The main units in the crypto are coins, tokens, stablecoins, and NFTs.

4 main financial units within cryptocurrency:

Coin – is a currency used to pay fees within the network. In the Bitcoin network, it is the BTC coin, and in Ethereum, it is the ETH coin.

Token – in addition to the native coins of the blockchain, there are also tokens.

Stablecoin – are tokens pegged to the exchange rate of fiat currencies (dollars, euros, etc.). For example, 1 USDT = 1 USD.

NFT – is also a token, which stands for Non-Fungible Token. As I understand it, you know what an NFT is. Yes, these are the digital works of art stored on the blockchain.

Coin

Imagine that the foundation is a coin. The coin has its own blockchain, which is named after it. All actions within the blockchain are carried out using the coin, which is needed to pay fees in the network. Without it, the blockchain will not function.

A few examples of coins:

BTC – Bitcoin network coin

ETH – Ethereum network coin

SOL – Solana network coin

TON – Toncoin network coin

Token

Tokens, on the other hand, are not coins. They are built on top of an existing blockchain.

A coin is needed to pay network fees, while a token is used to provide utility through a smart contract.

Tokens have different functionalities:

• Project governance. Analogous to stocks. The more tokens you have, the more influence you have on the project. Yes, internal voting takes place in projects. For example, MKR, ARB, OP, and others.
• Payment for something. Sometimes projects may require payment only in their tokens.
• Utility tokens. For example, the KCS token from the Kucoin exchange. Holding this token provides certain advantages: participation in exchange promotions, reduced fees, etc.
• Stablecoins. Tokens pegged to real currencies. For example, USDT, BUSD, TUSD, etc. All of them are worth about $1.
• NFTs. Those pictures on the blockchain. Yes, they are also tokens.

Stablecoins

Stablecoins are created to make it easier to trade other cryptocurrencies. A stablecoin is pegged to the exchange rate of fiat currencies. In 95% of cases, this is the US dollar.

The largest stablecoins are:

USDT
USDC
BUSD

But you can't just peg a stablecoin's exchange rate to the dollar. It needs to be backed by something. There are two main types of backing:

1. Holding real dollars in a real bank.
2. Over-collateralization. These stablecoins are backed by other cryptocurrencies, the total value of which is higher. For example, 1 million dollars in 1 million DAI (stablecoin) is backed by 1.3 million dollars in ETH.

Sometimes stablecoins can become unpegged (lose their connection to the fiat currency), for example, there was a moment when USDC was worth about $0.90 for a couple of days.

NFT

I think you've already understood what tokens are. Now, let me tell you about NFTs — they are also tokens, but non-fungible, meaning they cannot be replaced with another token.

I asked you for 0.1 BTC because I did some work for you. You easily sent me 0.1 BTC.

But what if I ask you for 0.5 NFTs from the BAYC collection (shown in the screenshot below)

You won’t be able to send me that amount. And how would you send it: split the image in half? That’s not possible in the blockchain. In the real world, you can’t buy half of a painting. That’s why NFTs are called non-fungible.

I think you understand that NFTs are images created on the blockchain. That’s true, but NFTs are not just images. The technology of NFTs is simply the best fit for creating them.

NFTs are a useful technology that allows you to store not just images, but also audio, video, and other data. Many people dream of creating ownership contracts in the future in the form of NFTs, for example, for a house. The potential of this technology is enormous.

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