Hello Professor, I am here to make my homework submission for this week's course. I am therefore grateful for this lesson.
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)
TOKENS
A Token is a virtual currency that represents a tradable asset residing on its own blockchain and provides opportunities for investment by its holder. It serves the purpose of legal tender and hence can be used for economic purposes.
Holders can therefore make purchases through them and can also trade the tokens to make profits. The crypto token is mostly used to raise funds for crowd sales.
This token, in addition, is mostly created and distributed, sold, or circulated through a process known as initial coin offering (ICO) which is generally a crowdfunding exercise undertaken to fund the development of a particular project.
Examples of Tokens and the associated blockchains they are built on:
| Token | Blockchain They are Built On |
|---|---|
| Tether | Ethereum blockchain |
| FTX Token | Binance chain |
| Uniswap | Ethereum blockchain |
| Klever | Tron blockchain |
| BitTorrent | Tron blockchain |
| PancakeswapToken | Binance smart chain |
| Aave | Ethereum blockchain |
What is the difference between a token and a coin?
Tokens and coins are two different things in the crypto ecosystem which are mostly used interchangeably. People need to understand their core differences and save themselves from the constant confusion of the two concepts.
The major differences between tokens and coins are discussed below;
| TOKENS | COINS |
|---|---|
| The creation of tokens is usually an easy task to do as they can easily be created based on a blockchain already in existence like Ethereum. | Whilst the creation of coins is usually a difficult task to do. |
| Also, tokens do not have their independent blockchain but are rather created on an already existing blockchain. | Whilst coins are created on their own blockchain. |
| Moreover, tokens are generally employed for several purposes. | Whilst coins are generally employed for payments processing. |
Explain the different categories of tokens listed below and explain their features
UTILITY TOKENS
Utility tokens are generally blockchain-based assets that are purchased by people with the aim of using those assets in the future for a particular thing. These utility tokens are not limited to only purchasing items in a virtual setting but serve several purposes because they are versatile.
SECURITY TOKENS
Security tokens are simply a digital representation of assets such as fixed income, investment fund shares, equity or commodities which are made available and traded on a particular blockchain. These assets are securities because they are controlled and regulated by governing bodies who determine their management, exchange, and issuance. Security tokens harness the combination of speed and ease of blockchain by providing firm legal protection of traditional securities.
EQUITY TOKENS
An equity token is a form of a security token that is supported by a traditional asset in the form of real estate or traditional company shares. Here, the major difference associated with the traditional stock is that it is shown in a database, but an equity token is shown on the chain of blocks of the recognized blockchain.
The main reason behind the equity tokens is that it offers companies an opportunity to issue shares and gain voting rights directly on the blockchain. It also improves liquidity and lowers transaction costs associated with royalties and fees of exchanges.
NON-FUNGIBLE TOKENS
Non-Fungible Tokens (NFTs) are a form of digital token which is built and recorded on a digital ledger or a blockchain. These non-fungible tokens are very unique and each token has a unique record that differentiates it from other NFTs on the same blockchain. They can be bought and sold digitally and not physically. Non-fungible tokens provide an exciting platform for brands to connect with their customers.
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)
THE AAVE TOKEN
Aave is a decentralized lending platform built and runs on the Ethereum blockchain that offers its customers the opportunity to lend, borrow and also earn interest on crypto assets without any involvement of a third party.
It makes use of smart contracts that allow assets to be controlled and managed by an interconnected network of computers that run its software.
An aToken is the special token that borrowers will receive as funds. And the token will then be encoded to enable lenders to acquire interests on their deposits.
Ideally, Aave is described as a for-profit company based in Switzerland which was founded in 2017 by Stani Kulechov. Interestingly, this man started the Aave software while still in school.
ETHLend was initially the name of the company and in 2017 it raised an amount of $16.2 million in an initial coin offering (ICO). At the same time, about 1 billion units of the AAVE cryptocurrency (initially LEND) were sold.
This ETHLand was somehow different from Aave because it sought to match borrowers and lenders in a peer-to-peer manner instead of the pooling of funds. ETHLand was finally renamed Aave in 2018. Aave issues two different categories of tokens which are the tokens issued to lenders to acquire interests on the deposits they make. And also the AAVE tokens.
Features of Aave
The platform creates 'flash loans' for quick issuance and settlements. These loans operate fasterband do not have collaterals attached. Such loans do not have any form of upfront collateral and occur in a very faster rate.
It also provides opportunities for lending and borrowing of several number different cryptocurrencies for its customers.
Aim of Aave
The major aim of the Aave software is to create a loan market or platform where customers or users can create and generate liquidity by investing their monies in pools.
Also, the platform as part of its aims provides loans to their users which have various operating policies and collateral.
Conclusion
This has been a very good assignment because it has made me learn extensively about the various types of tokens. The lecture was a good one as it was easy to understand.
Thank you so much Professor @remiscence01. Looking forward to your next lecture
Hello @deeni1 , 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:
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