Crypto Acadamy Week 10- Homework Post For [@pelon53]

Hello everyone,

Welcome to this post. Hopefully, all of you will be good and enjoying your health with the grace of Almighty God. This is my homework submission post for dear professor @pelon53 from Venezuela. I have read the whole of the lecture post and I have got it quite well. So, now I am going to discuss the tasks he has assigned this week. Today our topic of discussion is Tokens and their different types. So, let's start our discussion with the definition of Token.

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What is token?

A token is something that exists on top of a previously existing coin or blockchain. For instance, Ethereum has these apps distributed apps that exist on its blockchain and it would be very slow and very expensive for all of the small little computations that you need to use that act on Ethere to be done using it. So instead you create a token that represents each while you using that.

I will give you an example, whenever you were a kid and you went to Chuck E Cheese or game work so you wanted to play the games that were there. You went and you converted your US dollars or Euros or Ponds or whatever you use into a token at that place and you got to play the arcade games and did not have the constantly swipe your credit card and go through the settlement processes and get charged transactions fees and all these different things. You just used that token you got to enjoy the game and in the end, you took it out. You took out all the little tokens you adding either made it into prizes or you got your money back at the end in US dollars or Euros or whatever and that is what tokens are.

Used cases:

• They make things a lot faster on the walk chain.
• They make things less expensive in the term of computation.

So that's why tokens and coins both exist in tandem. They are different to each other and they are not the same thing.

So now we will discuss three types of digital tokens.

1. Security Token
2. Utility Token
3. Equity Token

Let's start these types without wasting our time.

(1) Security Tokens

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Any token that could be called as Security Token are subject to many regulatans in the United State and could face very severe penalties for not abiding by them so a lot of tokens accidently lies into the security tokens and now facing an uncertain future because of it. However, some tokens set out to make these requirements and regulations intentionally and thus are much more secure in their operations. Once a token is classified as a security token it means that it is the representative of legal ownership of asset either physical or digital. That ownershhip must be verifiable on a blockchain but the true value of a security token lies in its ability to democratize the ownership of assets.

For example in the real estate world you cannot really buy one one hunderedth of a house simply because a house cannot reasonably be split up a hundred ways but with a security token one can generate a hundred tokens that can represents take in a home. This significantly lowers the bar of capital required to invest and sees returns in expensive markets as well as allowing for the group ownership of things that were previously impossible to own in a group. If can only afford 10% of a house. Suddenly, I can purchase 10% of a house as an investment and avoid taking on a large loan just to enter the real estate market.

A security token is a token that meets any or all of the requirements of the Howey test and has an expectation of the profit. It is regulated by the SEC and both investors and developers need to be concious of that. If your token accidently falls into the category of security , you could definately be in trouble. Security tokens that are cleared about being a security token often have big benefits such as project stability and scam prevention.

So now we well discuss about an example of the security token which is Siafunds .

Sia Funds:

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Sia is an intresting newcomer to the blockchain and decentralized currency system. Sia has created a sharing economy platform which allows users to rent out their unused hard drive storage to other users on the platform. There are two tokens of the Sia platform.One is the Siacoin which is a cryptocurrency or a token which is used to buy and sell hard drive storage on the Sia network. The second one is the Siafunds which is actually a security token that shares a piece of all storage revenue of the Sia network. Sia system allows users to designate unused hard drive storage as nodes within a decentralized blockchain. Sia actually splits all the data accumulated accross the rented users devices preventing any single hard drive from holding all of your data. User data is instead splits into 30 pieces each of which is encrypted and distributed to different hosts. This creates a helpful file safe where if one hard drive fails the stored data is not compromised. Uniquely, the users who interact with Siacoin holds a private key insuring that thay maintain full ownership of their files. Sia's main strength is its distinction from traditional cloud-based storage groups where centralized servers are vulnerable to hacking. Sia's unique system of a global user-based blockchain is much stronger preventative for data loss. So, that's all about Sia.

(2) Utility Tokens

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Utility tokens are the digital tokens that promises the future use of a product or a service not meant to be an investment, they have a utility. They allow their users to access a network and to have their calls listened on a network through voting. This might sound like a broad definition and you are might it is. Most tokens say that they are the utility tokens but that is often not case because of how they are beinis often being sold by the token developers . A true utility token is actually quite rare. Being a utility token allows us to escape some government regulations and taxes so it is understandable why many developers seek to use that name even when it is not true. Many tokens that say they are utility tokens are actually the utility tokens.

A utility token is a tokan that does not meet the of the Howey test and as such required have any expectation of profit. Its value may raise and fall based on the supply and the demand but its value cannot tied anywhy to the value of the company behind it because thay are unregulated. They cannot be generated and sold freely including by scammers so be sure to exercise the caution when buying.

So now we will discuss an example of utility token which is the Golem Token.

Golem

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Golem was founded by Julian Zawatowski who was inspired to create a decentralized marketplace of available computing resources stored in personal computers in an idle state built on the foundation of the Ethreum blockchain. Golem works as decentralized universal supercomputer combining the computing power of every machine on its network and the ecosystem of Golem. You can loan out your computer's spare resources to other who requires extra power to perform compilacated tasks and computations using the shared economy model. This trend has been proven to be a reliable way for users to monetize their unused and underused resources on the consumer. Side users can rent computing power from the network to perform or speed up tasks that their computer might not have enough power for this is ideal for performing intensive calculations for functions such as an artificial intelligence natural language processing or even machine learning the Golem team's current focus is CGI rendering, an application that typically bottlenecks with long wait times and high expenses. Golem's marketplace matches consumers needs with their correctly size provider counterpart and all transactions are conducted in GNT columns, native token as an ERC20 token those transactions run securely on the Ethereum blockchain . Finally the resources are shared through IPFS , the interplanetary file system a decentralized peer-to-peer network for sharing data.So, that's all about the Golem.

(3) Equity Tokens

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The big challenge today for the new blockchain companies, new entrepreneurs how do they treat these tokens. What are they legally are they securities , are they something else? So let's take the existing fundraising model which is proven we all understand how it works and let's have all that one step forward onto the blockchain, that's the equity token in a nutshell . It works like a founder or an entrepreneur you have a traditional seed round so you are raising money from either friends and family or angel investors and that is just enough to get your proof of concept up and running may be it is tens of thousands maybe it is a couple hundred thousands but enough to get a product that you can show and demo and take out get your blockchainup and then from there you create a public offering because the vision of the blockchain is that everyone should be able to invest not just accredited investors no just non-US investors but everyone in the world.

So in this way you are buying a legal share of a company just like you would buy stock in any other publicily traded company in addition to buying and recording that share on the blockchain.You can also see the token that correspond to that share that you are buying or selling or trading.

Let's discuss an example of the equity token which is The DAO

DAO Maker

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DAOs are decentralized and fully automated organizations. They functions is just like the traditional organization. The only difference is that they have computers instead of the managers.It was a form of the investor-directed venture capital fund founded in 2016 that got famous for its failure. In the ICO of DAO the stack collected was about $150 million. More than 18,000 investors participated. Shortly after that, the account of the DAO was hacked. Unknown attackers stole $50 million worth of Ethereum. As a result the Ethereum had to execute a hard fork to restore the funds. That is why we know has the Ethereum and the Ethereum Classic. The possibility of being hacked is eradicated from the Ethereum version. Investors support subsided after the incident. The event has been a famous example of how fragile DAOs can be to the certain attackers. In the case of the DAO, the attackers has introduced the loophole. The ideas of DAOs has found an increasing number of supporters. Some of them thinks about the efficiency of the gains that could grow the GDP. Others dream about fully decentralized economies. They considered the DAOs to be a paradigm shift in the economical organization.

So, that's all about today's task. Hopefully all of you will like my this post.

Special thanks and mentions to dear sir @pelon53 for his great lecture. Looking forward for his reviews.

Thanks

Respected Mentions:

@steemitblog
@steemcurator02