What are crypto tokens?
The phrase crypto token means a specific virtual currency token or the method through which cryptocurrencies are valued. These tokens are fungible and transferable assets or services that exist on their blockchains. Crypto tokens are frequently used to generate funds for crowd sales, but they may also be used as a replacement for other items. These currencies are often produced, distributed, sold, and circulated via the conventional initial coin offering or ICO procedure. This procedure entails a crowdfunding activity to finance project development.
The list of ‘blue crypt’ tokens is continuously expanding, with new additions being contributed to the DeFi scoreboard.
ChainLink is well-known for solving the Oracle Problem – an oracle that supplies value to other projects in exchange for a fee.
Chainlink happens to be the industry leader in Defi. This is because the flow of fresh data is critical for a number of DeFi applications. ChainLink claims that its technology will eliminate conventional legal agreements and instead store information on blockchain in perpetuity.
ChainLink’s value rises as it becomes more popular among Node Operators. Not only that but Node Operators are rewarded for collecting $LINK tokens by having easier access to bigger contracts, which increases the value of $LINK. Those who behave maliciously, on the other hand, are penalized by having their $LINK tokens removed.
The $LINK token enables self-regulation of the ChainLink network. Some have proposed that payments do not have to be in $LINK, but that any other cryptocurrency would suffice. Nonetheless, ChainLink’s recent price performance suggests that the San Francisco team was correct to take the native token path.
Uniswap is a platform that allows for the automatic exchange of decentralized tokens. Uniswap gained momentum in 2020 as an automated market maker or AMM. Here, they were addressing the liquidity issue experienced by other Decentralized exchanges (DEXs).
Although Ethereum is still the most well-known DeFi protocol, Uniswap controls almost half of the DeFi industry. The platform allows users to trade ERC20-based tokens and earn fees as a market maker by providing liquidity to facilitate token switching. In other words, Uniswap enables customers to conduct transactions without the need for an intermediary, lowering the overall cost of the operation.
Some advantages, including cheap fees, user-friendly operations, complete ownership over your private keys, external wallet integration, and high liquidity, led to Uniswap’s record-breaking success.
Aave is a website where one can deposit their tokens. In return, they can earn some interest on those tokens. The APR on a stablecoin is about 10%+.
Ethereum transaction costs, which may range from $20 to $150 or more for a deposit and withdrawal round trip, need a larger investment, perhaps $10,000 or more, but the return is genuine.
Compound is a savings and borrowing software similar to Aave, except it pays a portion of the return in its own highly rated compound token.
Compound and Aave’s rates are just the inverse of what they charge. You receive 6.4 percent of the 8.37 percent interest rate that individuals are charged to borrow. Borrowing is a smart idea if you have enough collateral to pay the debt in full. Follow this reasoning to understand why this revolution is destroying the traditional method of conducting business.
It is a stablecoin developed by Maker DAO, another blue crypt. DAI is a stablecoin worth a dollar plus a bit more. Stablecoins are critical to this revolution because they provide a steady value in a token that serves as a bridge to “fiat currency” and its worldwide $150 trillion in liquidity, and DAI has a beautiful characteristic. It provides a 3% dividend every year. It is cash that provides a yield. If you keep it at Coinbase or another exchange, they will collect that yield for you, and you will be able to see your dividends grow right in front of your eyes.
Three percent a year in yield is not earth-shattering for those buried in the crypto world of mooning tokens and bitcoin $40,000, but when you consider it, it is paradigm-shifting for the whole financial system.
In a world of zero-interest rates, a 3 percent return is enormous; yet, DAI is a currency that pays a dividend by definition. That is a whole new concept, and it is supported by a business model, so it is not as if fresh tokens are just produced and distributed, because if that were the case, the price would fall rapidly from its peg, which it does not. It is just a new method of generating currency, which is if you are interested in economics, a kind of credit. DAI is a new kind of money that only computers can generate and the only crypto can successfully distribute.
So there are five blue crypt tokens to get you started on your study, but this is just the top of the colossal iceberg that has calved from the frozen undiscovered continent of crypto. There are dozens of projects available, and new ones are being added daily. The excellent ones have a chance to be worth billions, whereas the bad ones will inevitably fail.
This new invention will dwarf bitcoin even if and when it reaches the fabled $1,000,000 per coin.