Crypto Academy Season 3 Week 8 - Beginner's Course | Understanding Tokens. Homework Post for @reminiscence

I want to express deep gratitude to Steemit Crypto Academy for spicing up our knowledge of crytopcurrencies. Prof @reminiscence01, your lessons are always insightful. I have never really thought about tokens and coins as being different elements. Great thanks for this lesson. I will try to tackle this assignment to the best of my abilities.

Question One: What do you understand by Token and give an example of at least 5 tokens and identify the blockchain it is built on. ( give at least 3 different Blockchains)

Token in the crytopcurrency world is an element or instrument created as an attachment to an already existing blockchain which enables it to function as store of value, exchange medium as well serve other trading and financial functions. A token is a financial asset created on top of an established blockchain which has its native currency to facilitate some certain features as well as perform some services on the blockchain with the native currency being used to as base for such transactions. Tokens are extensions linked to blockchains to introduce some phases into the blockchain while building value as well supporting some features. The value of a token is not just monetary but also includes other functions.

Examples of Tokens and their Blockchains

Token	Blockchain
Dai	Ethereum
Maker	Ethereum
Amp	Ethereum
BitTorrent	Tron
Klever	Tron
JUST	Tron
Nexo	Binance Chain
Ankr	Binance Chain
WazirX	Binance Chain

Source

Question Two: What is the Difference Between a Token and a Coin?

Contrary to common and popular mixup by many in the crytopcurrency sector, a Coin and a Token are two very different concepts. There are many distinguishing features between them as well as very distinct meanings. A Coin is the base and native currency in a blockchain. It the primary element used as unit of value for trade, exchange and security in blockchain. While a Token is an attached and linked financial asset to a blockchain.
The distinctions between a Coin and a Token are expressed in the table below.

Coin	Token
A Coin is native to a blockchain	A Token is a foreign attachment to a blockchain.
Coins are platforms on which tokens are built	Tokens need to be attached to coins.
Creating a Coin requires great digital skills, resources and investment	Tokens require little technical skills and resources.
Coins use more complex exchange tools to convert from one to another	Tokens are easily converted and exchanged
A Coin can be used independently for transactions	A Token cannot be used indeon of a Coin. A Coin is used as base for Token transactions.
Coins are basically for payments and have less utilities	Tokens can be drafted to serve much functions and have more utilities.

Question Three: Explain the different categories token listed below and explain its features. Utility tokens, Security tokens, Equity tokens, Non-fungible token (NFT)

Utility Tokens:
This type of token is designed in other to serve as access to certain kinds of services or products. Ownership of utility tokens grants the owner the permission to make use of certain products or services for which the token was created or is accepted for. It acts as a pass or clearance for the owner. It is sometimes referred to as application Token. These type of token are not very common in the crypto sector. Utility tokens can be used to represent real physical products. They can also be used to purchase real services like pay for electricity. [WePower WPR is a good example of a token that represents a physical thing — it represents electricity] (https://www.bitdegree.org/crypto/amp/tutorials/token-vs-coin). Sometimes utility tokens are use to operate platforms and other apps. For example, the FIL token can access the Filecoin platform.

Security Tokens:
These are tokens used to represent investments. One purchasing these tokens have the intention that the tokens will increase in value such that profit will be made accordingly. These tokens hold promises of dividends and profit and may sometimes be representative of real physical investments.

Equity Tokens:
This tokens are those that accord the owner a stake in the project or investments. With equity tokens, the individual controls a certain unit of shares. When a company issues tokens as representative of stocks or equity in the company, these kinds of tokens become equity tokens. Thus, the individual becomes one of the owners of the company. Ownership of equity tokens gives one clearance to take part in decision making and also gain dividends from the assets of the company.

Non-Fungible Token (NFT):
This refer to very special and unique tokens which have differing unit of values. They can be both virtual or real and mostly exist in gaming apps and platforms. NFTs come with certain features that make them unmatched and cannot be copied. These tokens are not interchangeable and are used for premium contents and arts on the digital space.

Question Four: Make your own research and write extensively on any token you listed in question one. (Must include features of the token, the aim of the project, Use cases).

For this question, I want to discuss about the DAI token.

Formation and History of DAI

Dai was first released on December 18, 2017. It had the title Sai as its initial name. Dai means "to lend or to provide capital for a loan" Source.

The token was established on the ethereum blockchain by MakerDAO, which is the body controlling the DAI token. MakerDAO was originally established by Rune Christensen a Danish business man. At present, it is an autonomous organization. It ensures the effective regulation of the currency such as its amount in circulation as well as its value.
The developers of DAI claim that it is the first unbiased token without discrimination. At the present, many crypto exchange platforms offer DAI @ 1dollar equivalent. The official website for DAI is @https://makerdao.com/

DAI has experienced great successes over the years as well as some challenges. Some of its successes include the successfully keeping its value close to one dollar in the first year. Also some influx of large investors and firms like Andreessen Horowitz in 2018. Some of its challenges include the internal struggle over the integration of more traditional financial systems.

Source

Features of Dai

• DAI is a stable coin. This gives it some advantages as it has a soft peg to the price of U. S. dollar which is a relatively dependable and stable currency.
• Dai is backed by collateral on Maker (MKR) Dai Stablecoin System unlike most other tokens which are usually backed directly by U. S. dollar.
• DAI has been adopted and integrated into many platforms, decentralized apps decentralized finance systems especially those that operate on the ethereum blockchain.
• New DAI can be minted by any user via the use of Maker Protocol.
• DAI is not managed by a single private corporation but by an autonomous collection of investors.

Aims of Dai

• One of the Cardinal aims of DAI is to create a cryptocurrency that has its value very close to 1dollar as possible.
• DAI also aims to make its operation as decentralized and democratic as possible by allowing the governance of the token to an autonomous organization of investors. For instance, the ability of any investor to mint new DAI at any time by depositing some units of currencies into the vault using the Maker Protocol.
  The current market ranking of DAI is 27. Some of the statistics of DAI are given in the screenshots below.

Source

Conclusion

Being able to create a viable distinction between a coin and a token is very necessary. This knowledge is very useful in taking certain investments decisions. It also helps one to be able to decide how to trade effectively. Getting familiar with the various kinds of tokens, their implications and value can greatly position and investor in an advantage position. Also, the blockchain paltform of a token can offer vital information on the nature, prospects as well as value of a token.
With elements like tokens in the crypto sector, a lot of features and functions can be incorporated and made much easy and accessible to everyone especially considering the decentralized nature of the crypto activities.
This lesson has been really informative and expository. Great work by Professor @reminiscence01. Looking forward to the next lesson.