The cryptocurrency landscape, indeed the “Web3” industry as a whole, is evolving rapidly. As more participants join the market as investors, users, builders, or simply sidelined observers, it’s inevitable that new tools, protocols, startups and their tech will create evolving use cases for blockchain technology.
As the industry expands from simple store-of-value assets and record-keeping utility, we find exciting new ares of interest around, for example, NFTs, ownership, gaming, governance, interoperability, etc.
Naturally, it makes sense that the way we consider and use industry terms and their definitions will evolve and adjust to fit new applications and changing use cases. It’s likely that we’ll continue to see entirely new words and acronyms being created around use cases and technologies born from Web3’s progress over time.
This is not unlike traditional languages around the world, which are fluid and evolve as new generations create their own words or bring their brand of changes to the language itself. We should embrace these literary changes just as we have embraced the opportunity of what blockchain can do for various markets around the world.
First, let’s outline a basic understanding of what a digital asset is.
In a general sense, we can regard digital assets to mean anything of value that can bought, sold, stored, or transferred in a digital format.
This can include assets like fiat currencies, like dollars or euros, stocks and equities, and other goods like collectable art, objects like in-game tools, features, or other visual elements, corporate or real estate ownership, access to private events, clubs, or memberships, and, cryptocurrencies and tokens as we know them today.
In this regard, “digital assets” is a bit of an umbrella term that we can use to reference all digitized assets of value. We can effectively understand that all cryptocurrencies and tokens can be referenced as digital assets, but not all digital assets are cryptocurrencies or tokens.
When assets like US dollars, stocks, or commodities are moved onto the blockchain, we’ve taken a tangible asset or good and leveraged blockchain technology to “place” this asset onto a digital network, like Ethereum, for various investment or trading purposes. In the context of crypto, or Decentralized Finance (DeFi), this is sometimes referred to as tokenization.
The exciting thing about tokenization is that it can open new possibilities for accessibility, interoperability, and transparency in ways not fully experienced in traditional finance. Note that the term tokenization and its wider meaning extends beyond (and before) the context of cryptocurrency investing.
Here’s a simple look at digital assets and how cryptocurrency and tokens fit among them. Note that this diagram is not an all-encompassing outline of digital assets as an entire asset class.
Now that we understand the idea of digital assets, let’s explore the specific ideas of cryptocurrency, tokens, and altcoins, and how we can define the three.