Types of tokens

David Kemp

ICO (initial coin offering) is an efficient way of funding a project.  Developers offer tokens that can be acquired by investors, using fiat money or cryptocurrencies. There are different types of tokens for investments, each of them has own characteristics.

Developers of cryptocurrency projects use various types of ICO tokens, specific to the goal that they are trying to achieve. Knowing their strengths and weaknesses, as well as the specifics, you can quickly and effectively find the best asset and project for investment.

Tokens for ICO

There are different types of classifications of digital assets. For example, they may differ by backing: some do not have it, while others can be exchanged for certain services or goods.

The main types of ICO tokens are the following:

1. Currency-like token
1.1.   A full-fledged cryptocurrency
1.2.   Internal currency with individual characteristics
2. Securities-like token

Tokens that perform the function of cryptocurrency

Tokens may also be used used when developers offer new cryptocurrencies with some unique features. The electronic asset is used for ICO, the money is spent on website development, hiring specialists and other purposes.

In the future, the token can be traded on the stock market. In fact, it is completely equated to cryptocurrency. At the initial stage, the value of the asset is very low.

The situation is different if the token acts as an internal currency. It can use an already existing blockchain platform or have its own. The main feature of such assets is the ability to make payments within the project preparing for the ICO. It can be used to pay for advertising, cloud storage, etc.

In this case, investors may benefit from:

  • Making money in case price goes up.
  • The ability to use the desired platform without transferring fiat money to it (the commission is usually quite large).
  • Not paying much attention to technical details. There is no need for that. The exchange rate is no longer determined by the technical features of the cryptocurrency, but by the success of the project.

Which tokens are the best to invest in?

 Pay attention to the following token features based on the goals set:

  • Most beneficial. The best option is the ICO. Constantly there are new solutions in the field of blockchain, which are of interest to the crypto community. It is better to check the basic parameters of digital money: resistance to hacking, usability, fees, etc.
  • Mining capability. The reward is especially great in the early stages. Tokens can also be obtained as a reward for helping with advertising or other tasks. Here you need to remember the risk: the opportunity to get free coins leads to the risk of a sharp collapse in the event of a large-scale sale.
  • Reliability. The best solution will be tokens-certificates, which are backed by real goods and valuable assets. On the other hand, it will be difficult for an investor to earn large profits on such investments.

Before investing in a token, take your time and explore your options. From the very beginning, determine the purpose of investment and whether you are willing to take risks to make more money.

Financial experts recommend not to put all your eggs in one basket. The diversified investment portfolio may be not as profitable, but it will definitely save you from losing everything because of one unsuccessful ICO. Thus, you will be able to reduce the risks of losing a large amount and gain valuable experience.  Also, to answer the questions that you may have after reading this article – we recommend you to familiarize yourself with the topic of tokenization.