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What is Crypto?
Crypto is an entirely new asset class that is completely digital. There are many different types of crypto-assets that all share a few common traits:
  • Crypto-assets are native to the internet.
  • Crypto-assets use blockchain technology to record transactions in a decentralized and trustless manner.
  • Crypto users have total control over their assets and do not need to rely on any intermediaries like banks to transact with one another. It's like exchanging physical cash without the hassle of... exchanging physical cash.
While many popular centralized payment services like bank transfers, Venmo, Cash App, and PayPal allow users to exchange funds, they are not permissionless, censorship resistant, or convenient for all users.
Permissionless
Censorship Resistant
Convenient
If blockchain technology is thought of as an accounting system, crypto can be thought of as the units of account used in the system. Crypto allows anyone with an internet connection to experience the benefits provided by blockchain technology.

What Are the Types of Cryptos?

There are countless types of crypto-assets. The most common types include native cryptocurrencies, stablecoins, utility tokens, and governance tokens.

Native Cryptocurrencies

Cryptocurrencies are the most well-known type of crypto-asset. Cryptocurrencies are simply digital units of account intended to be used as traditional currencies are used: as a medium of transfer and/or a store of value.
The UMEE Token
Umee
The native UMEE token is the Umee blockchain's native cryptocurrency.

Stablecoins

Stablecoins are a form of crypto-asset that are intended to allow users to enjoy the benefits of crypto and web3 without having to deal with the volatility commonly associated with other cryptos. Stablecoins achieve their price stability by being pegged to or backed by a commodity or fiat currency, or by using algorithmic economics to regulate supply and demand. Many popular stablecoins are pegged to the US dollar, meaning that in theory they can always be redeemed by a user for $1 or $1 worth of another asset.
Stablecoins can be classified based on their stability mechanism. The most common types of stablecoins are fiat-backed, commodity-backed, crypto-backed, and algorithmic.
Fiat-Backed
Crypto-Backed
Commodity-Backed
Algorithmic

Fiat-Backed Stablecoins

Fiat-backed stablecoins aim to hold their pegs by maintaining reserves in fiat currencies. These stablecoins are commonly pegged to the US dollar due to its strength relative to other currencies.
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Advantages

Fiat-backed stablecoins are a popular choice among DeFi users because they have faith that they can redeem one fiat-backed stablecoin for one physical unit of the currency it represents at any time.
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Disadvantages

Centralized entities are needed to issue fiat-backed stablecoins and manage the reserves. This means that a fiat-backed stablecoin is only as good as the organization that issues it. These organizations may be targeted by authorities who wish to maintain full control over a currency, and/or be subject to banking regulations which other stablecoins may not be.
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Examples

USDT, USDC, BUSD, TUSD, GUSD

Crypto-Backed Stablecoins

Crypto-backed stablecoins are exactly what they sound like; stablecoins backed by other cryptocurrencies. Crypto-backed stablecoins typically require users to deposit crypto assets of greater value, and require users to be over-collateralized in order to maintain a $1 peg.
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Advantages

Crypto-backed stablecoins offer levels of decentralization that fiat-backed stablecoins cannot.
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Disadvantages

Crypto-backed stablecoins are only as good as the underlying collateral that backs them and the protocol that issues them. If a protocol is unable to ensure that crypto-backed stablecoins are properly over-collateralized at all times, the crypto-backed stablecoins issued by the protocol may lose their peg. High levels of over-collateralization are typically needed in order for crypto-backed stablecoins to be issued in order to protect the peg during times of extreme market volatility.
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Examples

DAI, MIM

Commodity-Backed Stablecoins

Commodity-backed stablecoins are similar to fiat-backed stablecoins, except they are pegged to a commodity rather than a fiat currency, and thus issuers maintain reserves of commodities. Since commodities fluctuate in value, commodity-backed stablecoins also fluctuate.
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Advantages

Commodity-backed stablecoins allow users to gain exposure to key commodities while offering the same fungibility as other cryptos. Commodity-backed stablecoins allow users to transact with commodities in ways that are not possible through legacy markets.
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Disadvantages

Just like with fiat-backed stablecoins, centralized entities are typically needed to issue commodity-backed stablecoins and manage the reserves in order to ensure that one stablecoin can be redeemed for one unit of the commodity.
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Examples

PAXG, XAUT

Algorithmic Stablecoins

Algorithmic stablecoins are unbacked or partially backed by other crypto-assets. They use algorithms to maintain their peg, which often involve the minting and burning of tokens based on the demand and value of the circulating stablecoin driven by economic incentives determined by their on-chain algorithms.
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Advantages

Algorithmic stablecoins are decentralized and may not require significant levels of over-collateralization to be issued.
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Disadvantages

Since algorithmic stablecoins are unbacked or partially backed, they are more susceptible to a de-peg than other types of stablecoins during market turmoil.
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Examples

FEI, UST, AMPLCommodity-Backed Stablecoins
Commodity-backed stablecoins are similar to fiat-backed stablecoins, except they are pegged to a commodity rather than a fiat currency, and thus issuers maintain reserves of commodities. Since commodities fluctuate in value, commodity-backed stablecoins also fluctuate.
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Advantages

Commodity-backed stablecoins allow users to gain exposure to key commodities while offering the same fungibility as other cryptos. Commodity-backed stablecoins allow users to transact with commodities in ways that are not possible through legacy markets.
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Disadvantages

Just like with fiat-backed stablecoins, centralized entities are typically needed to issue commodity-backed stablecoins and manage the reserves in order to ensure that one stablecoin can be redeemed for one unit of the commodity.
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Examples

PAXG, XAUTCommodity-Backed Stablecoins
Commodity-backed stablecoins are similar to fiat-backed stablecoins, except they are pegged to a commodity rather than a fiat currency, and thus issuers maintain reserves of commodities. Since commodities fluctuate in value, commodity-backed stablecoins also fluctuate.
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Advantages

Commodity-backed stablecoins allow users to gain exposure to key commodities while offering the same fungibility as other cryptos. Commodity-backed stablecoins allow users to transact with commodities in ways that are not possible through legacy markets.
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Disadvantages

Just like with fiat-backed stablecoins, centralized entities are typically needed to issue commodity-backed stablecoins and manage the reserves in order to ensure that one stablecoin can be redeemed for one unit of the commodity.
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Examples

PAXG, XAUT
Supplying & Withdrawing
User Guides
Use this guide to learn how to lend stablecoins on Umee.

Utility Tokens

Utility tokens are tokens that are used to access a specific web3 product or service.
In real life people typically buy general admission tickets that are exchanged for access to all sorts of organized events. In video games players often have the ability to earn or purchase in-game "currencies" that can be used to acquire in game items or experiences. In crypto people must earn or purchase utility tokens to transact on a specific network or use a unique application.
The UMEE Token
Umee
The native UMEE token is a utility token that is used to pay for transaction fees on the Umee blockchain.

Governance Tokens

Governance tokens represent control over of a network or application. Governance tokens allow networks and applications to widely distribute decision-making capabilities to their communities.
Big tech companies are often critiqued for exploiting their users in an effort to earn more money for their investors. This is because users and investors are not well aligned since one directly profits off of the other.
Governance tokens are typically distributed amongst users, contributors, and investors in order to better align the decision making process with the interests of all stakeholders.
The UMEE Token
Umee
The native UMEE token is a governance token used to govern the Umee protocol.
Voting
User Guides
Learn how to use UMEE tokens to vote on a governance proposal here.
Creating a Proposal
User Guides
Learn how to use UMEE tokens to create a governance proposal here.