Digital Tokens 101: What is a digital token?

Digital Tokens 101: What is a digital token?

Digital tokens are a relatively new addition to our everyday vocabulary, and it’s closely related to cryptocurrencies like bitcoin, but also with electronic tokens which are used to symbolize various resources on a blockchain. What is a digital token? How can you use a digital token? Read this short guide to understand the different types of digital tokens and to be able to join a conversation nest time someone mentions digital tokens.


Digital Tokens 101: What Does it All Mean?

The term ‘token’ can lead you to think about the plastic casino chips, or that thing used to swap to get a beer under a particular platform or within a particular market such as a festival.

Let’s explore the origin of this term ‘digital token’, and then have a look to the area of cryptocurrency tokens, differentiating between blockchain-native tokens like BTC on Bitcoin or even ETH on Ethereum, along with asset-backed tokens like IOUs on Ripple.

How Digital Tokens appeared


Chances are that we’ve all seen a digital token before, even though we didn’t realize it. Let’s think about when subscribing to an online service or newsletter.

After you enter an email address into a site to join a mailing list, you are often asked to look at your email and click a hyperlink. The link you get to confirm your subscription may look something like this: token=4bdebebc-135b-4748-b7ab-25b31a285df8

In cases like this, the ‘token’ is that this series of characters that was delivered to you. This number or string of characters is unique, so the company who sent you the confirmation email will know it’s your email address if you click on it.

So, the site sent you a token, and you shipped it back, demonstrating you had control of the email address.

But the term ‘token’ is presently being utilized in a totally different manner to identify different items in the cryptocurrency world.


Cryptocurrency Tokens


Cryptocurrency tokens do not exist as a number like the one in the example above (they’d be simple to replicate ), but instead, they exist as entrances on a ledger (a blockchain). You have those ‘tokens’ since you’ve got a secret which allows you to make a new entrance on the ledger, re-assigning the possession to another person. You do not store tokens in your own pc, you save the keys that allow you to access or reassign the amount.

Those ‘tokens’ could be considered as electronic resources that you can have control of, and you may reassign control to somebody else.

“Cryptocurrency” can refer to both tokens and coins, but differences exist between the two labels.

We’ll cover two kinds of token:

  1. “intrinsic”, “native” or “built-in” tokens of blockchains
  2. “asset-backed” tokens issued on the blockchain by a third party onto a blockchain, which can be redeemed at a later time

1. Intrinsic tokens (also called ‘native or ‘built-in’ tokens)
Intrinsic tokens are conceived for their usefulness.

Here are some famous examples of intrinsic tokens are:

  • BTC (Bitcoin blockchain)
  • XRP (Ripple network)
  • NXT (NXT platform)
  • ETH (Ethereum)

Check out the top 100 cryptocurrency tokens, and the entire list on Coin Market Cap.

All these ‘coins’ or ‘digital tokens’ stand at the core of their projects and blockchain. Without them, the blockchain wouldn’t work. It’s not rare to find digital tokens as part of a reward system, which encourages users to create blocks by validating transactions on the blockchain. Each blockchain has its own digital tokens system, although some can look alike.

How are intrinsic tokens created?

These tokens are created by computers and are not backed up by anything. It’s like writing down on a piece of paper “I have 1 billion coins”.

In reality, if you did this, then kept a fantastic record of those friends you gave them to, and in the event that you could record forward trades as your buddies gave them to other friends, you’d do pretty much exactly what these digital ledgers do.

Let’s take the most famous digital tokens for instance:

Bitcoins are ‘mined’ according to a schedule. The recently created coins are made to reward to the block-maker. The entire amount of bitcoins increases with time. They can be then traded.

The digital tokens XRP, were ‘pre-mined’ (created all the beginning) and shared among key participants. Each trade has a small XRP fee. These XRPs are destroyed over time. The entire amount of XRPs circulating goes down with time.

  • NXT, NXT

The NXT tokens were pre-mined. Each trade on the NXT system includes a commission in NXT. The fee goes into the block-maker (in NXT that is known as a ‘forger’ as opposed to a ‘miner’). The entire amount of NXT stays constant with time.

Ethereum has been pre-mined. Transactions and smart contracts require an ETH fee to be created and to operate, and the block-maker is rewarded with ETH. The block-maker also receives a block reward.

coin_issuance bitcoin ethereum ripple what is digital token

What is the purpose of intrinsic digital tokens?

The primary purposes of intrinsic digital tokens appear to be:

  1. Block validation incentives (‘miner rewards’)
  2. Transaction spam avoidance (if all trades cost a token, it restricts the capacity to create spam transaction and jam the network)

Even though these coins have worth (you can purchase and sell some of them on a cryptocurrency exchange for some other cryptocurrencies or fiat), they are not supposed to represent anything. They just exist as a digital token.

2. Asset-backed tokens

If we take a look at the history of money, we can observe an antique practice people had. In the old times, you could deposit gold at your goldsmith’s shop, and get a receipt or “I Owe You” (IOU) note from them. These notes could be moved from person to person, and anyone holding these notes could go back to the goldsmith and get into the possession of the actual gold.

Asset-backed tokens would be the electronic equivalent. They’re claims within an underlying asset (such as the golden), that you have to maintain from a particular issuer (the goldsmith). The trades are listed on the blockchains, as tokens become passed between individuals, and also to maintain the underlying asset, you ship your token into the issuer, and the issuer sends you that the underlying asset.

Asset-backed tokens are claims on an underlying asset, by a particular issuer.

Popular assets for all these schemes are currencies (USD, EUR, etc) and precious metals (Cryptocurrencies seem to attract the same crowd as silver and gold). People monitoring these assets on ledgers by producing a digital token to represents each of them.

How do asset-backed tokens work?

Let us take the case of Coins-R-Us, a false Bitcoin exchange, issuing Euro-backed digital tokens.

You send fiat money to Coins-R-Us by logging into your internet banking. It’s like a normal bank payment you sent Eur to the Coins-R-Us’ bank accounts. Let’s say you sent 100 Eur. Then you log into your account and see 100 electronic asset-backed tokens known as Coins-R-Us-EUR.

The production of the tokens is listed on a blockchain. This could be on the Bitcoin Blockchain, or as a resource on Ripple or NXT, or even a smart contract on Ethereum. Now you can send these digital tokens to your friends (possibly in return for some thing or as a present), and also the tokens continue to be monitored on the exact same blockchain.

At some point, one of your friends will want to exchange this asset-backed token to get something real. He would have to go back to Coins-R-Us, set up an account on their platform, tell them his bank account number, and send them the Coins-R-Us-EUR he got out of you. They would then sent him Eur to his bank account from their bank account.

The advantages of using asset-backed tokens are that they are a good way to keep records of transactions and are easy to transfer, but the users still need to go back to the issuer if they ever want to transform it into liquidity.

cryptocurrency vs digital tokens what are digital tokens

What are Cryptocurrencies?

What is the definition of cryptocurrency?

A cryptocurrency is a virtual or digital currency which is encrypted (secured) using cryptography. Cryptography refers to the usage of encryption methods to secure and check the transport of trades. Bitcoin represents the very first decentralized cryptocurrency, which can be powered with a general public ledger that lists and validates all trades chronologically, known as the blockchain.

A Cryptocurrency is a math-based, decentralized digital money that’s protected by cryptography

Cryptocurrency is a short expression for “cryptographic” money. Cryptocurrency integrates the principles of cryptography to execute a distributed, decentralized, protected information market.

Cryptocurrency is a kind of “virtual money” compared to fiat money that’s used more commonly, like the dollar or the euro. Virtual currencies are supposed to be utilized as money; they are mainly meant to be utilized as a medium of trade. Though some persons speculate about the value of one currency versus different money, the aim of these currencies is to be used as a medium of trade rather than as an investment.

In 2015, the Commodity Futures Trading Commission (CFTC) from the United States, declared that “Bitcoin and other virtual currencies are encompassed in the definition and properly defined as commodities.” However, because virtual currencies aren’t securities, they aren’t regulated by the Securities and Exchange Commission (SEC).

Briefly, this is how a blockchain functions:

digital tokens

(Source: The Bernie Group)

Cryptocurrencies have been around before Bitcoin was created, but its creation marks a significant milestone in the domain of digital currencies, mainly because of its decentralized blockchain and user adoption.

The development of Bitcoin precipitated the growth of a verdant and much more varied ecosystem of different coins and tokens, which are frequently regarded as cryptocurrencies generally, even if a lot of them don’t fall under the definition of “money”.

Digital tokens vs Cryptocurrency

Tokens, on the other hand, are usually an addition to a blockchain and reflect an asset or a utility. Digital tokens belong to a platform (e.g. the Ethereum network), to exist and function, and are created when a crypto project launches an Initial Coin Offering (ICO). Tokens, also known as crypto-tokens and digital tokens, are often given to early investors in exchange for cryptocurrencies such as Ether, Bitcoin, or even some other Altcoins, and can also be used as a kind of payment for utilizing a platform, or app.

Now, how do you tell exactly what token does what? There is a number token and they all exist independently. However, the main types of tokens are security tokens and utility tokens.

In the crypto space, people refer to digital tokens as crypto tokens.

Think of digital tokens the same as you would think of the tokens that we utilized in actual life actions. The most important intention of the tokens would be to provide clients with an equivalent priority for maintaining an item or something that the tokens belong to.

For example, in banking, they utilize tokens to facilitate the customers’ access to their account.

Digital tokens work in a similar manner, but they’re primarily utilized at the idea of ICO.


Coins vs Tokens: Categorization of Cryptocurrencies


It’s essential to be aware that all coins or tokens are considered as cryptocurrencies, even though the majority of the coins don’t be a currency or medium of exchange.

The expression cryptocurrency is a misnomer because money technically signifies a unit of account, a store of value and a medium of trade.

These features are inherent inside Bitcoin, also since the cryptocurrency area was kick-started by Bitcoin’s production, some other coins conceived following Bitcoin is normally believed to be a cryptocurrency, although most don’t meet the aforementioned qualities of genuine currency.

The most frequent categorization of all cryptocurrencies are:

  • Choice Cryptocurrency Coins (Altcoins)
  • Tokens

 crydigital tokens ptocurrency altcoin tokens


Cryptocurrency which is not Bitcoin is also known as altcoin or just “coins”. They are frequently used interchangeably. Altcoins only refers to coins which are an option to Bitcoin. Nearly all altcoins are a version (fork) of Bitcoin, constructed using Bitcoin’s open-sourced, first protocol with modifications to its inherent codes, thereby simplifying a totally new coin with another set of attributes. A fundamental notion of changing open source codes to make new coins is known as hardforks. To understand better what a hardfork means, you can study Bitcoin Cash which is a hard fork from Bitcoin.

This normally results in the introduction of a new coin. There are various sorts of forks like hard fork, soft fork or casual fork.

You will find different altcoins which are not derived from Bitcoin’s open source protocol. Instead, they’ve established their very own blockchain and protocol which affirms their native currency.

Interesting fact: The very first Altcoin has been Namecoin, that was made in April 2011. It’s a decentralized open source data registration and transport system.


Tokens are a representation of a specific utility or asset, that generally resides on a blockchain. Tokens can signify essentially any resources which are fungible and tradeable, from commodities to loyalty factors to other cryptocurrencies!

Creating tokens is a far simpler process since you don’t need to change the codes from a specific protocol or design a blockchain from scratch. All you need to do is follow a standard template around your blockchain (e.g. Ethereum, Waves system), which permits you to produce your own tokens. This performance of producing your personal tokens is made possible via the usage of smart contracts.

What is a smart contract? A smart contract is a self-executing programmed computer codes which don’t require some third-parties to function.

This is how the process works:

digital tokens how smart contract work
Tokens are made and distributed to the general public via an Initial Coin Offering (ICO), which is a method of crowdfunding, through the launch of a newly created cryptocurrency or token to finance o project development. It’s very similar to an Initial Public Offering (IPO) for shares, but there are some crucial distinctions. Many eagerly participate in ICOs, and see it as a fantastic method to invest in projects which may offer excellent returns of investment.

Interesting fact: A template for token creation is fantastic since it provides a standard interface for interoperability between tokens. This makes it much easier for you to save different sort of coins inside one wallet. An illustration is that the ERC-20 standard on the Ethereum blockchain, which is utilized by over 40 tokens.

What is a Security Token?

Security tokens are synonymous with an investment contract. Security tokens could represent shares in a business, earnings flows, an entitlement to dividends or interest obligations. From a financial view, they’re similar to stocks, bonds or derivatives.

The national laws apply to ICOs, and they are different from country to country. This means that securities, asset tokens fall under these laws. That’s why it’s important to know the country in which the ICO is launched, to know the regulations which apply to a token.

How to know if a token is a security token?

Usually, If the answer to the question “Is the token increasing in value over time, and is that increase connected to the company’s performance?” is Yes, then that is a security token.

A Security Token is an electronic token that represents debt, equity, an investment contract, or other security in an enterprise.

It isn’t a coin nor is it meant to be money. The four conditions that have to be fulfilled in order for the tool to be considered a security are:

  • It’s an investment of cash;
  • There’s an expectation of gains from the investment;
  • The expense of cash is in a frequent venture; and
  • Any gain comes from promoters or third party.

This is called the Howey test, which was a Supreme Court case, between the Securities and Exchange Commission (SEC) and Howey. They determined that if a digital token fulfils the four requirements of this test  (such as other securities) it’ll be controlled by the SEC. So these digital tokens are securities, not commodities or currencies, and therefore they’re not governed by the Commodity Futures Trading Commission (CFTC).


  • Regulatory framework, depending on the country
  • Expectation of return
  • Similar to a stock

What is a Utility Token?

Utility tokens are much like the tokens you would purchase at an arcade, and grant you access to an organization’s services or products. They are not regulated, and therefore utility tokens are not investments.

From time to time, the lines between a security and a utility token may become confusing, especially once you add in unclear regulations, which are added in the absence of a globally-accepted frame. But when a utility token is correctly structured and functions as a “voucher” for the organization’s services, it stays a utility and usually exempt from rigorous regulatory oversight.

A Utility Token is an electronic token created for utilization only, not for investment.

It’s not a coin.

If a person is buying a utility token for investment purposes, it’s very likely to be regarded as a security token, ( the SEC stands by this view). A utility token is a token which can only be utilized on the 1 platform or network (where it is issued) and can’t be converted into fiat or electronic money.

It’s somehow similar to loyalty points and gift cards. Gift cards or loyalty points can only be used on a single platform or community and are often representative of a prepayment for services.

In discussing the gap between utility tokens and security tokens, SEC chairman Jay Clayton said: “A token that represents a participation interest in a book-of-the-month club” shouldn’t be a security token.

On the flip side, tokens in “a yet-to-be-built publishing house with the authors, books and distribution networks all to come” will probably be a security token since “prospective purchasers are being sold on the potential for tokens to increase in value — with the ability to lock in those increases by reselling the tokens on a secondary market — or to otherwise profit from the tokens based on the efforts of others.”


  • Not, or less, regulated
  • Aren’t investments
  • Give Accessibility to a product/service

Security Tokens vs Utility Tokens: Why It Matters

Knowing the distinction between a utility token along with a security token is an essential aspect.

Whether you are holding tokens or are arranging a crowdsale, then you want to be aware of the difference.

To begin with, you do not wish to purchase something without understanding exactly what it is, and secondly, you have to understand what legislation the token should be compliant with pre-launch of a token crowdsale.

Prior to picking what coin to start your own ICO with, you will need to ask yourself a question: “Which are the requirements of my ICO?”. And make sure you don’t fall into these common traps:

Avoiding Security Tokens

Even if you intend to avoid regulations and call you token a utility token because that doesn’t make it a utility token. By calling a token a “utility” token or structuring it to supply a utility doesn’t stop the token out of being a safety.

In case a security token gets the features that your ICO needs, then pick a security. When there’s absolutely no demand for a security token, then do not make one unnecessarily.

Underutilizing Utility Tokens

Utility tokens are of numerous types and with different attributes and can cover the needs of an ICO. Utility tokens are dynamic. Many overlook their features, however, it is crucial that you do your homework before ignoring the choice completely. By exploring all the features, one can get a better understanding of the capabilities of a token, have a better chance to successfully launch their own token or invest in a profitable project.

Altcoins vs Tokens

The most important difference between altcoins and tokens lies within their construction. While altcoins are different currencies using their ow blockchain, tokens function within a blockchain that eases the introduction of decentralized software. Nearly all coins in  (near to 80%) are tokens because they are much simpler to make.

Cryptocurrency vs Digital Tokens

Can you answer the question “What are the common for a dollar bill, the stocks of a company and a prepaid gift card?”

They don’t have a lot of things in common. Now let’s take this analogy to cryptocurrency (or virtual currency), security tokens and utility tokens. Again, they don’t have that many things in common.

But if you comply with that the world of digital translators from the media and popular media, you’d believe virtual currencies, security tokens, and utility tokens are very similar as they’re often simultaneously and discussed under the subject of “cryptocurrency.”

Many online publications and even investment guides use the term “cryptocurrency” to describe virtual currencies, security tokens, and utility tokens. But these three terms describe extremely different concepts, each of which can be subject to various legal frameworks and regulations.

While every one of the items is made on distributed ledgers using the blockchain technology, from both a legal and a practical standpoint, the similarity ends there. We should rethink using the term”cryptocurrency,” and instead use the phrases that are particular to the classes that have grown: virtual currency, security tokens, and utility tokens. Within our descriptions below we supply more details about the significance of each one of those classes.

digital token and icos what is a digital tokens

Initial Coin Offerings (ICOs) and Digital Tokens

ICO is the abbreviation for Initial Coin Offering. This is similar to crowdfunding or IPO. The essence of this process is that cryptocurrency projects are inviting anyone to become an investor in their project. The majority of these crypto projects launch a new cryptocurrency.

Let us clarify the usage and term of “ICO”

ICO stands for First Coin Offering. The normal ICO denotes the offering of electronic tokens that are generally either safety tokens or utility tokens. Furthermore, an ICO is generally not the first offering of the issuer. While ICO rhymes with IPO and is still a tricky term, it shouldn’t be confused with the public offering of securities.

As the marketplace rises, the terminology used in the field of cryptocurrency will hopefully get a wider spread and be understood properly. The differences between the different kinds of tokens are important. By understand their purposes, we can better apply the laws on their sale, use and the way they are created.

By ‘participating’ in an ICO, an investor is actually funding the project developers with more famous cryptocurrency, such as Bitcoin or Ethereum. With these funds, the project owners will be able to develop the project, and the investors are holding the digital tokens similar to stocks.

If a trader holds an electronic token, he then owns those shares from the project.

Digital Tokens Plays Important role in ICO:

The importance of digital tokens is revealed when we started learning about the fundraising which many startups need and acquire through ICOs. The creation of a crypto token requires some particular features and need to fulfil a certain task, while registered on the blockchain. Nowadays, there are websites willing to help with any part of the creation of a blockchain project.

Cryptocurrencies can be hard to understand, particularly because of their inherent blockchain technologies, which it’s all about complex math calculations and terminology you haven’t heard before. But we have you covered. Here are some resources to help you get started in the crypto world:

The concept of Tokenization

Tokenless Blockchain

As in Tim Swanson’s excellent report on permissioned ledgers, there is the concept of tokenless blockchains. This might imply a blockchain or decentralized distributed ledger that lacks an intrinsic token (eg Ripple with no XRP), nevertheless, asset-backed tokens are most likely to still be utilized. ‘Tokenless’ doesn’t refer to the lack of the asset-backed token, but to the lack of intrinsic token.

We do not always require a token. Based on the blockchain system, you might or might not require an inherent token.

Generally, permissionless ledgers where anybody may add a block, want some type of incentivisation scheme for block validators to perform their job. But in distributed ledger systems in which you control both the validators and block-creators, they then might do their task for a number of motives (perhaps the task is part of a contract). , such as since they’re contractually bound to do so. There is a bit more about it here.

Dematerialization and Tokenising legal constructs

Presently there’s a great deal of buzz in the blockchain circles and all sorts of things are tied to a blockchain: stocks, gold, debt, businesses, IPOs, diamonds, artwork, decentralized organisations, wine, music, countries and so forth.

Sometimes the objective is to have the ability to transfer resources (or IOUs) fast and easily while maintaining the physical thing secure (in a warehouse).

Other times, it is to get a digital token whose electronic possession matches the physical travel thing. For instance, once I offer you an actual diamond, I send you the electronic diamond-token, so you can control it now, and thus that the blockchain recordings the provenance of this diamond, such as a supercharged certificate-of-origin that contains a complete listing of possession.

Seeing legal constructs, notably stocks and companies, I think there’s a gap between monitoring claims to inherent objects onto a ledger, and really lawfully dematerialising the thing.


Dematerialising something is the process in which we replace a material item with an electronic one. For instance, paper share certificates have mostly been replaced by possession entries in databases. Some paper contracts are replaced with pdf documents.

Even though you’re able to declare “this digital token represents a share of a company”, and you’ll be able to send this to somebody else, this does not have any legal position. The token is not the share, even in the event that you possess the share in actual life, and you issue the token on the rear of it. The token is something beyond the law that you’ve created.

Sure, since the owner of stocks, you might devote to others that should they own that token, you then are going to pass the privileges (such as if you have this token, I’ll pass any dividends I purchase (from actually possessing the shares ) to you.

But if the shares are registered on your name in the shares registry, the authentic and legal shares registry, not the blockchain ledger that you’re using to monitor the electronic token you’ve created, then you own them.

That is why it’s untruthful when people say they’re generating *insert legal construct here* on the/a/some blockchain. They are not, It’s just as someone would create a business by writing “I create a business with 100 stocks” on a napkin, without doing all of the actual work of lawful firm creation and registering the business to a national authority of the country he lives in.

Sure, even if the legislation changed and a particular blockchain becomes part of the system or has been deemed equal to the country’s register of organizations, then yes, on this statutory blockchain, you might create a business. This is something all blockchain enthusiasts are looking forward to seeing: how legislation will gradually adapt to the blockchain technology.

Crypto Resources To Get You Started

If you are beginning your journey into the world of cryptocurrencies, then here is a list of useful guides and resources which can get you started:

Trading & Exchange

The Beginner’s Guide to Cryptocurrency

The Beginner’s Guide to Cryptocurrency

Nobody except you is able to take responsibility for your Cryptocurrency buying decisions, and thus you do have to think it through before investing.
If you’d like to find out more about this technology supporting cryptocurrencies, please check our info on the blockchain technology. As a newbie to cryptocurrency, it’s important to read a guide to cryptocurrency.

As a newbie, the world of cryptocurrency is a huge sea of unknown terms and technologies. We all ask ourselves “Where do I begin?”. What to keep in mind and what cryptocurrency keywords to look for when researching? What cryptocurrency resources to use?

This is a guide for the cryptocurrency beginners, to help you understand what to expect and to look out for. Most importantly, enjoy the process, it might be the best experience of your life just yet.

The rise of the Cryptocurrencies

Since the technological literacy of the population increases, approval of cryptocurrencies has raised as well. Online headlines like ‘Bitcoin price hits new all-time record’ and ‘Ethereum price surges’ are beginning to become a regular thing on the masses’ information feed.

What we know for certain is that individuals who were sceptical of Bitcoin and the tech behind it are gradually understanding and becoming increasingly more involved with crypto. The market cap of the whole crypto area is currently at $137 billion, March 2019, and the all-time high was $813 billion in January 2018. Who knows what will happen next month?


The Present Cryptocurrency Space

You’d have known of Bitcoin along with also the ‘altcoins.’ This naming convention began was because back in the times of 2011, forks of Bitcoin appeared from the markets. The forks, or clones, hoping to find their place on the market place, aiming to become ‘greater’ than Bitcoin. Since the appearance of Bitcoin, countless new cryptocurrencies have surfaced, aiming to take some of Bitcoin’s crypto market cap. Until now, Bitcoin has retained its crypto market dominance. But all these altcoins are gaining market share at an alarming rate. Ten times or even more expansion was discovered at a period as short as six months (visit PIVX, an altcoin).

Cryptocurrency, Stocks, and Fiat

The currencies we all know are known as ‘fiat’ in the cryptocurrency community. Although they have ‘currency’ in their own title, cryptocurrencies share more similarities with shares than to money. When you obtain any cryptocurrency or digital token, you’re in reality purchasing some tech inventory, part of the blockchain plus a bit of the system.

Cryptocurrency Exchanges

The most common places where people can purchase and exchange cryptocurrency are the cryptocurrency exchanges. Exchanges are places where you might purchase and sell your own crypto, with fiat.

There are numerous steps to estimate the reliability and quality of a market, including liquidity, disperse, fees, buy and withdrawal limitations, trading volume, protection, insurance, user-friendliness. Out of all of these, here are a few cryptocurrency exchanges perfect for beginners.

Most of the beginner friendly crypto exchanges will require you to deposit fiat from your bank account and then buy crypto.  You will need a bank account, and then follow some basic steps:

  1. Access the’Buy/Sell Bitcoin’ tab
  2. Choose the payment method
  3. Input the desired amount
  4. Click ‘Purchase Bitcoin’
  5. View your blamed Bitcoins or other cryptos in your account

When you become acquainted with purchasing crypto and begin to itch for some crypto trading (e.g. BTC/ETH), just carry out an instantaneous transfer from Coinbase into Coinbase Pro (former GDAX) free of cost and begin trading. Consider Coinbase as the location to conveniently purchase and save your crypto and Coinbase Pro as your own gross profit trading platform. Transfers between both are free and instant.

As you gradually find familiarized with different currencies, you may wish the alternative of investing in them. Research your exchanges of choice thoroughly.

When registering on those trades for the first time, do make it a point to confirm your account together with the essential files early, since you don’t wish to get stuck in the centre of a dull and slow admin operate once the trading chance comes. Verification on crypto exchanges may take weeks, and purchase/withdraw limitations might just grow gradually as your exchange.

If you’re investing in a currency other than USD, check out the market’s simplicity of withdrawal and funding. You don’t want your trade to come into fiat withdrawal issues. Make sure to check the deposit and withdraw limits and commission fees. 

Cryptocurrency Wallets

Exchanges have inbuilt online wallets to keep your cryptocurrency. But for people who heard of this Mt. Gox hack, then you may feel uncomfortable to store it on a cryptocurrency exchange. If you don’t want to maintain your crypto holdings in the exchange wallet, you have the choice to use a more secure wallet. Wallets are considered the safest way to secure your crypto investment.

By keeping your cryptocurrency in a wallet, you eliminate the platform risk, and it’s all up to you. After that, the biggest risk would be to physically lose your cold stored wallet or forget the password. A small network fee may be changed for the transfer of your cryptocurrency to a wallet. Always take precautions and avoid cryptocurrency trading mistakes.

Since it is hard to own something and not physically see it, many cryptocurrency investors prefer to store their cryptocurrency on hardware wallets, to remind them of their crypto holdings. Additionally, the hardware wallet’s user interface makes it effortless to keep numerous coins, which is particularly handy once you take part in ICOs (Initial Coin Offering) later on.

Cryptocurrency as part of Your Investment Portfolio

This topic is exceptionally subjective. Crypto has the capability to realize many ‘rags to riches’ stories, but its volatility makes it inconsistent. As a precaution, the money that you put in crypto ought to be money that you’re fine with losing. Most cryptocurrency investors are influenced psychologically by the volatility of the market. Of course, the risk could be worth it in the end, but this possible outcome comes with a lot of risks and psychological torment.

Of course, we recommend starting out with cryptocurrency you can acquire free, so check out how can you earn free cryptocurrency.

The popular and conservative recommends this portfolio:

  • < 30 years old (maximum) 30% Crypto, 50% Conventional Investments
  • 30 – 40 years old (maximum ) 20% Crypto, 60% Conventional Investments
Cryptocurrency mistakes newbies should avoid

Cryptocurrency mistakes newbies should avoid

Cryptocurrency mistakes newbies should avoid: Lack of expertise, Psychology and other Foolish mistakes newbie cryptocurrency traders make

How to prevent mistakes newbie cryptocurrency traders make?

Errors are brought on by a lack of expertise

We knew that it while preparing the listing. We have checked one more time and we all knew that we’re going the ideal way. A dealer must combine unknown business and he does not know the effects of his activities or their lack. Therefore he makes several activities, occasionally he earns, occasionally he loses after all he knows what he’s done. He’s his own bags of mistakes and for the large aspect of dealers, it’s the exact same.

Generally, nobody learns from the error of different dealers, we chose to publish this listing. Perhaps you have enough discipline to not get rid of money as the most aspect of dealers Well, nobody learns from the expertise of many others, we chose to publish this listing. Perhaps you have enough discipline to not lose your cash as other dealers do.

To tell the truth, typical mistakes rely not just on experience. They’re associated with a deficiency of knowledge and abilities which are useful especially for cryptocurrency trading world. We are going to examine the principal illusions of dealers, that make traders lose part of the funds.
In addition, you are going to discover 3 dumb mistakes, they appear to be evident, but they hurt sensible and decent people over and over again. They believe that”that won’t happen to me” These errors are part of the emotional world, but they do not deserve another category.

We’ll classify all errors according to their standards:

  1. Lack of experience
  2. Psychology
  3. Foolish cryptocurrency mistakes newbies traders make

The overview:

Should you catch on quite quickly, you will observe this long read begins from the origin of problems. this is a comprehensive guide and explanation of every error cryptocurrency traders and newbie make:

  • The 20% principle – the most suitable proportion of inexpensive resources in your portfolio using reduced capitalization. It should not be over 50%.
  • If you have discovered a”sexy” cryptocurrency from networking stations, likely you have missed a chance to buy it.
  • It is important not only select unique coins to your own portfolio but also put money into various kinds of the marketplace.
  • If you would like to trade as a casino, then you must invest all your money in a deposit or on your initial wager. If your plan is to create money from trading, then you should not comply with this information.
  • Should you see coin cost visiting the moon, then you must check a trading volume, averting pump & dump strategy.
  • It is a major mistake to market money if it begins falling. Additionally, you should not hold it indefinitely. Assess your trading forecast and do not follow it if it is not working.
  • Exchange support isn’t a bank, so your capital are under danger.
  • Examine your errors. If you have reserved your reduction, find a way how to prevent it next time.
  • Trading with No strategy. It is like driving to nowhere: you will quit driving when gas is finally over.
  • Do not follow your plan – it is like shifting the destination whilst driving with no map and with no clue how to read a topographical map.
  • Risk management – amounts that determine your entrance and exit rules along with your dimensions of Stop Loss. Without them, you see the tea leaves trade or combine the collective mind. Join our discussion and inform us if you adhere to this information (incidentally, this is poor information ).
  • All preceding rules will not help you in the event that you don’t know what the current program shows you. But if you’re able to just browse the graphs, with no principles you’ve got a fantastic danger to get rid of money.
  • You ought to look closely at the small things, this information can allow you to conserve your own funds.
  • We’ve got terrible news for you in the event that you run out of cash or hope to earn a lot of money in stocks.
  • In case your dynamics includes a developing loss and it resembles a loss and it is encouraged by reduction signs, there’s a fantastic possibility
  • that this can be a reduction. You ought to take it and try to not revenge. The marketplace acts like a living organism, however, it is not worth of revenging or fighting it if you have failed.
  • News effect on price moves. It’ll be too late in the event you choose to put in the trade with a broad group of different dealers.
  • You need to stop theft and supply safety to your own funds.
  • Advisors earn money on innocent novices, not on successful guidance.
  • You need to make an effort and make money rather than looking for a button. In cases like this, you will have the ability to forecast your own result.
  • You need to use just reliable robots.
  • Insufficient comprehension of Stock Exchange motion
  • The most essential ability of every dealer is your ability to browse the market. The charts move continuously, at the cryptocurrency business, even in brief periods anything could happen.

1. Lack of experience


Cryptocurrency mistakes newbies should avoid: Purchasing cheap cryptocurrency

It isn’t worth investing in a cryptocurrency only’cause it’s cheap. There are still individuals who reside in 2010 when the market consisted of the few of cryptocurrencies.

These people today think that cheap altcoins are undervalued: after their price goes to the moon.

This doesn’t indicate that weakly capitalized coins aren’t worth purchasing. Risky and lucrative assets must be included in your portfolio, so they could bring fantastic gains. Their percentage should not be more than 20%. If you begin trading, you need to supply your portfolio with assets that are strong, and their commission must be not less than 50%.

If cheap is what you are looking for, there isn’t anything cheaper than earning free cryptocurrency.

Cryptocurrency mistakes newbies should avoid: Purchase a cryptocurrency following its growth

You shouldn’t invest money on”sexy” tokens. Ordinarily, it’s too late to purchase it if everybody discusses this”sexy” token since the cost soar is accompanied by its own crash.

Cryptocurrency mistakes newbies should avoid: To not diversify your funds based on Advertise leadership

Maybe you’ve learned about diversification and believe it is an investment in various coins. Nonetheless, it’s usually regarded as insecure to spend only in 1 way of the marketplace. That is why cryptocurrency investors opt to invest in trading, mining, ICO, and startups in precisely the exact same time, also disperse this portfolio properly.

Why is this essential? Cryptocurrency marketplace lives by its own legislation, its own lively can differ: a sharp increase, lingering fall, sore level – and you can’t predict it. It’s essential for each and every dealer to rely on the gain from different trades in the event of a failure at once in several kinds of investment.

In cases like this, you should not forget about balancing and creating your portfolio. It is vital to produce a record of the very promising coins and pick the sum of every coin on your own funds. You have to look at your portfolio frequently and delete or add resources.


You should not spend money on “hot” tokens. Usually, it’s too late to buy it if everyone discusses this “hot” token because the price soar is accompanied by its crash. Some investors had bought highs Ripple (XRP) and Tron (TRX) in 2017, and they regretted a few weeks later, in 2018.

Cryptocurrency mistakes newbies should avoid: Invest all your funds on your first deposit or trade

Generally, newbies attempt to make from scratch as far as you can. Maybe not all them think how to generate their own strategy or how to not lose their deposit.

Attempting to make all of the cash from the cryptocurrency marketplace, they frequently overlook the vital components in trading – capital and money direction.

It contributes to serious mistakes – shifting all of the available capital to their own trading accounts.

Don’t make your initial deposit from your entire amount, particularly in the event that you don’t have a trading program or your statistics.

Cryptocurrency mistakes newbies should avoid: Be a victim of a pump and dump scam

If you have discovered unknown coin, which cost went to the moon, then you ought to stop dreaming, since this might be part of the pump and dump scheme.

At exactly the exact same time, you should not dismiss it you need to assess its trading volume on CoinMarketCap. Its 24h trading quantity significantly less than $1mln – that could possibly be a “pump and dump” scam.

Cryptocurrency mistakes newbies should avoid: Sell your cryptocurrency if the price is going down

This is a current market, babe, this may occur: a coin cost that you have, suddenly, starts to fall. About persistence, we will talk about a little later.

Let us talk about the 1st one about promoting your coin when it functions to collapse. You will see the error.

You need to alter your position before you choose to market falling cryptocurrency. Let us say that you have invested in this coin since you thought in its own prospects.

1) Have you ceased thinking in the long-term outlook of the cryptocurrency?

2) Have you shifted your goal?

3) Have you noticed any information, which affected its cost?

We believe that you have known everything: if all of your answers are”no”, you need to wait to get a much better time.

Such trades accumulate a massive reduction, which is extremely tricky to pay with gains.

Generally, volatility is fine. Cryptocurrencies – are claims, their costs go not just up and down, but they constantly fluctuate. Additionally, the majority of the time that their rates are from the sideways motion — they fall and grow roughly in precisely the exact same selection. Consequently, if the cost has dropped contrary to your expectations, then it’s fairly possible this is only one more fluctuation prior to expansion.

It is important to start a trade after assessing the cryptocurrency price chart and the most recent news. If that which shows you that you ought to start a trade, maybe it’s well worth waiting until the close of the drawdown.

Cryptocurrency mistakes newbies should avoid: Choose only one cryptocurrency

If a coin does not satisfy your expectations, then you can face together with the next common error – hold money at any price.

Yep, you should not sell it instantly, additionally, you should not rush and opt for an opposite manner.

Persistence, particularly in the event that you confront failures and problems with any money, is a potent technique. Generally, this is a helpful attribute of personality, which generally provides an edge, but not necessarily.

In a couple of days, you will observe an inclination to permanent losses. You should not persist – only promote the coin, create a few changes on your plan, have a look at your situation and fix your ineffective strategy.

It is very important to understand:

Prevent your own personal rules and beliefs should you see they aren’t functioning.

Cryptocurrency mistakes newbies should avoid: Store your funds on the exchange

It’s dangerous to store all of your funds within a market. We’ve got numbers of instances once the trades were closed with no reason and blocked users balances indefinitely — their customers lost their capital. Accounts with low-security level could be hacked.

The trades aren’t exactly the same as banks, so they’re aimed to not save capital. You need to store your cash in more secure and more suitable cold wallets.

You should regularly draw your money if you do not intend to use this amount throughout the transaction.


A range of mistakes that are connected with a lack of particular skills. That is why they are sometimes utilized as a guideline for selecting which path to research further.

This block comprises the following errors:

  • Avoid assessing unprofitable trades
  • Trading with No strategy
  • Launched in a trade That Doesn’t suit your plan
  • Know nothing regarding risk management
  • Do not know stock market motion
  • Prevent assessing unprofitable trades

Cryptocurrency mistakes newbies should avoid: Avoid analyzing unprofitable trades

It’ll be nearly possible to lower your unprofitable transactions to zero. You ought to consider trading for a company and plan your own losses.

All traders confront with losses. A number of them believe this is a reduction, then come to the conclusion they weren’t fortunate enough. That can be a mistake.

Without assessing what’s occurred, it’s hard to comprehend what do you want to modify firstly, so as to prevent losses that are new.

You need to examine your failures and examine them, so as to define your errors.

If it’s a challenge for you to examine it on your own, you can combine our trading discussion, there we assist beginners.

Cryptocurrency mistakes newbies should avoid: No strategy crypto trading

Everybody knows about the volatility of this cryptocurrency marketplace — the origin of (endless pleasure ) gains and (infinite pain) risks.

Cryptocurrency market has created an illusion of”I shall quickly input and cope with everything through the procedure.”

Regrettably, without a transparent trading program, you get a fantastic opportunity to lose your money, since you need to make decisions based on instinct and feelings, you need to consider different people- everything that contributes trading from company to betting. A few indicators that you know are not likely to help since they reveal nothing about the dangers and quantity of trades.

Additionally, emotional stress will make you feel drowsy fast.

Cryptocurrency mistakes newbies should avoid: Engage in a trade that does not match your strategy

People who remain at trading, earlier or later, with a different number of losses, realize that they want their own approach.

After a few losing trades, traders see it is crucial to adhere to the plan rigorously.

Thus, follow your strategy, averting joining the transaction that doesn’t agree with your plan, even though it appears appealing and transparent.

If you have noticed that you ought to alter your priority, then you need to change it, but you need to also prepare a plan. Don’t attempt and reevaluate your trading procedure if you aren’t prepared to risk.

What proportion of your funds would you hazard in each individual trade? When can you use Stop the Loss?

The dilemma is that the world is merciless to people who don’t maintain a journal of trades and don’t put limitations on losses.

It is not important if you use conservative or aggressive risk management.

Without it, the problem will later be fairly miserable for you.

Generally, don’t test your luck and compute your own risks.

Cryptocurrency mistakes newbies should avoid: Lack of understanding of stock market movement

The program is composed of corrections and instincts.

Impulse is a lively upward or downward motion that’s more powerful than the preceding maximum or minimum. Correction is a motion of the chart in a particular impulse. Correction is more than an urge.
To be able to specify price movements of a coin, then you need to inspect the graph at several periods: 1 hour, 4 hours daily.
With no abilities, traders have a fantastic opportunity to purchase the highs and market them with a reduction.


2. Psychology

List of errors connected with mental eligibility of the dealer, which may be solved together with introspection and self-control. Robots cope better compared to individuals with this listing.

  • Inattention
  • Emotions
  • High expectations
  • Fighting against loss and neglecting stop reduction
  • Forget assessing breaking news and dismiss facts

Cryptocurrency mistakes newbies should avoid: Inattention

The cryptocurrency marketplace is truly volatile, and it’s fairly tricky to keep an eye on everything. This issue could be partially solved by robots, also by way of training.
At times it’s possible to purchase cryptocurrency at a rather large price. This will lessen the price, so the cost will probably be unprofitable.

It is vital to create your own trading plan and determine the intricacies of this inventory, you need to calculate and make conclusions quickly. Incidentally, robots deal with it better than individuals.

Stress, euphoria, expect, irritation are harmful. They bring reductions to a dealer or even cause the reduction of their deposit, they don’t allow to have a sober look at the circumstance.

Cryptocurrency mistakes newbies should avoid: Emotions

Emotions take over investors and they raise their losses, don’t take profits in time, and start intentionally poor traders.

If you believe you get started earning large amounts from the very first days, you’re confused. In reality, success doesn’t come instantly and depends upon your expertise obtained by perseverance and self-confidence.

People who get to the finish, get an outcome. On occasion, the very first income from cryptocurrency trading comes after dropping a few deposits, but the outcome is always well worth it.

Cryptocurrency mistakes newbies should avoid: High expectations

If you believe that you start earning big amounts from the very first days, you’re confused. In fact, success does not come immediately and depends upon your experience obtained by perseverance and self-confidence.

Those who go to the finish, get an outcome. Sometimes the first income from cryptocurrency trading comes after dropping several deposits, but the result is always well worth it.

Cryptocurrency mistakes newbies should avoid: Struggling against loss and failing stop reduction

The brutal fact is that trading losses won’t regain. But it’s hard for novices to set up with losses, and frequently they begin to behave responsibly: attempting to maintain the position until the previous satoshi or perhaps double the loudness of the trade. The longer they behave weirdly, the higher are their losses, they could lose their deposit.

The reason for the error can be found in the certainty of dealers. They think that investment must”return” the cash to them. Regrettably, they convince the industry rarely.

Don’t take altcoins as a distinct region of the marketplace or product.

Cryptocurrency mistakes newbies should avoid: Forget researching news and dismiss the truth

The price of cryptos is dependent upon the news. Dealers forget about it, particularly if they use technical evaluation whilst trading. It is important to utilize basic analysis in cryptocurrency trading and unite it using specialized evaluation.

This error isn’t common. Some dealers forget about it, but they could understand the value of monitoring the information. Well, every event from the cryptocurrency business can bring sharp price changes or alter the trend management.

The frequency of monitoring is dependent upon your trading plan. It’s thought that you are able to develop your abilities in 21 days. Set a reminder and find time for studying daily. As an alternative, you may subscribe to this newsletter.

3. Foolish cryptocurrency mistakes newbies traders make

They have been dedicated by adults, normally smart men and women. We’re Certain That You Aren’t capable of doing, however, we recommend checking them:

  • Careless attitude toward safety
  • After others guidance and Purchase signs
  • Seeking to locate”a cash button”
  • Utilizing unreliable trading bots
  • Careless attitude toward safety

Dealers consider safety if it is too late to take care of it. Before enrollment on the market platform, you need to check whether it employs the best applications to encrypt personal information, such as SSL certificates. It’s also wise to be certain transactions with SMS and email verification are protected. Additionally, email ought to be safeguarded also.

Cryptocurrency mistakes newbies should avoid: Following others guidance and buy signals

You ought to be aware that IT-celebrities can place advertisements, even John McAfee confessed paid advertising, moreover, you should not overlook that advisers are not accountable for their own words.
It is trendy to buy signs on forums, and other programs before the market turn against you. You must remember the “easy money” signifies something else.

Successful traders utilize advertisements rarely and select unique methods of boosting their approaches. By way of instance, through trust administration. Should you purchase access to signs group, you get a fantastic opportunity to combine a bogus group and shed your own funds.

Cryptocurrency mistakes newbies should avoid: Seeking to locate “a cash button”

The simple fact that countless dealers couldn’t locate it, obviously, doesn’t imply anything. Well, there’s absolutely no button.

We won’t dissuade you in the event that you choose to find it. You need to understand that this button will be hidden so much if it actually exists. It is much easier to make money than attempting to locate a cash button and we encourage this thought.

Cryptocurrency mistakes newbies should avoid: Using unreliable trading robots

The marketplace offers a significant array of robots, advisers and sign bots, free of charge or not free of charge.

Generally, these are scam programs geared toward parasitize the innocent beginners.

  • You should not purchase robots when you have not analyzed it and can not rely upon it.
  • Prevent projects that haven’t any community. Remarks can be imitation, community – certainly not.
  • Developers frequently offer their bots at no cost, but you may utilize in on the market that has a lousy reputation.

You know yourself better than anybody else, so that means that you can forecast your potential mistakes and you understand where situations you need to pay extra attention.

Blockchain Games vs Crypto Games: What is the difference?

Blockchain Games vs Crypto Games: What is the difference?

Blockchain games are surely the future. The main issue is that people today do not understand how this works, perhaps due to the lack of education. Most of the time they believe almost everything they hear or read online. But still, money is made this way, and many startups profit big time from this lack of knowledge.

Note that blockchain technology can be applied to a vast number of industries, not only used in the economic sector for currency transactions. Comparing Blockchain games vs crypto games will hopefully give you a better insight.

Unfortunately, there is a HUGE lack of information and confusion about the difference between blockchain games and crypto games.

Blockchain Games vs Crypto Games: What is a Crypto Game?

The most frequent use for blockchain tech in games so far has been to store your items on the blockchain, tying them to your (Ethereum) wallet and making them permanently your own. Another term for this process is tokenization.

In contrast, in “classic” games, any items that you supposedly own in-game are in fact stored on the game publisher’s servers, as is your whole account. There are many ways for you to lose possession of your assets in this case – server malfunction (failure or attack), halted game development, banned account, etc.

The first generation of blockchain games are actually crypto games or tokenized games. They were solely based on this principle and they focused on collecting unique assets and trading them, for fun, profit, or both. CryptoKitties was the game that started this trend and they’re still quite popular.

The main difference between the two is that a blockchain game has every process in the game recorded on the blockchain as a transaction. No one can change, delete or influence the result of a game, whereas a crypto game has only a token used within the game. 

Even more, crypto games don’t even use their own blockchain. Most, if not all of them, use the Ethereum platform, which requires you to buy another token just to trade the token of the game (Gas on Ethereum).

It’s needless to add that if only 10% of the games which use the Ethereum platform would start trading at once, the network would crash. Therefore, a blockchain game would ideally be a game which uses its own blockchain. Joseph Lubin, the co-founder of Ethereum, acknowledged onstage at Ethereal Tel Aviv 2019 that the network, in its original form, wasn’t built for mass adoption: “We knew it wasn’t going to be scalable for sure,”.

To add to the confusion of this type of games, some projects claim they are developing their blockchain so that others can use it to develop blockchain games. None that we know of, yet.

CryptoKitties has collectable and unique cat cards, which are in fact tokens you can exchange, but the entire game is based on Ethereum. Also, the game is not a blockchain game, only the tokens are on the blockchain. But yes, the tokens/collectable cards can be traded and the prices are in ETH, which can indeed be transferred to a cryptocurrency exchange and be traded for another crypto or fiat.

What is the essence of blockchain games?

Just ask yourself who controls or can check the back processes of those games, and how it is decided who scores more or who gets a better crypto kitty? A blockchain-powered game has all of these processes stored on the blockchain, easy to asses and transparent for all who want to verify it.

The many blockchain game names found on Google, have merely a whitepaper, for a future project, but none of them is functional. The market also exploded after the overnight success of CryptoKitties which was at its best a well-developed marketing plan. CryptoPuppies falls into this category as well as other not-so-famous variations of collectable crypto animals. The developers just stopped replying to their early enthusiasts. And this is not a singular case.

Let’s talk about crypto casinos.

Many believe that gambling and crypto put together in the same sentence give the blockchain technology a bad name. As you can see, there are many ways to utilize blockchain, but most developers seem to be in it for the short run, for the quick win. Ethereum platform has become their home and the network is invaded. Even the developers of Ethereum aren’t happy with this, as another short success of such a game would compromise the network.

Fortunately, crypto enthusiasts now know how to better research a project before investing in it. Just try to remember 2017, when ICOs weren’t regulated and nobody understood what they were, but people were just throwing money at anyone with a whitepaper.

Blockchain Games vs Crypto Games: What is a Blockchain game?

Blockchain games are any games that include blockchain technology in its backend or in its mechanics in general.

Blockchain, by definition, is a public and transparent distributed data ledger. It gives the developers and the users the chance to check and verify every transaction ever made, not leaving any place for interpretation or data manipulation. The blockchain is a growing list of records, called blocks, which are linked using cryptography. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data.

Nowadays, the blockchain stores not just cryptocurrency and tokens, but also in-game assets and progress. But most processes of the games, remain as they were: clueless of the blockchain technology and nowhere near it.

However, there is hope, as the market is barely starting to understand and embrace this new technology. At the moment there is exactly one cryptocurrency project with the blockchain technology to build a blockchain game, not just for the cryptocurrency inside the game, but for everything that the game implies.

This project which stands out, as a true blockchain game, is one in which not only the cryptocurrency used to develop its in-game economy is stored on the blockchain, but the entire game uses the blockchain technology. FootballCoin is a fantasy football blockchain game. It will probably become known at least for being the first project of its kind.

FootballCoin is the first and so far, the only blockchain game on the market. The rest of them just spend money they don’t have on marketing.

Gaming is evolving and as in any other field, gaming can and probably will adopt the blockchain technology the right way, not just for tokens.

What is an asset-backed cryptocurrency?

What is an asset-backed cryptocurrency?

Would the world benefit from an asset-backed cryptocurrency? YES! So how does an asset-backed cryptocurrency works?

Since Bitcoin introduced the idea of digital forms of money to a massive audience, the characterizing topic of basically all crypto tokens has been their extraordinary instability. But soon all that can change for the asset-backed cryptocurrency and asset-backed tokens (ABT).

The world is loaded up with resources, including land, stocks, gold, oil, among numerous others. The vast majority of these benefits are not actually transferable or sub-dividable physically. A change to a computerized framework along the lines of blockchain presents a suitable answer for these issues, subsequently the developing enthusiasm for asset-backed cryptocurrency.

What is an asset-backed cryptocurrency?

An asset-backed cryptocurrency or token is a cryptocurrency that utilizes a physical asset, such as real estate, for investment and revenue purposes.

They are considered to be the most reliable because the revenue system is backed by a physical asset which can be seen and accessed and therefore, it is easier to trust. Some analysts consider asset-backed cryptocurrency to be the next steps in the growth of cryptocurrencies.

There exist numerous digital currencies on top of the blockchain. The currencies (or tokens) can be used to transfer ownership of assets or objects outside the blockchain. This, in essence, is the tokenization of real assets.

Is an asset-backed token possible?

Land, gold, fiat money or oil are all examples of resources that could support and be part of the development of crypto tokens and possibly asset-backed cryptocurrency.

Being connected to a physical resource gives something extra and can influence how that asset-backed cryptocurrency is being transacted. Since most resource sponsored coins are attached to outer markets on which those benefits are exchanged.

Let’s take, for example, precious stones or silver. If the awareness of the token grows, at that point financial specialists will exploit the disparity and money out the physical resource.

Exactly how the basic resource of the token is overseen and secured in this procedure it will keep on being of fundamental significance. Institutional and standard financial specialists will be attracted to those coins upheld by systematised activities for managing and stripping resources.

Read more on Mainstream cryptocurrency adoption

Challenges of tokenization and ABT

While the tokenization and asset-backed tokens of genuine resources come with a guarantee, there are some challenges to overcome. Financial motivation help solve some of these challenges, and organizations and governments take part in the goal of creating a strong foundation in this field. Here are some of the issues:

  • Regulatory vacuum — The fields of cryptocurrency, tokenization and asset-backed cryptocurrency
    are not well regulated. As such, they introduce certain risks to qualified investors and customers.
  • Legal enforce-ability of property rights — Does owning tokens and asset-backed cryptocurrency confer ownership over the corresponding asset? In the event that the asset is inexistent, who is liable? How does the owner recover damages?
  • Technical infrastructure — There is a need to improve security and safety standards to make sure that asset-backed cryptocurrency is connected to its assets in the real world.

Read more on Regulation of Cryptocurrency Around the World Report

Benefits and Perspectives of asset-backed tokens

By joining the upsides of blockchain and traditional venture instruments, tokenisation can affect exchanges and speculation. The advantages of tokenization and asset-backed cryptocurrency are various and can be outlined as pursues:

  • Improves liquidity of assets like real estate
  • Allows fractional ownership
  • Permits the diversification of risk by owning parts of several assets
  • Alleviates territorial and temporal barriers
  • Allows newer models for raising capital
  • Allows more control, and even the ability to choose the level of control over an investment with implemented digital democracy
  • Decreases the number of intermediaries, and therefore the amount of fees
  • Unlocks liquidity premium

Read more on How to earn free cryptocurrency (without investing or mining)

As the digital currency advertise keeps on advancing, develop, and expanding, asset-backed cryptocurrency and tokens will be the portal to more extensive applications.

The Economics of Cryptocurrencies

The Economics of Cryptocurrencies

Let’ explore some of the factors that affect the price movements of a cryptocurrency. We have identified the main factors which affect the cryptocurrency price (but there are many more other)

  • Supply & Demand
  • Utility
  • Market Sentiment
  • Mining Difficulty

Supply & Demand

Supply and demand is a fundamental factor that affects the price of a cryptocurrency (and the price of any type of market). Bitcoin is the most well-known, and therefore, the most sought-after cryptocurrency. With a circulating supply of 16.7 million coins, the number of bitcoins available is quite low when compared to altcoins.

Circulating supply of the top ten cryptocurrencies according to coinmarketcap
Source: Coinmarketcap

This low supply, when weighed against the staggering demand Bitcoin has seen in the past few months, is believed, by some, to be the reason for Bitcoin’s surge in price.


Utility = the usefulness of a cryptocurrency. The more useful a cryptocurrency is, the more likely it is to be perceived as valuable, and therefore, the more likely it is to be bought.

Let’s take Ethereum as an example! People believe it is useful because of the platform that it provides in allowing people to build decentralized applications on top of. This novel use of blockchain technology as a sort of app store, as opposed to a medium of exchange, has been perceived by some to be very useful. And so, Ethereum can be said to have high utility and therefore be seen as valuable.

Market Sentiment

As a cryptocurrency trader, it is likely that you will switch between multiple positions at a high frequency. Therefore, it becomes key that any position you take is well researched and has a positive market sentiment surrounding it.

Read more on Where Is the Cryptocurrency Industry Headed in 2019?

It is important to research any project you intend investing and to read recent articles on that cryptocurrency. If you invest in a cryptocurrency that has had no real coverage, it is likely that your position will stagnate, or even worse, to decline in value.

Getting a clear view of the sentiment surrounding a cryptocurrency allows you to filter the useless cryptocurrencies and focus on active projects capable of growth.

Mining Difficulty

Mining difficulty = a measure of how hard it is to be the next person that gets to add a block to the blockchain, and receive the reward for doing so.

Read more on Mining Cryptocurrency: Crypto Mining Business Model Used Worldwide

A lower mining difficulty indicates that a cryptocurrency is easy to mine; this results in an increase in the rate of supply, and therefore, downward pressure on its price.

Conversely, a higher mining difficulty suggests that a cryptocurrency is harder to mine. This results in supply growing at a slower rate, therefore resulting in upward pressure on the price.