Cryptocurrencies
digital or virtual currency that is secured by Cryptography
Coins
Crypto coins are strings of computer code that can represent assets, concepts or projects whether or not they are tangible, virtual or digital. It was intended for various uses and with varying valuations. Originally, these coins were meant to function as a type of currency.
Tokens
Tokens are programmable assets that live within the blockchain of a given platform. They are usually created and distributed through an initial coin offering (ICO).
There are 3 types of tokens：
• Value tokens (similar to Bitcoins)
• Security tokens (similar to stocks)
• Utility tokens (designated for specific uses)
More about Tokens
Tokens can be used to create and execute unique smart contracts. These contracts can establish ownership of assets outside the blockchain network. In addition, tokens can represent units of value such as electricity, money, points, digital assets and much more, and at the same time be sent and received.
Some examples of utilizing token is Ether (ETH), which is used to make transactions on the Ethereum network. Another example is to use it to represent digital art (non-fungible tokens). Last example is using it in software application, such as granting access to an app, verifying identity, tracking products within a supply chain, etc. People are still exploring different ways to use tokens which is why we should be excited for the future!
There are 3 types of tokens：
• Value tokens (similar to Bitcoins)
• Security tokens (similar to stocks)
• Utility tokens (designated for specific uses)
Differences between Coins and Tokens
Crypto coins and token are often viewed as the same thing, but infact, they are very different and is not interchangeable. Crypto coin is created on its own blockchain and acts much like fiat currency. They can be used to store value and as a means of exchange between two parties. Tokens, on the other hand, are created on an existing blockchain and have many more funcntions than solely acting as currency.
Volatile and High Risk
An Altcoin can drop 90% of its value within a day. For example, the price of Etherstone fell 100% from $0.013565 to $0.000000137 in a single day. In fact, in November 2022, over 70% crypto currencies lost 90% of their value from all time high.
Unknown Future
The underlying blockchain technology that powers cryptocurrencies are still emerging and in their infancy. There are still a lot of possibilities of how this technology will grow in the future. There is a chance that cryptocurrencies will not be broadly adopted.
Cyber Crimes
Not only are there examples of personal wallets that store cryptocurrency gets stolen, incidents of theft happen on exchanges too. Investors often will not be able to recover stolen assets and will deal with the lost him/herself.
Hard to leave the market
Be aware!
Risks when investing in Cryptocurrencies
There are lots of scams in the crypto market. Be aware of all the risks before you start investing or trading them! Learn more about the scam cases in crypto.
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Examples of Altcoins
Altcoins stands for “Alternative Coins”, which are all types of cryptocurrencies other than Bitcoin/ They are alternatives to Bitcoin and Fiat money. It includes different types such as stablecoins, mining-based coins, staking-based coins, and governance coins.
Disclaimers: The information on this site is for general information purposes only. It is intended to be used by virtual assets investors, but it does not constitute professional advice, whether legal or otherwise, and does not purport to be comprehensive. You should seek legal or other professional advice before acting or relying on any of the content. LITELAB@HKU does not accept responsibility for any loss that may arise from accessing or relying upon the information contained on this site.