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Token

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Key takeaways

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Fungible Toke

A unit of a fungible token is not unique. That means that they are interchangeable with each other like Bitcoin, Ethereum, Gold, Dollars, Euros,... A Bitcoin will always have the value of one Bitcoin. It doesn't matter if someone owns the first ever mined Bitcoin or the twenty-thousandth Bitcoin, they are both of the same value. A registered share for instance is not fungible, because it has the name of the shareholder, and with that, that specific share has special rights, that other shares don't have. There are three main types of fungible tokens in the world of Defi.

Utility Token

Most of the tokens found today are utility tokens. They are not backed by any security or fiat currency and in fact, they have no external value. They are used for example to participate in decentralized apps like DEX or as in-game currencies.

Stablecoins

Stablecoins are tokens that are pegged to fiat currencies like the USD. Many stablecoins use the ERC-20 token standard. Technically it is simple to implement a stablecoin in Ethereum as an example. The implementor needs to launch a contract with a certain amount of tokens. Afterward, these tokens would be distributed to users with the promise that those tokens can be redeemed for a proportionate amount of fiat currencies. To do so, the issuer has to lock a certain amount of fiat currencies so that the tokens stay in a predefined ratio to the fiat currency.

Security tokens

Security tokens are very similar to stablecoins, with the difference, that security tokens are not pegged by fiat currencies but they represent securities like stocks, bonds, or physical assets like commodities or precious metals.

Non Fungible Token

NFT

Tokenization of assets

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