Lesson 3 of 7 · All lessons in this module
- Distributed ledgers, blockchains and their financial usesVideo lesson
- Proof of work, proof of stake and network types
- Types of digital assets: cryptocurrencies and tokens
- Digital assets versus traditional financial assets
- Direct investment: wallets, exchanges and their risks
- Indirect vehicles, asset-backed tokens and DeFi
- Risk, return and diversification of digital assets
Lesson 3 of 7 · 15 min
Types of digital assets: cryptocurrencies and tokens
Digital assets split into cryptocurrencies (Bitcoin, altcoins such as Ether, stablecoins and meme coins, plus central bank digital currencies) and tokens built on existing blockchains (NFTs, security tokens, utility tokens and governance tokens), each with a different purpose and risk.
In short
- Cryptocurrencies run on their own blockchains and transfer or store value without an intermediary; tokens are built on an existing blockchain.
- Bitcoin is the original and most traded; altcoins are the thousands of others, led by Ether, whose programmable blockchain hosts smart contracts.
- Stablecoins link their value to another asset: collateralised ones hold reserves (fiat, gold, other crypto); algorithmic ones manage supply by code and can collapse if the mechanism breaks.
- Meme coins start as jokes and rise on hype; CBDCs are central-bank tokenized fiat money.
- NFTs are unique (non-fungible) certificates of authenticity; security tokens digitise ownership rights in securities and may pay dividends; utility tokens pay for network services; governance tokens give votes on how a network is run.
- An ICO sells new tokens to investors: cheaper and faster than an IPO, but unregulated, usually without voting rights, and often linked to fraud.
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