Crypto Academy / Season 3 / Week 8 / Homework Post for Professor @reminiscence01 — Understanding Tokens

Hello everyone. How are you over there?
It is a new week in the Crypto Academy. This is the week 8 of the season 3. This homework post is submitted to Professor @reminiscence01. He taught "Understanding Tokens." At the end of the lecture, Prof. gave four questions. These questions are listed below:

1. 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)
2. What is the difference between a token and a coin?
3. Explain the different categories token listed below and explain its features.
   Utility tokens
   Security tokens
   Equity tokens
   Non-fungible token (NFT)
4. 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).

So, I will be attending to these questions one after the other.

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Question 1

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)

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Token are virtual currency of cryptocurrencies which are built on the blockchain that has been in existence. Because there are lots of work, coding and resources required to build a blockchain, the existing blockchains allows new projects to build their tokens on them.

The tokens of a cryptocurrency are created with the aim of raising funds for a new project. The created token are even sold at an event called IDO, Initial Dex Offering or ICO, initial coin Offering. People who invest on the token often believe that the new project would make sense and the token will appreciate late in future.

Tokens are also called crypto assets and are what the cryptocurrency uses as a medium of exchange on the blockchain on which it is built. But it should be noted that, before a transaction can occur on the blockchain where a token is built, it requires a governing coin of that blockchain. For example, the tokens built on Ethereum blockchain requires Ether, ETH before a transaction can occur.

Tokens are often tradable. They can use them to trade. They can also be transferred from one user to the other on the blockchain. They can also be used for voting and Investment within the community of the project.

Examples of Tokens

1. FTX token — Built on Binance Chain
2. Uniswap — Built on Ethereum
3. BitTorrent — Built on Tron
4. Link — Built on Ethereum
5. Binance USD — Built on Binance Chain
6. Mark — Built on Ethereum
7. WIN — Built on Tron

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Question 2

What is the difference between a token and a coin?

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The word tokens and coins are often used interchangeably almost every time due to the way people see them. Even professionals who have had experienced in the world of Cryptos use them together. There are differences between these two words. Let's see the differences now.

Difference Between Tokens and Coins.

Coins are digital currency which are built on their blockchain. They are often regarded as the native cryptocurrency of their blockchain. For example, ETH is a coin of Ethereum blockchain, BTC is a coin of Bitcoin blockchain.
Tokens are virtual currencies which are built on another's coin blockchain. That is, the virtual currency which have no blockchain of their own but that they are built on an existing block chain is known as tokens.

Coins often require a lot of efforts, coding and resources before their blockchain can be created. But tokens are easy to create. And that's why some blockchain platforms such as, ethereum, Tron and Binance smart chain allow tokens to be built on them. From this, we can say that coins are not much but there are lots of tokens out there simply because they can be easily created on the existing blockchains.

Coins are only used for the purpose of transaction or payment services. But tokens can be used for more than transaction. Tokens are used for voting. Tokens can also be used for investment and many other things depending on what the organizers decide to use it for. Since, coins are used for payment, one can even purchase tokens with coins, but tokens cannot be used to

It's also important to know that native coin of the blockchain in which a token is needed in order to exchange the token or to make any kind of transaction on the network. In essence, A token is often dependent on native coin of the blockchain in which it is built, but a coin is not dependent on thetoken

Examples of coins includes Ethereum (ETH), Bitcoin (BTC), Tron(TRX), Dogecoin , LITECOIN etc. Examples of Tokens are Tether(USDT), Binance USD, DIA, WINKLink etc.

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Question 3

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

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Utility tokens

Utility token is a type of token built when an organizers of a new cryptocurrency wants to do a kind of fund-raising for the new project. This token is created so that the Investors can invest in the project.

This type of token is often sold at a very affordable price at an event called IDO or ICO. The investors who wants to invest in the project often pay another coins or token to acquire the new token.

Utility token often allow the users or holders the tokens participate in different services which are provided by the organizers of the project.

Features of Utility Token.

• Utility tokens is tradable.
• It can be exchanged with other tokens
• It is always sold at an event known as I DO or ICO.
• It allows holders to participate in the activities of the project such as staking, voting, decision making Investment etc.
• It's built on the existing blockchains.
• When the demand for this type of token increases, the price also increases.

Security Token

Security token is type of token which are formed or created with the aim to replace traditional ways of investing to stocks, bonds etc. It is a token which have similarities with traditional assets such as stock.
This is a type of token which is often used for investment purposes. This type of token works like buying a stock. The stock may appreciates and earn you dividend in future. This particular token also like that. Different Companies and organizations now have tokens such that it will just be like stock to invest in.

Features of Security Token

• It allows holders to participate in decision making
• An investor of this type of token gets dividends from the organizers of the token
• Various activities related to transactions are recorded on the blockchain. So it's very transparent.
• The token has value.

Equity tokens

This is another category of token which is very similar to security token. It is a token created for people to invest in. Just like a traditional way in which people invest in stocks, bonds futunes etc. and make profits and receive dividends from their investment. Companies and organizations are providing equity tokens to their Investors to act as bonds stocks etc to invest in it and receive dividends from it.

Features of Equity Token

• Investors will receive dividends from their Investment
• It is built on existing blockchains
• It is very transparent
• It's often created to serve as alternative way to traditional asset

Non-fungible Token (NFT)

This category of token is a very unique kind of token which is created in the certification of original owner of some digital assets such as photos or videos.

Because of the increase in adoption of this category token, the original content creator often give out their work to be sold and receive NFT in return.

These type of token is very unique and are not interchangable. Examples of these tokens are THETA1THETA, Chiliz (CHZ), Decentraland (MANA), Flow etc.

Features of Non-Fungible Token (NFT)

• It is unique
• It is not interchangable or replaced
• Most of NFT are built on Ethereum blockchain
• It can be used for investment and other purposes.

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Question 4

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).

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For this task, I'm going to talk extensively on FTX token or FTT.

FTT

FTT is a native token of a trading platform called FTX. The coin was founded in May 8th, year 2019. It was founded by two people called Sam Bankman-Fried and Gary Wang

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_{Fig. 1: Image of Sam Bankman-Fried and Gary Wang}

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Sam Bankman-Fried was a trader at Jane Street Capital’s international and he traded all kind of assets including currencies, stocks etc. before founding FTX. He has his first degree in Physics at MIT. He's currently the CEO of FTX.

Before coming to FTX, Gary Wang was a software Engineer at Google. He also attended MIT where he obtained his first degree in mathematics and computer science. He is the CTO of FTX.

Mission of FTX

FTX is a cryptocurrency exchange built by traders, for traders.FTX offers innovative products including industry-first derivatives, options, volatility products and leveraged tokens. We strive to develop a platform robust enough for professional trading firms and intuitive enough for first-time users.
SOURCE

Aim Behind the Project

FTX is a community of traders who are skilled with many years of experience in trading different assets. Noticing some shortcomings in the mainstream crypto futures exchanges, the decided to create a platform which will addressed the shortcomings. The platform was launched and a token called FTT was created together with it.
Most customers fund are lost to socialized losses of derivatives exchange. FXT addressed this issue

FTT token is unique because it is backed by a company called Almeda research. The company is often regarded as the world leading company in crypto trading and also one the largest liquidity providers out there.

Currently, FTT token price is $46.26 at the time of writing this post and it is ranked number 34 on coinmarket cap. Let's see the screenshot below.

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sub> Fig. 2: Price and Rank of FTT by CMC

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Also, the market capitalization of FTT is
4, 390, 456, 105.43

sub> Fig. 3: FTT Market Capitalization by CMC

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FTT is listed on the several exchange platform such as binance, Huboi, FTX etc.

sub> Fig. 4: Exchange Platforms for FTT

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Features of the Token

• FTT can be used as collateral
• FTT is the backbone of FTX as it is the native token.
• The token can be exchanged with other tokens.
• FTT is a native token of FTX that is built on binance smart chain.
• FTT are regarded as a leveraged token. This means traders don't have to try on margins.

Use cases

It is a token which is often used by traders as a leveraged token and for OTC trading. This token was created for cryptocurrency derivatives exchange.

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Conclusion

Because the creation of blockchain requires a lot of efforts, resources, coding etc, existing blockchains are even allowed new project to build their tokens on the blockchain. Some of the popular blockchains in which cryptocurrency token are built on are Ethereum, Tron and Binance smart chain.

Coins are the names give to the native cryptocurrency of the a blockchain. For example, ETH is a coin of Ethereum blockchain. But tokens are virtual currencies which are built on existing blockchains. Thanks to Professor @reminiscence01 who taught the course, "Understanding the tokens." I habe learnt one or two things from the course as I now have understanding of tokens are coins.

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