Photo by Nikita Andreev on Unsplash

Since 2013 I had been preaching Bitcoin after being introduced to it. I had actually got caught in the Mt. Gox crash and lost a decent amount of Bitcoin during that time. I had bought at $200, $400, $600, then $800, and even $1,000 until it went to $1,200 and then crashed to $200. While most people had been selling their Bitcoin when “M.T. Gox” went “Empty” (pun intended), I had been quickly buying as much as I could and lowered my dollar cost average to $400. The misunderstanding that people had is they thought Bitcoin was at fault. It’s like saying an Intel stock was bad because the Nasdaq crashed, huh? It actually wasn’t too different from the Great Recession in 2007 when all Stocks dropped, even though some had perfectly good books (not the banks, of course).

The point here is to not follow the crowd, you really need to look into what the technology is and decide if it’s something you see going far. Right now we’re entering the same era as the “.com” boom. Back then, add “.com” to your business and BAM — IPO money. Now it’s add “Blockchain” to your business and BAM — ICO money. Lots of people are asking me for their advice and instead of telling each person the same thing, I thought to write it up instead. In this article, I’ll be discussing the different types of coins I see, without picking out a specific token. The following articles after this one will go over the first 4 sections and mention specific tokens.

Utility Tokens

These are the buzz tokens everyone is trying to be. Utility tokens are tokens that are actually used in the specific business. For example, when you use the Brave browser and allow ads to show on your browser, you’ll be paid in BAT tokens. The idea behind utility tokens is the value of the tokens will rise as more people use them

Currencies

These are tokens/Blockchains that are focused to be used as a currency, such as Bitcoin (well, not anymore, at least not right now), Bitcoin Cash, Litecoin, Monero, Dash, etc. Right now there’s a battle of which Coin will be the one that becomes the true cryptocurrency, and it will be a while before the market decides the best use case. The value of the cryptocurrency will also increase as it becomes more widely adopted.

Securities

This is the token that everyone (in the U.S.) is avoiding to be, unless you have the financial backing to register with the SEC. Securities tokens will pay you for holding shares of their tokens. It’d be similar to REIT’s or Stocks that pay Dividends. Right now the basic consensus of whether a token is a Security is based on the Howey Test. If you want to setup a Security Token I’d suggest doing it in Zug, Switzerland and definitely not in the U.S. unless you plan to bring in only accredited investors. FYI, some ICO’s won’t let you invest into their token if you’re in the U.S., however, you can always pick it up on an exchange after the ICO!

Non Utility ICO

Think of these tokens as just Stocks. They don’t pay you Dividends and they’re not used in the business. Why would you invest in these? Well, why are you invested in Amazon, or why is anyone invested in any Stock? For same the same reason you’d invest into a Stock, is the same reason why you’d invest into a Non Utility ICO. Maybe you’re just being speculative or you believe in the business and want to help support it so it can create a product you’re looking forward to.

Pump and Dump

Seriously, these coins exist, and it’s what you want to avoid. These are coins bought by John McAfee before he tweets about them and then sells them when everyone else buys them. There are actual coins out there presenting themselves as useless coins and yet money is being flowed into them. Again, do your research and see what the community has to say about them! One really easy way to avoid these coins is checking their blogs and website and seeing if they’re making updates. If they haven’t added any content after 3 months, you could probably bet they’re partying somewhere else.

Did I miss another “type” of token, feel free to leave your comments!

P.S. For those of you curious how “hodl” came into existence, it was late in 2013 when someone misspelled “hold” in a bitcointalk forum. Then not too long afterwards someone made a Braveheart meme showing Mel Gibson screaming and the letters “HODL” right above him :)