Types of Crypto
Cryptocurrencies
Examples include BTC, ETH, and UMEE.
Cryptocurrencies are the most well-known type of crypto-asset, and can be broadly defined as digital units that originate on blockchain.
Stablecoins
Examples include USDT, USDC, and DAI.
Stablecoins are a form of crypto-asset that are intended to allow users to enjoy the benefits of crypto and web3 without having to deal with the volatility commonly associated with other cryptos. Stablecoins achieve their price stability by being pegged to or backed by a commodity or fiat currency, or by using algorithmic economics to regulate supply and demand. Many popular stablecoins are pegged to the US dollar, meaning that in theory they can always be redeemed by a user for $1 or $1 worth of another asset. There are four primary types of stablecoins, each with their own unique characteristics and stability mechanisms. Learn more about the different types of stablecoins here.
Stablecoins on Umee
Many crypto users prefer to deposit stablecoins on decentralized money markets rather than depositing fiat currency to a bank because they are able to use such a platform as a savings account and earn greater lending interest without having to go through the middleman (a bank). By lending stablecoins via secure protocols like Umee, crypto users are able to safely earn lending yield without being exposed to the high price volatility seen in other crypto-assets. Similarly, many crypto users enjoy borrowing stablecoins from decentralized money markets rather than taking loans from traditional banks because the rates are often more reasonable, and the terms of the loan are more favorable.
Utility Tokens
Examples include LINK, BAT, and UMEE.
Utility tokens are broadly defined as a type of crypto-asset that serves a specific use case within a web3 application or blockchain ecosystem. Utility tokens derive value from their redeemability, similar to how gift cards, coupons, or tickets derive value in real life. Unlike gift cards, coupons, or tickets which are limited by various terms and conditions, utility tokens are fungible and can be freely lent, borrowed, or traded thanks to the accessibility and trustless nature of blockchains.
Utility Tokens on Umee
In the Umee ecosystem, the UMEE token is considered a utility token to pay gas fees on the Umee blockchain. Umee allows users to lend and borrow crypto-assets across chains, but in order to interact with the Umee blockchain and access Umee’s services users need to have an UMEE token balance. Every transaction that occurs on the Umee blockchain costs a small fraction of an UMEE token, therefore UMEE tokens must be redeemed in order to enjoy the services provided on the Umee blockchain.
Certain utility tokens like UMEE can be lent or borrowed from the Umee Market. This means crypto users who are in possession of utility tokens they don’t need, but also don’t want to sell, can lend them on the Umee Market to earn lending yield, and/or use them as collateral to borrow another crypto-asset. Additionally, crypto users who want to use a specific web3 product or service but don’t want to purchase the utility tokens required can easily borrow them from the Umee Market.
Governance Tokens
Examples include UNI, YFI, and UMEE.
In traditional organizations all decision making power often lies in the hands of a small group of individuals known as the board of directors. While investors, employees, and customers are all stakeholders, they generally have minimal say in much of the decision making processes.
In crypto, governance tokens grant holders the ability to vote on issues related to the specific application or network they represent. Usually one token equals one vote, and a specific amount of governance tokens are required in order for an individual to submit a governance proposal to be voted on by other token holders. The focus of governance proposals varies widely, but generally governance proposals are made to determine how funds are allocated in order to influence the future of a project, or to alter various protocol parameters.
Governance tokens are typically distributed amongst users, contributors, and investors in order to better align the decision making process with the interests of all stakeholders. Governance tokens leverage the benefits provided by blockchains to allow applications and networks to be governed in a more decentralized, transparent, and fair manner than traditional organizations.
Governance Tokens on Umee
On the Umee blockchain, the UMEE token is used for all governance activities. Users who stake UMEE have the ability to vote on governance proposals to help shape the future of the network. This means that the Umee community decides things like which assets should be supported for lending and borrowing on the Umee Market, and how to make Umee more attractive for lenders and borrowers through programs like liquidity mining.
Crypto users who possess certain governance tokens they don’t need can deposit them on the Umee Market to earn lending yield, and/or use them as collateral to borrow other crypto-assets. On the other hand, users can also borrow certain governance tokens from the Umee Market in order to accumulate greater voting power without the need to actually purchase the tokens.
Non-Fungible Tokens
Examples include Bored Ape Yacht Club and CryptoPunks.
Non-fungible tokens, or NFTs, are a type of crypto-asset that are unique by design. While all crypto-assets have unique characteristics, NFTs are special because they use unique identifiers/data to prove that none of the individual tokens are the same. The unique data attached to NFTs makes them ideal for proving ownership of another one-of-a-kind asset. NFTs can be particularly useful for replicating unique real world items like real estate, event tickets, or medical records. Since NFTs give users the ability to tokenize unique real-world assets, crypto users are able to use NFTs to securely transfer, borrow, lend, or prove ownership of non-crypto assets.
NFTs on Umee
In the future, Umee plans to support NFTs that have stable value (e.g. valuable art collectibles and NFTs that represent real world assets) on its lending platform.
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