Steemit-cryptoacademy week2 homework on Tokens for @pelon53 by @beautiefair

Hello great minds,

Special thanks to professor @pelon53 for the wonderful lecture. Before diverging in the homework proper, i will explain some few things, for proper understanding of the homework.

Introduction

A lot of people have different views about the word "token". Some see it as a way of expressing love, while others see it as a computer language. In this discussion we will be specific on token, when it comes to cryptocurrency.

What is Token?

Source;
https://images.app.goo.gl/sApqdszB8DkxwGDp8

Tokens are digital currencies that are of very high value which can be used to purchase items and also make good investments.

What is the purpose of Token?

Crypto-tokens can serve as a company's share or interest in a business or company. People that have token can use it to make purchases and also make investments. It can also serve as collateral for loans.

What is the difference Between A crypto coin and crypto token?

A lot of people often mistake crypto coin with crypto token; but both are quite different from each other. Crypto coin can serve as a digital currency which can be used by individuals to make payments, while crypto token can serve for lots of purpose such as trading, making payments, means to save and store valuables and also as a form of crypto currency.

Types of Tokens

There are many types of token, but i will focus on Just 3 types.

• security token
• utility token
• equity token

Question1; what is security token? And Explain one example.

• Security token:
  security tokens are tokens that represent tradable financial assets. Or it could be said to be peripheral device aides to gain access to an electrically restricted resources. This means that any token that is expected to appreciate in values, can be called a security token. One can automatically get the right to shares in any company stocks hence he/she purchases a security token of the company or project, that’s to say that it could represent a fixed assets to some kind. It maybe a property such as house, hotel or company. A security token can also be said to be a tokenized, digital form of these traditional securities.
  i. An ownership position in a publicly-traded corporation(stock).
  ii. A creditor relationship with a governmental body(bond).
  iii. Rights to ownership (option).

Advantages of Security Token

• Improving traditional finance: Any smart contracts will reduce or eradicate the cost, complexity and paperwork of traditional finance.

• Speeding up processes: If there’s no middlemen, securities are allowed for faster execution time.

• 24/7 trading: This allows for 24/7 markets which eliminates the huge inefficiencies of daily market closures.

Examples of security tokens is the Sia fund. Siafunds were designated as securities by the SEC back in 2018 and since then, it has become the security tokens that is used for revenue sharing on the Sia network; a 3.9% fee from every storage-related transaction on Sia is distributed to the holders of Siafunds. That’s is to say that in every completed contracts on the network, 3.9% of each funding source is reversed for Sia fund holder.

Question2; What is Utility token? And explain an Example.

Utility tokens are tokens that promised the future use of products and services. They are integrated into an existing protocol on the blockchain and used to access the services of that protocol. They are not created for direct investment like security tokens, but can be used for payment of services within their specific ecosystems, that is to say that they give one access to the values created by blockchain network. It really represents the access to services delivered by blockchain based economy. Tokens are generic unit of values which means they can represent any kind of value.

Utility token examples;
Some examples of Utility tokens are:

• Basic Attention Token, BAT
• Timicoin
• Sirin Labs Token
• Golem

Basic Attention tokens: This is used for the interactions with the brave internet browser. They are also used for advertising blockage or specific type of viewed ads or to earn tokens for viewing it.
Timicoin token (TMC): This helps in accessing the network of the project in order to gain medical information stored in it. It helps in the processing of the requested data so that it can be transferred between p2p servers.
Sirin Labs Token (SRN): This is an example or type of utility token that is used to gain initial funding for the company. It is mainly used to be the first line to buy the company’s products. It can as well be used to perform quick transfer of funds within the network without any fees.
Golem: This could be said to be the most amazing utility token because it’s network’s participants are using the token to provide their personal computer’s power for the shared remote supercomputer-like network of the project. Difficult computing task, rendering and so on are performed via p2p network and provided for the users of GNT utility token.

Question 3; what is equity Token? And explain an example.

Source;
https://www.bitcoinmarketjournal.com/equity-token/

An equity token is a type of security token that functions as a traditional share, in either the underlying company, third-party asset or venture and takes its value from the company’s success or failure. The tokens are pegged to the performance of the respective underlying, that is the New York stock exchange, NYSE and National Association of Securities Dealers Automated Quotations, NASDAQ. It is believed that any stock that is purchased, the holders will automatically own their given percentage of the total enterprise. They can also be entitled to a portion of the company’s profits and a right to vote on its future.

Example:   Holding a Class-A equity token could entitle the holder to 10 votes per token, while a Class-B token could carry a 5-vote share and so on.

Example:  If a company releases 100 equity tokens, each token entitles the holder to 1 percent of the earnings and 1 out of 100 votes.

• Ten tokens would entitle the holder to 10 percent of the earnings and 10 votes, and so on.

Conclusion

In the text above, it is clear that the main challenges faced by the security token industry are education, adoptions and interoperability, and despite the challenges encountered, the adoption even if slow is imminent. Also, it is possible to point out that even if the security tokens don’t disrupt the world of finance as ICOs did, they will definitely transform the way we raised and invest in money. The community-based economies that evolve around utility tokens and cryptocurrencies are an important future path of digital transformation. For such ecosystems to grow, the continual maturation of associated secondary markets is essential (Locklin 2018). For the equity token model to work, there must be some process that must be in place such as investors must have ready access to reliable information about STOs and there must be trustworthy and knowledgeable brokers-dealers available to identify and sell these securities to qualified investors.