17 types of Blockchain Tokens

From Algorithmic Tokens to Virtual Financial Assets, there are 17 types of Blockchain Tokens.

From Algorithmic Tokens to Virtual Financial Assets, there are 17 types of Blockchain Tokens.

1. Algorithmic Tokens

Tokens that use an algorithm to vary the supply in order to stabilize price / volatility e.g. UST (now defunct) a so-called algorithmic stablecoin of the Terra ecosystem. Interestingly, Algorithmic Tokens are prohibited by the Dubai Financial Services Authority (DFSA) - the independent regulator of financial services conducted in or from the Dubai International Finance Centre (DIFC).

2. Asset-backed Tokens

Tokens that are backed by off-chain assets such as fiat currency, agricultural commodities, and precious metals e.g. USD Coin (USDC), and PAX Gold (PAXG).

3. Crypto Currencies

Tokens that can be used to buy and sell products & services or which can be quickly converted to 'cash' e.g. Bitcoin (BTC), Litecoin (LTC), Bitcoin Cash (BCH).

4. Crypto-backed Tokens

Tokens backed by on-chain assets such as cryptocurrencies e.g. Wrapped Bitcoin (WBTC).

5. DeFi Tokens

Tokens that are part of Decentralized Finance (DeFi) protocols such as Collateralized Debt Positions (CDP). For more about DeFi, see this post: What is DeFi?

6. DFSA Recognized Crypto Tokens (Dubai)

Tokens recognized by Dubai Financial Services Authority (DFSA) - the independent regulator of financial services conducted in or from the Dubai International Finance Centre (DIFC):

• Bitcoin (BTC),

• Litecoin (LTC), and

• Ether (ETH).

7. Exempt NFTs (India)

Tokens that are exempt from taxation as NFTs in India - whose transfer results in the enforceable transfer of ownership of underlying tangible assets.

8. Exempt Virtual Digital Assets (India)

Tokens exempt from taxation as VDAs in India - gift cards & vouchers, mileage points, reward points, loyalty cards, and subscriptions to websites, platforms, and applications.

9. Fractional Licenses of Intellectual Property (FLIPs)

Tokens that represent the whole or part of licenses relating to copyright, industrial designs, patents, and trademarks.

10. Governance Tokens

Tokens that give holders a vote in a project’s development e.g. Uniswap (UNI).

11. Non-fungible Tokens

Tokens that relate to off-chain collectibles and digital art.

12. Open Blockchain Tokens (Wyoming, US)

Tokens issued under Wyoming, US law HB0070 - Open blockchain tokens-exemptions e.g. Wrapped Asset Project (WRAP).

13. Privacy-enhanced Currencies

Tokens that are either private by default or which allow the activation of privacy functionality e.g. Monero (XMR). Interestingly, Privacy-enhanced Currencies are prohibited by the Dubai Financial Services Authority (DFSA) - the independent regulator of financial services conducted in or from the Dubai International Finance Centre (DIFC).

14. Public Blockchain Natives

Tokens that are used for paying fees for usage of a public blockchain e.g. Ether (ETH).

15. Security Tokens

Tokens that represent equity or ownership of a company.

16. Utility Tokens

Tokens that are part of a specific use case e.g. Filecoin (FIL) which is the incentive layer of the IPFS decentralized storage ecosystem.

17. Virtual Financial Assets (Malta)

Tokens that are recognized under the Virtual Financial Assets Act of Malta e.g. Chiliz (CHZ).