Cryptocurrencies have become an essential financial instrument and investment opportunity for new investors, big corporations, and even home-based entrepreneurs. But distinguishing between the cryptocurrencies is crucial because you need to understand what you are investing in and whether it proves to be an excellent asset for your business. Here are the top four types of cryptocurrencies that entrepreneurs should know about:
Coins vs. tokens
The most significant difference in cryptocurrency is between tokens and coins. Coins work primarily on blockchain technology, but tokens don’t. Most of the popular cryptocurrencies you usually come across are coins. Since coins have their own blockchain, they are decentralized. All the peer to peer network records, every transaction takes place on a digital ledger. Tokens basically represent access to a specific product or stock. On the other hand, coins function as currencies. Moreover, tokens are more complicated than coins as they fall under various SEC regulations.
Converging cryptocurrencies
The introduction of stablecoins has changed the scenario for tokens to some extent. They are very popular in the Bitcoin bear market. Based on a comprehensive review of the QProfit System, these coins will prove to be an excellent investment instrument in the years to come.
One of the benefits of stablecoins is that crypto investors and entrepreneurs can shift their investments from volatile cryptocurrencies to stablecoins because of their stability and flexibility. You don’t need to convert your investments back to USD as it will involve double transaction fees. When the bull market returns, you can convert your stablecoin back to your favorite volatile currencies at a minimal cost.
Utility tokens vs. security tokens
The SEC has more stringent rules and regulations for security tokens than utility tokens because the former are considered digital securities. However, most of the tokens you use in the crypto market are utility tokens. The tokens you buy or trade on a crypto exchange being a non-accredited investor are the utility tokens that usually provide early and exclusive access as well as discounted rates.
Importance of security tokens
Security tokens work differently than utility tokens. They provide part-ownership in a real-world asset without involving blockchain. Unlike utility tokens, you need to be an accredited investor if you want to participate in security token offerings because the SEC regulates security tokens. Investing in these security tokens is slightly more complicated than utility tokens as entrepreneurs and investors need to use a security token issuance platform to trade and buy tokenized securities.
The security token issuance platform requires users to meet specific requirements. One of the essential requirements that you need to meet is confirming your investor status by a KYC provider. The respective platform will create a personalized profile that specifies the amount and the limitations that each investor can trade.
The difference between tokens and coins represent two forks in the crypto market: currencies as a payment method and currencies as tokenized securities. For new entrepreneurs and investors, it is essential that they know the types of cryptocurrencies before investing to avoid the risks of losing big money.
