Cryptoasset = a digital asset, created, managed, and traded on a blockchain
A cryptoasset is a digital asset that uses cryptography, a peer to peer network, and a public ledger to do three things :
- To regulate the creation of new units
- To verify transactions
- To secure these transactions without any middleman
Cryptocurrencies like bitcoin, the granddaddy of all cryptoassets, are instruments of exchange, stores of value, and units of account. To wit, Bitcoin today holds over $100 billion and supports billions a day in global transactions. Banks are taking notice, going from “bitcoin bad, blockchain good,” to “bitcoin, yikes!” JPMorgan and Bank of America are speaking openly about the risks cryptocurrencies pose to their business, and Goldman Sachs and TMX Group’s Shorcan are moving swiftly to trade these assets.
Zcash and other “privacy coins” build upon bitcoin’s principles, but add privacy to the mix.
How are those different from regular money ?
First, they are not issued by the government. They are created and controlled by computer programs, or algorithms.
The second major difference, and one that must be understood to appreciate the value of cryptos is that, unlike conventional currencies, the total amount that can ever be in circulation is limited. Cryptocurrency, in contrast, works on a deflationary model. Because the total supply of the currency is restricted, you do not use more coins to pay for goods and services, but less
Platform/Protocol tokens like ether of the Ethereum blockchain, a $40 billion mega-unicorn and Canada’s most successful start-up ever, are designed to support decentralized applications that eliminate intermediaries in virtually every facet of the economy. Ethereum has also emerged as the leading platform for ICOs where a project can tap into global pools of capital. To date, entrepreneurs have raised over $7 billion through ICOs, 70 percent of them using Ethereum’s standard, ERC-20. Ethereum and its challengers—Cosmos, Aion, and ICON—will form the backbone of the next era of the Internet.
Permits decentralized applications, powered by smart contracts. Escrow agents, bankers etc are not needed anymore as middleman. Automated investment bank.
Ethereum = city grid, Dapps are the cars, Ether is the gas
Polkadot and Cosmos have also quite potential (interconnecting all blockchains).
Utility tokens or App coins are programmable blockchain assets that have utility in an application such as Golem, which aims to aggregate the power of the world’s smartphones into a decentralized supercomputer that anyone can use to run computations in exchange for golem tokens. Think Amazon Web Services without Amazon.
Usually run on top of other platforms and don’t have their own blockchain (running on ethereum for instance).
Security tokens are native digital bonds, equities, and other securities that trade peer to peer without financial intermediaries. Why should a stock trade settle in three days (T+3) when buyer and seller can trade directly and settle instantaneously (T+0) on a decentralized exchange? The CSE intends to get into this market. Others would be wise to follow. ICOs have already upended venture capital. Bay Street will be next.
Security tokens have to be backed by a tangible asset, security coins have the features and protections of traditional assets, such as a share of company stock, while also leveraging the benefits of being a digital asset. And virtually any kind of physical asset — real estate, equity, etc. — can be “tokenized,” or used to back a security coin.
Fidelity is on this as well. Various initiatives ! No clearing houses, etc.
Those are digital bearer assets.
Natural asset tokens represent tangible goods like gold, oil, or carbon in peer-to-peer markets with real-time settlement. For example, the Royal Mint partnered with the Chicago Mercantile Exchange to create Royal Mint Gold, a digital gold token backed by gold bullion in the Royal Mint’s vaults. The entire commodities market is up for grabs, as is mass-market carbon trading.
Natural resources are a hard market to penetrate, beause of the lack of standards and because it’s a fragmented audience. Blockchain could do that, by aligning incentives with a common goal, like reducing carbon emissions.
Crypto collectibles are unique digital assets. Consider CryptoKitties, an app that enables users to purchase, raise, and even breed unique virtual pets. As of January 2018, CryptoKitties’ 235,000 users had conducted $52 million in transactions. Crypto collectibles can also represent unique tangible assets like Picasso’s paintings. Companies like Everledger and others are enabling the tracking and trading of these rare and very real collectibles on the blockchain.
Crypto fiat currencies and stablecoins are issued and governed by central banks. In 2017, Venezuela shocked many by announcing its launch of the petro, a cryptocurrency backed by the country’s vast oil reserves. The Federal Reserve and the Bank of Canada should take notice: implemented properly, crypto fiat currencies can make markets more efficient, transparent, and inclusive—and central bank policy more responsive to crises and shocks.
If crypto-fiat currencies are implemented the right way, they can :
- Make markets more efficient
- Improve inclusion
- Increase transparency
- Make central bank policy more effectice
Stablecoins try to maintain the same value over time, almost always by pegging themselves to some underlying asset, like a fiat-currency or gold, or by managing price through an ever-changing supply.
- Tether (USDT)
- MAkerDAO (Dai)
Stablecoins could gain traction, assuming two conditions :
- If existing cryptocurrencies remain highly volatile
- If governments don’t create their own crypto-fiat currencies
An optimal stablecoin cryptocurrency should have the following four traits: price stability, scalability, privacy, and decentralization. Additional traits that will assist the wider adoption of any stable coin are simplicity along with elegance of concept, easy integration points for partners, and ability for an exchange to work with. However, stability is key
Initial coin offerings : ICO and STO’s
Fundamentally changing how companies, users and investors are coming together.
However, while ICOs have raised a great deal of money, the fundraising method also gave birth to a variety of scams and subpar cryptocurrency projects. Many investors lost a great deal of money.
STOs hold a better potential for fundraising, as the tokens investors receive actually represent stakes in the company and its assets. This differs from ICOs, where investors receive tokens that are essentially useless until the project makes good on what it has promised.
Financial security issued in the form of a digital asset; which typically represent ownership rights in an underlying company and/or its assets. This is distinctly different than the aforementioned ICOs, which were ‘Utility Tokens’ or digital tokens that provided access to a project’s future product/service with no tangible claim to an asset or equity ownership.”
