Types of Tokens and Their Use: All the Necessary Info

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Types of Tokens and Their Use: All the Necessary Info

A token is a type of cryptocurrency. It is a special coin that is tied to a certain project, without which it cannot exist. When working with tokens, it is essential to remember two things:

  • Use the service for token swaps on odos.xyz, if you want to know how to exchange them;
  • Tokens are different, as well as their use.

We will stop at the second option and try to cover the topic in more detail.

Network Tokens

Working in web 3, we pay commissions for everything: signing contracts, transfers, exchanges, creating a liquidity pool, etc. — we pay all commissions in the network’s native token. If we use the ERC-20 network, then we pay fees in ETH. The more protocols in the network, the more often the native token of this network is used, which suggests the reliability and stability of the token.

Network tokens include all native network tokens, such as ETH, BNB, SOL, NEAR, ATOM, etc.

Stablecoins

These tokens include tokens that hold or “try” to hold the exchange rate at the same level. There are already stablecoins tied to the US dollar and the Mexican peso. In a highly volatile market, you need to have an asset that is stable and use it as a form of payment.

Stablecoins can be divided into types of collateral and by the way they “hold their rate.” Stablecoins include USDC, USDT, BUSD, DAI, USN, etc.

Governance Token

Governance tokens are the first cryptocurrencies representing voting on the blockchain, distributing the power to make major platform decisions from a centralized structure to the entire community. GT tokens can include BSW, CAKE, DXD, etc.

Liquidity Pool Token

This is the token that the user receives from the decentralized finance platform for funding the Liquidity Pool. The larger the amount provided to the platform for exchange transactions, the more Liquidity Pool tokens will be issued in return. LP tokens include BNB/USDT Pool Tokens, USDC/USDT Pool Tokens, ETH/SOl Pool Tokens, and any other tokens when creating a Liquidity Pool on the DEX.

Reward Token

Reward token is a mechanism designed to be an additional distribution of mining to vendors and borrowers of the Venus Protocol. Each site has its own RT: CAKE, BSW, ARG, etc.

Wrapped Token

A wrapped token is a cryptocurrency whose value is tied to the value of another cryptocurrency. The name implies that the original asset is placed in a “wrapper,” a kind of digital storage that allows you to create wrapped tokens on another blockchain. Wrapped tokens include WSOL, WBTC, WETH, etc.

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