens”? Are you mentally rummaging through your childhood pockets for arcade tokens? Perhaps you’re whisked away to memories of the intense battles in Street Fighter, or the relentless attempts to snag that elusive oversized teddy bear from the claw machine.
Or maybe, it reminds you of a small token of appreciation you received after helping out a friend or a colleague. Such tokens, tangible or intangible, signify value or sentiment.
However, today’s conversation on tokens isn’t about nostalgia or gratitude. Because when we talk about tokens today, we’re diving into the digital realm. These assets represent a crucial component of the next-generation internet… the Web3. So, what exactly are digital assets, and what are the 9 types in existence?
Defining Digital Assets
Let’s start by making it clear that in Web3, digital assets and tokens refers to the same thing but aren’t exactly the same thing. Defining these terms upfront often simplifies the understanding of the concept. Here we go:
- Digital – when something is in a digital format, it means it’s in a form that computers or digital devices can process.
- Asset – is a valuable resource or property that is owned by an individual, organization, or entity.
- Token – a tangible or symbolic item that serves as a representation of value (i.e., one arcade token represents 50 cents).
With that said, digital asset refers to any item of value, such as data, content, or ownership rights, that exists in a digital format, making it accessible and transferable via computers or digital devices.
On the other hand, a token is a digital representation of the asset. We’ve discussed this in our previous article about Tokenization.
Types of Digital Assets
While you might have heard a lot about cryptocurrencies like Bitcoin, it’s worth noting that digital assets come in all shapes and sizes:
- Cryptocurrencies: Think Bitcoin – the granddaddy of them all. It is often likened to ‘digital gold’ due to its store of value properties.
- Stablecoins: The steady Eddies of the crypto world. Stablecoins are pegged to traditional currencies (a.k.a. fiat money), like the USD dollar, providing stability in volatile markets.
- Exchange Tokens: They are the native tokens of crypto exchanges such as Binance’s BNB, and they are crucial for operational functionalities.
- Securities Tokens: These are digital representations of securities, which might include investment funds or derivatives.
- Protocol Tokens: These are native tokens of blockchain platforms. Say, Ethereum’s Ether, which facilitate network operations and functions.
- Governance Tokens: These grant holders voting rights in decentralized organizations, examples include Uniswap’s UNI or Compound’s COMP.
- Non-Fungible Tokens (NFTs): Unique tokens verifying the authenticity and ownership of a digital item, popular in the arts and collectibles space.
- Natural Asset Tokens: Represent real-world commodities like oil or land.
- Central Bank Digital Currencies (CBDCs): Digital versions of national currencies, such as China’s Renminbi.
Tokens have always been a representation of value. But today, as we ride the wave of Web3, the concept of tokens is being reinvented, elevated, and expanded in ways we never imagined. These digital assets are much more than just “internet money”. They’re the building blocks of a new digital age, promising a future that’s decentralized, democratized, and brimming with endless possibilities. So the next time someone brings up “tokens,” you can smile, thinking of both that old arcade game and the exciting digital frontier we’re all venturing into!
