Welcome to Crypto Jargon, in this episode: In a previous episode of Crypto Jargon we explained the difference between a coin and a token, so now let's break down the types of coins and tokens that are currently most commonly used in crypto. Starting with Stable Coin which was born in opposition to the very volatile nature of cryptocurrencies in general. As you know, prices of most cryptocurrencies fluctuate in extremes, sometimes by more than 100% in a day or even in hours. So, the necessity for traders to have alternatives gave birth to these so-called "Stable Coins". Typically, a stable coin is an asset "not a currency" which offers price stability characteristics.
It is mainly designed to be used as a unit of account or as a store of value. Most stable coins today are cryptocurrencies that are pegged to another stable asset, like silver, gold or a fiat currency such as US dollar. Some prominent examples of stablecoins are USDTether, TrueSD and USDCoin. Many exchanges that do not operate directly with fiat money, are using stable coins as alternatives to the fiat money these coins are pegged to. "Stable" is used in this case as a broad term of course, as the US Dollar itself is not 100% stable but as a world reserve currency, it is accepted as the standard for determining the Bitcoin value worldwide so most stable coins are fixed to be at 1:1 ratio with the US DOLLAR for that purpose. Virgin Coin is simply a brand new coin, acquired through mining, that has not yet been used in any transactions, or being spent yet.
Ok, the next one is Privacy coin as the name suggests, This is a type of cryptocurrency that has privacy features such as enhanced level of anonymity or masking layers that obfuscate the addresses of its sender or receivers, or both Since Bitcoin is not fully anonymous but all its transactions are traceable and publicly visible, some alt coins are focusing on providing anonymous features in order to compete with bitcoin. Such coins are Monero, Zcash, Dash, Zen and many others.
Now when we mention scamcoin and a shitcoin, it becomes clear what we're talking about something that is not very legit or at least, not very valuable. Shitcoin, pardon my French, is a term typically given to those alts that have no use or potential value. Could be any new altcoin that is not mainstream or does not add innovation to the market. In trading world, however, this is not necessarily a bad term. Some traders don't avoid a coin because it has weak fundamentals. They care mostly about Technical Analysis and they would often trade these for short term gains. However, if you see yourself as an investor rather than a speculator, you should not really touch these, simply because they don't have a future in the long term. A "Scamcoin" on the other hand, is a term referring to a cryptocurrency that is dubious in nature and doesn't have any specific tech behind it. Its sole purpose is to make the creators of it rich and usually becomes a subject to Pump' n' Dump practices and market manipulation, until it loses all its value.
Bitconnect and Onecoin are two such examples of Scamcoins no real tech in them, no use-case and with heavy MLM compensation plans to attract new investors. Stay away from any MLM crypto is my advice, I've never seen a decent cryptocurrency come out from this network marketing model. Ever. Now, moving onto Tokens. As I explained, tokens are different to coins due to the fact that they are created as smart contracts on an existing blockchain such as Ethereum, EOS, Stellar, NEO and others.
Tokens have various functions, they can be protocol tokens those that act as a platform on which to build decentralized applications (DApps) such as Gnosis and Stellar. And other types of tokens could be "utility tokens". A Utility token is a unit of currency consumed in a process, providing access or a service or access to the product For example, an arcade token that gets used when a videogame is played or a coin like BNB, Binance Coin which is used to pay exchange fees, hence the word "utility", because it has use. a Security token is a token on the blockchain that represents a real asset. An example of a security token would be shares in a company issued on a blockchain. or a token is considered a security if it fulfills the following criteria: It is an investment of money The investment is in a common enterprise There is an expectation of profit from the work of the promoters or the third party.
Because these tokens are deemed a security, they are subject to government regulations. Examples of security tokens are Tezos and Polymath, for instance. Then we have Commodity Tokens. these tokens are backed by real-world commodities, whether it is gold, silver or oil. The rate of these tokens depends on the rate of the commodity backing it. For instance, Digix and El Petro are two such examples. Lastly, there's even Collectible tokens Cryptokitties and RarePepe are such examples These tokens represent a virtual collectible unit, like baseball cards, adorable kitties or memes.
And they are built on the blockchain. and this concludes today's episode of Crypto Jargon. If you like this episode, give me a thumbs up. and also leave a comment don't forget to share it with someone else who might also benefit from watching this episode and if you're new to this channel, feel free to subscribe and click the notification icon so that you'll never miss an episode. Thanks for watching! I'm gonna see you on the next one. Enjoying this content? Go check out Crypto Jargon, the eBook out now on Kindle it's an Amazon bestseller and it's the most up to date crypto dictionary with more than 700 terms, acronyms and trading slang related to cryptocurrencies and blockchain tech.
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