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What now? There are TYPES of crypto other than Bitcoin? Yes. And the underlying foundation of these cryptos can be different which is just a fancy way to say they can have different technology that may or may not be proprietary.
So, the article title seems to be a complex question and so we will break it down in smaller pieces to answer the question: What is the difference between a stable coin and a DEP20 token?
First, what is a crypto token?
A cryptocurrency is simply a digital asset that uses encryption to store value, or bought and sold on exchanges. Cryptocurrencies can be bought and sold, but they’re also a means to make transactions. Cryptocurrencies are designed to be decentralized, so there is no controlling entity that issues it. This has its pros and cons.
A stable coin is a digital currency which is pegged to a fiat currency, the US Dollar. It does this by being backed by a central entity that regulates the supply of the stable coin and helps to maintain its value. This central entity can be called a bank, it could be an organization such as an ETF or even another blockchain technology company that employs smart contracts on the blockchain. There are many different ways to do this and it depends on what the goal of the cryptocurrency actually is.
In general, stable coins are used for lower-risk financial transactions with efficient execution times. It's designed to maintain price stability in crypto markets, and is widely integrated into banking systems.
What is a DEP20 token?
DEP20 stands for Decentralized Exchange Protocol 20th Version. A DEP20 token is a digital asset that has been created by an agreement between certain parties (in the same way that a stock or bond issuer brings together investors for the purpose of offering tokens or shares). It is an existing blueprint for decentralized exchanges that has its own set of guidelines and rules. A DEP20 token is one of its type that uses DEP20 as the basis or foundation for exchange design.
Most DEP20 tokens are based on Ethereum blockchain, the most popular platform that is used for smart contracts. The most popular cryptocurrency exchange in the market today – BINANCE – uses DEP20 as its Exchange Protocol to create a decentralized, peer-to-peer exchange platform of digital assets.
As a DEP20 token has been created by agreement of certain parties, it can easily be understood why a stable coin is also based on DEP20. Since a stable coin is pegged to its fiat currency counterpart (the US Dollar), it would not be possible to change the supply of an underlying asset without the central entity's consent.
Stable coins use technology called tethering to provide price stability features in contrast to DEP20 tokens which trade as a currency within the cryptocurrency market.
So, is Ethereum a DEP20 token?
Rather than being a cryptocurrency, Ethereum is a decentralized platform that runs smart contracts. The core technology of Ethereum is the Smart Contract and not the blockchain. The currency Ether (ETH) is based on a smart contracts platform called Ethereum so it can be said that Ethereum is also an ERC20 token.
What this means:
The exchanges that use DEP20 format are expected to have their own token issue, while the exchanges using Ether format do not require any additional issuance. Since platforms of both types use open-source code, they are essentially equal in their functionality. However, DEP20 tokens have more rules and guidelines for how they work than Ether tokens (ERC20).
So, in a nut shell is a DEP20 token similar to stock versus actual currency similar to the US Dollar (USD)?
DEP20 is similar to securities in that it is an issuance of shares or a loan. DEP20 tokens are more like bonds or revenue shares than actual currency and thus they are not backed by any external entity. A DEP20 token is not equivalent to a cash instrument, and it's responsibility to address on its own terms. In the case of a DEP20 token, there is no standard agreement as to what constitutes its value.
As the issuer of a DEP20 token, the entity can make changes anytime at its discretion regardless of the agreement made by stakeholders involved in the agreement. In the case of stocks, there are rules and requirements that must be met in order to make changes to the value or structure of a program.
How are shares issues for a DEP20 token?
Currently, companies are formed and they put together an ICO that is similar to an IPO. This is typically a cryptocurrency company, and they issue shares on a blockchain. After the ICO, the value of the token was already predetermined. This means that the value of a token issued by a security issuer cannot fluctuate.
Most companies will put their securities on an exchange for trading. The main difference between stocks and tokens is that investors are in control over whether they can sell or buy back tokens at a different price than what it is issued. This is where there are more potential risks when dealing with stocks because it involves buying and selling at higher prices than what it was originally bought for. Trading securities on an exchange provides more transparency, as well as increased security with regards to safety features like escrows, etc.
How can you trade crypto stocks?
Almost every stock and bond trading platform is online and an investor has to access the platform via their computer. Traders can also opt for a mobile application that can be used to access the platform. These days, there are certain mobile platforms which allow investors to buy or sell securities from their smartphone. Trading stocks and bonds online is more convenient and it allows traders to make transactions in a faster manner. There are also stock trading tools like candlestick charts that provide additional information about the price movements of securities with regard to time. I am not an expert in economics, trading, finances, or crypto trading and am not providing any advice.
How does the structure of a DEP20 token differ from that of a traditional startup?
There are many similarities between traditional startups and ICOs: both involve raising funding and creating value; both have extensive legal documentation and the need for investors to trust the company in question, but what differs is that ICOs lack equity capital from shareholders (a goal of this project). In the case of startups, there are venture capitalists that put money behind a project.
The investors that participate in ICOs are not looking to earn a return or make any money off of this project. Rather, these investors are looking for new opportunities where they can make an investment and see their investment grow. This is the main difference between ICOs and traditional startups. In the case of securities, there is a high degree of risk because it involves making investments in businesses that have yet to experience profitability or failure. An investor takes on high-risk when investing in securities because he or she does not know if they will eventually be able to recover their investment should the business fail.
Conclusion
So, what is the difference between a stable coin and a DEP20 token? A stable coin is a cryptocurrency that is pegged to its fiat counterpart. As a tokenized form of its underlying asset, it is not possible for the price of the tokenized asset to fluctuate or drop significantly in value.
DEP20 is a type of smart contract that has been created by an agreement between parties. This means that changes of any kind can be made at any time by the issuer, regardless of what has been agreed upon at the start. DEP20 tokens are similar to securities in that they can be exchanged on an exchange and can be used as a form of investment. Because these tokens are not actually pegged to anything in the real world, they are considered assets instead of currency like Bitcoin or Ether (ETH).
Be careful and do your homework.
Disclaimer:
Cryptocurrencies are highly speculative and risky investments. It is important to do your research before choosing any coins or tokens you want to invest in. Cryptocurrencies can still be a solid investment, but you should not expect huge returns in the short term.
This post is by no means meant to discourage anyone from investing in cryptocurrencies and blockchain technology. I am merely trying to convey that there are a lot of unknowns and high risks involved with this new technology. It may take years for cryptocurrencies to catch on, but there is also the possibility that they will never break into mainstream use at all.
I am not an expert in economics, trading, finances, or crypto trading and am not providing any advice.
