For crypto investors, names like Bitcoin, Ethereum or XRP are familiar. However, many still do not know that each token in digital currency actually belongs to its own class and category.
Each class of crypto tokens has different functions and roles. Let's get to know each of these classifications;
Bitcoin (BTC): Core Crypto Asset
Bitcoin is a special category that stands on its own. It is the world's first crypto and is still considered the most dominant digital asset to this day. Bitcoin is often called digital gold because of its limited, decentralized nature and its use as a long-term store of value.
In most cases, Bitcoin's price movement serves as a benchmark for the entire crypto market.
When Bitcoin strengthens, market sentiment is usually positive. Conversely, Bitcoin's decline often triggers selling pressure on other crypto assets.
Stablecoin: Crypto and Fiat Link
Stablecoins are designed to maintain a stable value, usually pegged to a fiat currency such as the US dollar. The purpose is to reduce high price fluctuations in the crypto market.
USDT, USDC, and DAI are among the most widely used stablecoins. These assets are often used as temporary storage, a hedge against market volatility, and a medium of exchange in the crypto ecosystem.
Utility Tokens: Essential Functions in the Ecosystem
Utility tokens provide access to specific functions within a blockchain platform.
The value of these tokens directly depends on the level of usage and demand for the services offered by the ecosystem.
For example, BNB is used for transaction fees and various functions in the Binance ecosystem, while MATIC serves as the backbone of the Polygon network.
As platform usage increases, demand for these tokens typically increases as well.
Governance Tokens: Power in the Hands of the Community
Governance tokens give their holders the right to vote on important project decisions, including protocol changes, development proposals, and future directions.
Tokens like UNI and AAVE allow the community to play a direct role in the governance of the project. This model aligns with the principles of decentralization, where power is not concentrated in just one party.
Meme Coins: Sentiment and Speculation
Meme coins exist based on community, internet culture and ‘viral’ momentum on social media. Their value is highly dependent on market sentiment, influencer support and viral factors.
Dogecoin and Shiba Inu are the most famous examples. Although meme coins have the potential to record a sharp price spike in a short period of time, the risk is also very high due to limited fundamentals.
Security Tokens: Regulated Crypto
Security tokens represent real investment assets such as stocks, bonds or real estate.
Unlike most other cryptocurrencies, these tokens are subject to financial regulations and securities laws.
They are often seen as a bridge between traditional financial markets and blockchain technology, but require a stricter level of regulatory compliance.
In short, each type of crypto has its own function and risks. Some are suitable as a store of value, some are focused on technology and some are more market sentiment.
By understanding these differences, investors can make more rational decisions and not easily equate all cryptos as purely speculative assets.
