A cryptoasset is any digital asset that uses cryptographic technologies to maintain its operation as a currency or decentralized application.
Cryptoassets leverage
cryptography,
consensus algorithms,
distributed ledgers,
peer-to-peer technology and/or
smart contracts to function as a store of value, medium of exchange, unit of account, or decentralized application (
DApp). There are four most common types of cryptoassets:
cryptocurrencies, utility
tokens, security tokens and
stablecoins.
Cryptocurrencies are the most widespread of these: the two largest assets by
market capitalization on the crypto market, Bitcoin (
BTC) and Ethereum (
ETH), belong to this class.
Cryptocurrencies are
coins, i.e. fully independent assets, that can be
transacted between the participants of their networks and use the
blockchain technology to function. A blockchain is a decentralized ledger of all transactions that have ever been made with a particular cryptocurrency, which is maintained and updated via the use of a consensus mechanism, such as
proof-of-work or
proof-of-stake.
Utility tokens are not coins in the strict sense of the word, as they do not run on their own blockchain. However, they still use the blockchain of the parent platform they are based on, like Ethereum or EOS (
EOS). Utility tokens are called so because they can be used to access a specific product or a service; for example, Storj (
STORJ) allows one to pay for using
decentralized storage space on its network. Utility tokens can still be used as a means of exchange, but that is not their primary purpose.
Security tokens are cryptoassets that derive their value from other assets, both physical and digital, that can be traded. These tokens are subject to security regulations like those enforced by the U.S. Securities and Exchange Commission (
SEC).
Finally, stablecoins are a type of cryptoasset whose price is pegged to that of a traditional currency, like the USD or EUR. Examples of stablecoins include Tether (
USDT) and DAI (
DAI).