2.1. cryptocurrency token definition
2.2. cryptocurrency token offerings
2.3. cryptocurrency token or coin
With cryptocurrencies arriving on the market as a new wave of quasi financial instruments, the differentiation in its types has arrived hot on the heels. While Bitcoin and Ether are the most popular by far, there are hundreds of tokens already in circulation. Each project, if it wishes to ever make any profit off of its product, will have to issue tokens. Consider them as in-game currency inside a video game app. Without something to offer, a project will have no justification for attracting investors to pay for the functioning of its product platform.
There are essentially two types of tokens. Utilities and securities. The utility tokens are services or units of services that can be purchased to perform some actions on a project’s platform, much like premium currency in a video game that enables you to buy faster upgrades or elite units. They are, essentially, API keys, used to access the service. Such tokens are a way to fund projects.
And then there are the tokens that represent shares of a business. We should consider the SEC announcement claiming that any token that can’t pass the Howey test should be considered as a security and fall under the 1934 Security Exchange Act. The Howey test consists of the following: Is it an investment of money or assets? Is the investment of money or assets in a common enterprise? Is there an expectation of profits from the investment? Does any profit come from the efforts of a promoter or third party? The final factor of the Howey Test asks if any profit that comes from the investment is largely or wholly outside of the investor’s control. If so, then the investment can be considered a security.
The offerings of tokens are largely based on the services offered by the project issuing them. If the project is large and expects its product to have a large audience, then the project must conduct a serious financial and business model analysis to consider how many tokens should be issued based on a number of factors. The offering itself consists of sales rounds. These are separate timeframes at which investors are offered to buy the tokens at discount or with bonuses. Usually, they are named either Pre-sales, Main Sales, Rounds or ICOs with a dozen other analogues.
All coins or tokens are regarded as cryptocurrencies, even if most coins do not function as a currency or medium of exchange. The term cryptocurrency is a misnomer since a currency is a unit of account, a store of value and a medium of exchange, legal tender. All these characteristics are inherent within Bitcoin, and since the cryptocurrency space was started by Bitcoin’s creation, any other coins conceived after Bitcoin are considered as a cryptocurrency, though most do not fulfil the aforementioned characteristics of an actual currency. There are coins and there are tokens.
Though the crypto market is still relatively new and lacks many of the traditional institutions of a civilized market, there are projects on the market that seek to indemnify or mitigate the associated risks that investors take when deciding to invest in projects. Cryptics is one such project that seeks to offer the necessary instruments for alleviating the situation with uncertainty. The concept behind it is to support market participants by providing liquidity on exchanges and a safety cushion for retail investors by creating a platform that connects market players and develops algorithms to predict changes in the value of cryptocurrencies. Such instruments based on highly advanced scoring models involving machine learning and AI are incomparable with human intuition that even the luckiest and most prudent investors could ever be endowed with. The multitude of factors involved in predicting a cryptocurrency’s rise or fall are all taken into account by the algorithms that Cryptics employs. Investors should consult such projects as the expense is well worth the ensured profit and peace of mind.