Steemit Crypto Academy Season 2: Week-2| Homework Post for Professor @pelon53 By @faizanwrites07

Hello (Hola) to all of you steemians!

Greetings and best wishes to all of you for the Crypto Academy season 2.

First of all, I would like to say thank you to Professor @pelon53 for letting me attend his amazing and informative lecture, feeling honored. Here I am writing my homework for the lecture on TOKENS.

I will try to answer all the questions in a sequence. Let me start with a brief understanding of TOKEN first, before moving on to the questions.

_{"Picture edited by me on Canva.com using a Free to use template"}

TOKEN:

The Token is a currency type that represents a specific commodity or usage belonging to its blockchain. The token is also known as a measure of the value of something, which is given to it by its organization. It can be used as a unit of value in exchange for purchases, investments, etc. The value of tokens can be specifically identified in a specific community or organization, for example, tokens were paid in previous times to workers, which could be later exchangeable with food against their work of labor, but that token does not have any value outside of the organization. I can elaborate more by means of tokens used in mobile games. For example, there is a mobile game named Roblox in which a currency is used as a token named Robux which does not have any value outside of the game but you have to purchase it with real money to use it in the game.

This means that a token can easily satisfy a specific need within a specific system or blockchain because it has value in that specific ecosystem. For example, it can be anything like a currency, book, article, song or music, etc.

Token differs in away from cryptocurrencies, as unlike cryptocurrencies Tokens can be exchangeable for goods and services under the same ecosystem, which makes it more useful than cryptocurrency.

Most of the tokens are disbursed in the ICO (initial coin offerings), in which the manager or founder convinces the potential investors to invest funds in their projects against the tokens which will have a specific value within the project.

One of the drawbacks of the old tokens was that it was controlled after issue by companies and private entities, who were also deciding the number of tokens required to them.

But now bitcoin has changed many things, as it has enabled the creation of digital tokens by using blockchain technology. The tokens acquired some features of cryptocurrencies due to the entrance of blockchain. Blockchain technology created the opportunity to produce secure, controllable issuance and reliable tokens.

After the basic idea of the token, let's move to the questions.

1. What is Security Token? And explain an example.

Answer:_Source

Security Tokens are a type of Tokens, which represents the underlying securities of a project. Security token act as a specific tool to perform a specific action which can be performed without that tool. This means the restriction of everyone and the approval of the specification is accepted through this.

If a company after issuance of share convert it into tokens would result in the form of Security tokens. which will allow the investor to have a shareholding in the project according to an underlying contract.

These security tokens can only be produced, with the approval of the local laws in reference to the underlying assets. It means that in the future there is a legal right against a specific value of the security token.

Benefits of Security Tokens:

1- Security token has the same value as security or share of the company. which enables the investors to be entitled to profits in case of growth of the company.

2- Security token represents the digitalized shares, which have the transparency in transactions as like blockchain, which is visible to all the public. This allows us through a test called "Howey" in situations to find out between different tokens, as to which one is a security token, etc.

Example: BitTorrent

BitTorrent is a type of token designed by a programmer named Bram Cohn in April 2001, whose current owner is the founder of Tron Mr. Justin Sun. Mr. Justin bought it in 2018 for an amount of 140 million dollars. BitTorrent is the most commonly used token today whose function is to exchange files on the internet. The estimated monthly usage is almost 170 million people.

BitTorrent with the sale of 59.39 billion BitTorrent Tokens, raised an amount of 7.2 million dollars in just under 20 minutes.

2.- What is Utility Token? And explain an example.

Answer:_Source

Let's discuss utility tokens first, Utility Tokens enable you to access the products and services in the future of a company. unlike security tokens, utility tokens don't have investments like securities or shares in a company. which means it does not generate any profits for you, but it can be redeemed in the future against a utility through an exchange platform. As of the said scenario, utility tokens are of great benefit in a situation when a company wants to launch a coupon, which can be used in the future as an exchangeable coupon for services or goods of the said company in the blockchain. For example, Tokens obtained for online games, Netflix, etc which does not represent any shares in that specific platform but is only a token that can be used against the utility of services playing games or watching Netflix.

A Utility token is different from security tokens in a way, that utility tokens are not regulated by anyone in any way, which means that anyone can produce it and can be used as a scam but on the other hand security tokens are regulated by legal laws of the countries in which it is produced which prevents your investments from any scammers and theft.

Example: Basic Attention Token (BAT)

_source

The example of a Utility token I will talk about today is Basic Attention Token (BAT). Let's discuss it, BAT is founded by Mr. Brendan Eich (the Chief executive officer). BAT is not a currency but a digital advertising token. This token addresses one of the important issues in today's world on the web, which is advertising. The company gives rewards to those users who are dedicated to advertising, which means the users will be rewarded for the watch time of the advertisements by them. when incorporated, it was based on the Etherium technology, which was used in a digital browser named brave as a unit of utility between the publishers and users.

These tokens were offered to potential investors through an initial coin offering in 2017. which resulted in fundraising of amounting to 35 million dollars in less than a minute against almost 1000 million BAT tokens.

3.- What is Equity Token? And explain an example.

Answer: _Source

The equity tokens show a slight mixture of both the tokens, security, and utility tokens because they are almost 50 percent utility and 50 percent security tokens. but it compels more towards security tokens, which makes it a bit related to the security token family. The ownership of equity token can give you some sort of share in the investments but with less control. Equity is also a digital asset but also has banking regulations.

Equity tokens are daily used tokens on the blockchain but still, their functionality is rarely known to many people, because they can represent a property like real estate or assets like stocks. it is different from a traditional share of a company in a way, that traditional share is get registered in a database while equity token gets registered on the already existing blockchain of a specific platform.

In my opinion, equity tokens are the easier to use tokens between all because it gives so much flexibility to investors to ensure their rights being an investor. it is very easy than security tokens to create an equity token. Some points worth remembering while creating an equity token, which are: Before creating an equity token, one must be registered the blockchain platform. he/she shall specify the commercial terms before creating the equity token. The part of your company will be acquired by the buyer of the token, with the extent of that token.

Example: Binance stock tokens

_Source

Let's discuss the example of equity tokens, one of which is Binance stock tokens. Binance is the largest cryptocurrency exchange platform, which has announced its stock tokens recently. the equity tokens, as discussed above have features of both the tokens (security and utility). It means that the equity token has an underlying share like traditional shares, Which has a positive correlation with the equity tokens. In simple words, when the value of shares will be high it will proportionally take the value of the token high.

Binance has announced the tokens of a well-known company named TESLA owned by Elon Musk. The value of its stock is approximately 729 Dollars today on 25th April 2021. One can buy any percentage of the stock of any company by means of a new tokenized trading service. There will be no transaction fee charged for any stock token transaction as per the official statements of Binance.com.

Bottomline of the task:

First of all, u would say thanks to professor @pelon53 for his amazing lecture. After all the research work I can say that the tokens have a very bright future especially the equity tokens due to the emergence of Binance just a week ago in the market which is the largest exchange platform for cryptocurrencies. These three tokens named security, utility, and equity tokens are having their own specific features which the others don't have, and they all are differently marketed to the investors. They also depend on the ecosystem in which they are produced or developed, as security tokens are regulated under the security laws of a country so that will have also an impact on the value and market of the security token.

This was my homework for Professor @pelon53. I am really thankful to my professor and the crypto academy for teaching us.

Thank you for reading.

Regards: @faizanwrites07