CryptoAcademy Season 3 Week 8 / Homework Post for Professor @reminiscence01 / Understanding Tokens
Introduction
Dear Steemians,
I welcome you all to Season 3 Week 8 in CryptoAcademy. It is another wonderful time to engage in this community. I am Kehinde Micheal with username @msquaretwins here on steemit. It is my pleasure to be submitting my homework post for Professor @reminiscence01 who has explained in details the topic "Understanding Tokens" in the beginners class. Prof has dealt well with the said topic. In the next paragraphs, I will be answering the questions posted in the homework section.
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)
What is a Token?
It is not easy to create blockchain because of its robustness and high level of security it requires. As such, it requires high level of programming and coding. Therefore some existing blockchain like Ethereum blockchain, Binance Smartchain, etc gives opportunity for new project to launch their project on their network.
The digital asset of any project that is built on any existing blockchain is called a token Tokens in blockchain are also known as crypto tokens. The tokens are often pushed to the public through offering like Initial coin offering(ICO) Initial Dex Offering (IDO), presale etc for the general public to acquire the tokens while the project also raise fund. This allows people to accumulate the token and participate in the token project without any special credential for identity verification.
Many existing blockchain platform like Ethereum blockchain, Binance chain, Tron blockchain etc allow project to be launched on their blockchain. Tokens that are built on Ethereum nlockchain are called ERC-20 token, those that are built on binance smart cjain are called BEP tokens and tokens that are built on Tron blockchain are called TRC-token.
Tokens are not control by any authority like bank or institutions. They run on the rules of the existing network on which they are built. It should be noted that token can be exchanged and can be held for a long period of time.Reference Article
Example of Tokens and the Blockchain they are Built
1. Bit Torrent Token (BTT): BTT is a token that was launched in 2019 on Tron Blockchain network. It was developed by Bram Cohen and BitTorrent Foundation. The token was introduced to the general public throught the initial coin offering. The current market Cap for BTT according to CoinarketCap is $2,755,766,560 and the price is $ $0.004176.
2. Compound Token(COMP): This is a token that was launched on Ethereum blockchain. The current market cap and price of compound token are $2,428,062,351 and $443.34. This project was developed by Robert Leshner to allow crypto lovers to lend and borrow crypto.
3. Telcoin (TEL): Telcoin token was launched in July 2017 by Paul Neuner and Claude Eguienta as a token that connect cryptocurrency and blockchain with telecomunication. Hence the token name, Telcoin. The token name is coined from Telcomunication and coin. It was built on Ethereum blockchain. The current price of this coin as today 18th of August 2021 according to coinmarketcap is $0.01804
4. Augur Token (REP): This token is a peer to peer token that is used to predict market. Augur token (REP) is a token that is used for betting. This token was launched on Ethereum blockchain network
5. FTX Token: FTX token is another popular token in the crypto space that was founded by by Sam Bankman Fried and Gary Wang. It was built on Binance chain.
| Token name | Blockchain Platform |
|---|---|
| Bit Torrent Token(BTT) | Tron Blockchain |
| Compound Token | Ethereum Blockchain |
| Telcoin (TEL) | Ethereum Blockchain |
| Augur Token (REP) | Ethereum Blockchain |
| FTX Token | Binance Chain |
Question 2
What is the difference between a token and a coin?
Differences Between a Token and a Coin
| Token | Coin |
|---|---|
| A token is a digital asset of a project that launched on existing blockchain platform. | A coin is a native cryptocurrency of a blockchain whic is mainly used as a payment fee within the network. |
| Token has no platform of its own, instead it runs on another existing blockchain platform | Coin runs on its own blockchain platform. |
| It is very easy to Create a token | It is difficult to create blockchain because of high level of programming and coding it requires. Therefore creating a coin is very difficult. |
| Tokens can not be used to buy coins | It can be used to buy tokens. |
| Token allow users or holders to take part in company decision, product or services | Coins are used for transaction purposes. I.e for buying and selling of goods. |
| Miners of blockchain can not receive their reward as tokens. | Coins are used to reward blockchain miners. |
| Users need coin to exchange token | Users don't need token to exchange coin |
Question 3
Explain the different categories token listed below and explain its features.
• Utility tokens
• Security tokens
• Equity tokens
• Non-fungible token (NFT)
Utility Tokens
Utility tokens are tokens created at the early start of a project to raise the awareness for the project. Founder use this kind of token to raise fund for the project while also allowing community to accumulate the token. The token is often pushed to the community through pre-sale, Initial Coin Offering(ICO).
People acquire utility token by exchanging coin for it or they buy it with fiat money. People who acquire utility token during ICO often profit from it because the value of utility token during ICO is often less than its value after ICO. Users with utility tokens are enabled or authorized to participate in the decision making of the project and can use it to settle bills within the project frame.
Features of Utility Tokens are;
- They are built on existing blockchain platform
- They are used to raise fund for the project.
- Utility tokens are use to settle bills within the project frame.
- They are allow token holder to have access to company products and services.
Security Tokens
Security tokens are also built on existing blockchain. They are token created for people to have share in a company. These tokens represent stake of a company. Security tokens can be viewed as traditional stock or bond, but in this case a decentralized one. Having security token give investors right to partake in decision making of the company and also permit them to share in the company profit.
Features of Security tokens are;
- Security tokens are built on blockchain which allow transparency and people can trace every transaction therein.
- Because security token can be staked, it can be use to calculate reward for people who hold token for long time.
- Security tokens are used to distribute reward to investors.
- Securities tokens must meet the official rules or conditions of the project before it could be transfered.
Equity Tokens
Equity tokens are similar to traditional stock except that it is built on a blockchain with transparency. Equity tokens are stocks given to investors at the early stage of the project. This token give investors right to own part of the project and receive reward from the company profit. Investors who buy this tokens also have right vote and participate in the decision making of the project.
Features of Equity Tokens are;
- It offer value to both investors and the company.
- The amount of token own by investor dictates the percentage of ownership he has on the project.
- Equity token may come in form of stocks, tokenized ventures, real estate, contract and futures.
Non-fungible token (NFT)
Non- fungible tokens are tokens that represent ownership of an item. Non fungible tokens run on blockchain network. It is a token that gives proof of ownership of something like, collectibles, artwork etc which indicate that they can be monetized. The owner have the right to use it for any purpose within the jurisdiction of the project blockchain.
Features of Non fungible tokens are;
- Non fungible tokens run on blockchain network.
- Non fungible tokens can not be exchanged.
- owner of NFT can sell their unique item.
- They are compatible with any Ethereum built project.
- NFT can be used as a form of collecteral for decentralized loan.
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).
I will be using compound token for this question
Compound Token
What is Compound Token (COMP)?
As said earlier, Compound token is a project that was developed by Robert Leshner to allow crypto lovers to lend and borrow cryptos. It This project was launched on Ethereum blockchain.l in 2018 with its Headquarter in San Francisco.
A sum of 2,396,307 COMP was distributed to the share holder and 2,226,037 COMP was allocated to the founder and team members of this project. A total number of 372,707 COMP was reserved for future team members and 5,004,949 COMP are distributed to the user of the protocol.
Lenders are rewarded with COMP based on the amount in the wallets. They deposits crypto to their wallet which borrowers have access to. Lenders and borrowers are rewarded with COMP token as the lend, borrow and pay back the asset.
The current market cap and price of compound token are $2,428,062,351 and $443.34.
How Compound Token Work
Compound uses web 3.0 wallet for quick access to their ecosystem. Once user gain access, the overview of the site will appear before them, and from that place they can pick any crypto asset they want to act upon. Once this is activated, they can now decide to supply or borrow asset. User cannot do both at the same time.
cToken like cETH, cBTC, cUSDC is used as the balance of the crypto asset deposited to the Compound market platform while Compound Token COMP is earned as the interest of holding the cToken in an account.
Compound link both lenders and borrowers together through smart contract built on ethereum blockchain. Lenders are people who deposit crypto assets to their wallet for people to borrow and the borrowers are those who borrow crypto assets. Lenders get their reward in form of compound token. The reward is dependent on the amount cToken held in the wallet by the lenders
Navigating Through Compound Website
• The official website for compound is Compound website. When you click this link, you will be lauched to their home page.
• From the the home page, we can see four features, market, governance, treasure and doc.
• Click market as indicated by the red arrow in the image below
• When you click market, another page will appear. This page will show you total crypto supplied and total crypto borrowed.
• You will also see the number of suppliers and number of borrowers. These are indicated by red and blue arrows in the screenshot.
• Then then scroll down the page to see total supply for each crypto.
• USD coin is ranked number one based on the supply rate.
• The list of crypto base on supply is marked in the red box in the screenshot below
• The second feature is Governance. Click Governance from the home page as indicated by an arrow below
• Then the governance page will appear. You will have access to overview , the recent proposal, number of voting address and votes delegated. Check the screenshot below to check this
• The next feature is Treasury
• Click Treasury from the homepage
• Then treasury page will appear for you.
• Uou can click get acceas from the page as indicated by the arrow.
• You will then get access to treasury account
• The last feature is docs.
• Click docs feom the home page as indicated by an arrow in the screenshot.
• The Compound docs page will the appear for you.
• This page is where you can get information about Compound token
• Information of cToken, security, governanance etc can be gotten here.
• Check the screenahot below to see the information you can get in this page.
Conclusion
As a reault of increase in the adoption of cryptocurrency arround the worls, many tokens have come to being. Much of this accolodate should be give to existing blockchain which allow project to be built on this network. More and more tokens that keep serving purpose are beung launched on the existing blockchain and this tells us that blockchain or cryptocurrency has promising future.
I did used tokens and coins to mean this same thing before. Thanks to Prof. @reminiscence 01 who has introduced us to this great topic.
Thank you for reading
Written by : @msquaretwins
Cc:- @reminiscence01
Hello @msquaretwins, I’m glad you participated in the 8th week of the Beginner’s class at the Steemit Crypto Academy. Your grades in this task are as follows:
Recommendation / Feedback:
Thank you for participating in this homework task.
Thank you professor @reminiscence01. I hope to participate in your next class.