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Tokens in the world of finance: reality and prospects

Tokens in the world of finance: reality and prospects

Recently, Defi tokens have received a 46.000% rate of return. This insane increase is largely due to their limited issue — only 30,000 YFI coins.

Vice President of RACIB noted: “The demand for DeFi can become an avalanche.” The advantage of DeFi solutions is that they are decentralized. This removes legal restrictions and allows quickly conduct transactions with cryptocurrency.

Such an “astronomical” rate of return is common in the token world. No one could imagine such numbers ten years ago or regarding other financial instruments. It is no surprise investors and startups are interested in tokens. However, working with tokens is always a lottery, because it is a high-risk crypto financial derivative.

To put it simply, a token is a digital security issued by a startup to raise capital through an ICO (Initial Coin Offering). Token holders can resell them when prices for tokens grow or use them in other ways (for example, get dividends from tokens linked to real estate).

Nowadays, ICO is slowly being replaced by IEO (Initial Exchange Offering). With ICO, a token listing on the exchange doesn’t happen immediately but takes several months after a tokensale. In the case of IEO, an exchange already acts as the main partner of a tokensale provider. The latter issues tokens and sends them to the exchange right away.

It should be noted that ICO and IEO are very fast ways of raising capital. Start-ups can raise a million dollars in minutes, and investors can get high dividends in the short term. This is hard to imagine if we are talking about other fundraising methods.

However, with the hype around ICO and tokens, many scam startups appeared. The price for their tokens decreased in the market, or they were not issued at all, and the developers just disappeared. As a result, investors lost their money. But even if a startup has good intentions, it will be difficult for it to “stay afloat” because of the high competition in the market. Experienced investors understand this and buy tokens from several startups, hoping that some of them will work out.

The demand for tokens will only grow in the future because of their rate of return markers. However, the competition in the market will increase as well, and it will become difficult for companies to release their tokens in the market.

How can I buy/exchange tokens?

You can buy and exchange tokens on a crypto exchange. However, it is not recommended to store tokens and invest in them without learning all the information about tokens first.

If you are a beginner, it is best to use bitcoin, stablecoins, and altcoins to store, invest, and exchange cryptocurrency. These crypto assets can be called “traditional” because of a certain degree of stability they have in the crypto market. Therefore, you can invest in these assets without knowing much about them.

Crypto exchange understands the importance of storing assets and offers its service for exchanging traditional cryptocurrency (fiat-crypto, crypto-fiat). Using a crypto exchange is the quickest way to buy and invest in cryptocurrency. The exchange procedure is transparent and fast.