Uses of crypto (use cases): Beyond digital currency
Cryptos fuel significant changes in a huge industry, their utilities are much more than just coins. Time to explore some cases of crypto use beyond what we know so far.
Do you think cryptocurrencies are meant to replace the regular currencies we use? Do you think cryptocurrencies are a kind of anti-regime technology built with a single purpose, to shut down banks?
Not that you’re wrong there, but that’s just one part of crypto history. The uses of crypto in the world of blockchains and decentralized applications are vast, and we will explore them today.
But let’s start with what a currency is.
What is a currency?
A currency is anything we can use as a unit of account, a store of value and a medium of exchange. Today, they are usually pieces of paper, metal coins and digits that we trust. However, it is known that currencies evolve over time.
The cryptocurrency revolution began in 2009 when an anonymous individual (or group) named Satoshi Nakomoto began the journey to offer the world a peer-to-peer digital currency and payment network, a revolutionary way of transferring value.
11 years and over 8000 cryptocurrencies so far, the total value of the ecosystem has evolved and is well ahead of the original method of “value transfer” to be used for more uses than just currencies.
Cryptos are disruptive and are a key part of Web 3. Today, we are going to tell you how their use cases extend far beyond those of traditional currencies.
Overcoming the idea of a simple digital currency
Over the years, many blockchains have built unique infrastructures that support decentralized applications (dApps) and lay the foundation for a decentralized financial system (DeFi). They allow you to enjoy various peer-to-peer services by removing third parties, such as banks.
Most of these ecosystems have individual currencies or tokens that serve exclusive functions and capabilities. We will explore four ways in which these cryptocurrencies go beyond the definition of currencies to make the digital world and Web 3 even more interesting.
Protocol currencies
Blockchain technology is the basis for cryptocurrencies. It is a single-file storage technology that relies on a set of rules to securely validate and record new transactions. Instead of a centralized entity, many nodes or miners distributed around the world participate in these mechanisms to approve new transactions. What is their motivation?
Each blockchain network has its protocol currency. The network rewards nodes that help validate new transactions and secure the network. The two best examples are Bitcoin and Ethereum.
Bitcoin or digital gold
While it is an excellent store of value and medium of exchange, Bitcoin (BTC) is also the protocol currency of the Bitcoin network. Bitcoin miners who use high-computing power devices to operate the network earn as a reward for newly mined Bitcoins.
Ethereum or Gas
Ether (ETH) is the protocol token of the world’s largest dApp blockchain, Ethereum. Miners on the network earn ETH as a reward for their contribution. In addition, each dApp on Ethereum offers its own services and token-economics. For each transaction on the network, users must pay Gas fees in ETH.
You can say that ETH is the fuel, which you must pay to do any action, similar to how you put gas in your car for transportation or how you use the gas to cook.
Utility tokens
As we said before, dApps have their own native tokens. These tokens have different utilities within the blockchain ecosystem and are therefore called utility tokens.
For example, you can use native utility tokens to pay for multiple services within the ecosystem or participate in the governance of the Dapp and so on. To illustrate this, let’s look at two very famous projects: UNI and BAT.
PLAIN
UNI is the auxiliary token of the most popular Uniswap decentralized exchange (DEX). DEXs like Uniswap allow users to trade and trade cryptocurrencies without relying on a centralized entity. The platform depends on liquidity providers (LPs) to add liquidity to the various groups, from where other users can borrow tokens. LPs then earn a commission for their contribution. As a UNI token holder, you can also participate in the governance of the exchange and vote on platform-related decisions or propose your own changes.
.BAT
The Basic Attention Token (BAT) is the native token of the Brave browser. It gives people freedom of choice and allows them to earn money if they watch ads. Brave allows users to select ads and blocks ads for anyone who did not participate. The users they choose will be rewarded with a BAT token and then content that specifically matches their interests will be displayed.
Stablecoins
The prices of most cryptocurrencies are volatile. Thus, they may not be the perfect case for an effective medium of exchange. For example, if you’re a business owner, you may not want to accept payments in a currency whose value changes quickly in a short period of time.
Thus, crypto loyalists created stablecoins, which are cryptocurrencies backed by a fiat currency such as the dollar or the euro. This way, you can enjoy the security and speed of cryptocurrencies along with the stability of fiat currencies.
Two of the most popular stablecoins are Tether (USDT) and USDCoin (USDC). These currencies are claimed to be supported as one-to-one with the US dollar, meaning that for every USDT, there is one dollar in the stock of the network that created the coin.
Non-Fungible Tokens (NFTS)
All the tokens we have discussed so far are fungible tokens. Even regular currencies like the dollar are fungible. We can exchange them on a 1:1 basis or divide them into smaller units.
NFTs are the complete opposite. Think of them as digital objects. They all represent a completely unique or rare set of data, and you may not be able to trade them based on 1:1.
Lately, you may have heard of the NFTs’ hype. This means that artists create digital artworks, integrate their work into a non-fungible token, and sell them on NFT marketplaces. NFTs have also found a place in gambling, music, real estate, and other industries.
Crypto in the future
Cryptos came with the promise of changing the financial system, but they have offered much more than that. Just about seven years ago, cryptocurrencies only served as a means of payment and store of value, but today they are changing the way we interact with applications, use online services and the concept of digital ownership.
With each case for using crypto, we are closer to a big goal: to provide freedom and return power to people.