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Blockchain
and DLT
(BLCH)
ITC801

Subject In-charge
Dr. Joanne Gomes
Professor Dept. of Information Technology SFIT
Room No. 317
email: jgomes@sfit.ac.in
Module 5
Lecture 1
Crypto assets and Cryptocurrencies
 Topics
• Cryptocurrency and cryptoTokens
• ERC20 and ERC721 Tokens,
• Comparison between ERC20 & ERC721
• NFT, ICO, STO, Different Cryptocurrencies
 Crypto/ Digital Assets
• Crypto assets are purely digital assets that use public ledgers over the internet to prove
ownership.

• A digital asset is a non-tangible asset that is created, traded, and stored in a digital format.
• They use cryptography, peer-to-peer networks and a distributed ledger technology (DLT) –
such as blockchain – to create, verify and secure transactions.

• In the context of blockchain, digital assets include cryptocurrency and crypto tokens.

• The biggest differentiation between the two is that cryptocurrencies have their own
blockchains, whereas crypto tokens are built on an existing blockchain.

• It means cryptocurrencies are the native asset of a blockchain — like BTC or ETH —
whereas tokens are created as part of a platform that is built on an existing blockchain like
DAI, LINK, and CryptoKitties .
Three Tiers of Blockchain Applications: Currency, Tokens, Infrastructure
• Blockchain as currency
– A blockchain is a decentralised record of and mechanism to transfer value or ownership. That’s
why it’s commonly described as a public ledger.
– Blockchain-based currencies are cryptocurrencies: The security and supply of money is
algorithmically controlled in a decentralised manner.
– But for them to become widely used and accepted as media of payment, a large and sophisticated
ecosystem was needed: This is where local exchanges like Luno come into the picture.
• Tokens on a blockchain
– Tokens function like currencies on the blockchain: they assign and track ownership of
(programmable) digital assets.
– In the case of currencies, the token is given a numerical value that represents a monetary digital
asset. But the token can be programmed to represent any asset or fungible unit of an asset,
allowing for a new concept of ownership.
• Blockchain as infrastructure
– The next development in blockchain technology is thus the decentralisation of all aspects of
computing to create Dapps (Decentralised Applications).
Three Tiers of Blockchain Applications: Currency, Tokens, Infrastructure
Blockchain for currency Ex. Bitcoin Blockchain as Infrastructure for application
development Ex. Smart Contracts

Blockchain for Tokenization Ex. Asset Tokens

 Cryptocurrency
• A cryptocurrency also called coin is the native asset of a blockchain network that can be
– traded,
– utilized as a medium of exchange to acquire goods or services, and
– used as a store of value as an asset which can be exchanged for a fiat currency.
• A cryptocurrency is issued directly by the blockchain protocol on which it runs, which is why it
is often referred to as a blockchain’s native currency.
• cryptocurrencies are not only used to pay transaction fees on the network, but are also used
to incentivize users to keep the cryptocurrency’s network secure.
• Characteristics of cryptocurrency:
– Decentralized
– Built on a blockchain or other Distributed Ledger Technology (DLT), which allows participants to
enforce the rules of the system in an automated, trustless fashion.
– Uses cryptography to secure the cryptocurrency’s underlying structure and network system.
 Cryptocurrencies Examples
• Cryptocurrencies Examples of Cryptocurrency
– Operate on their own blockchain Bitcoin Ethereum BNB
– Act as money
– Can be mined

Cardano XRP Solana

Polkadot Dogecoin TRON Avalanche

 Apps for Cryptocurrency
• L
 Crypto-Tokens
• A crypto-token is a digital unit of value that represents an asset or utility.
• These are developed on top of existing blockchain networks using dApps and smart
contracts.

• Tokens are different digital assets from cryptocurrencies.

• Cryptocurrencies are the native asset of a specific blockchain protocol, whereas tokens are
created by platforms that build on top of those blockchains.

• E.g. Ether is the cryptocurrency native to the Ethereum blockchain, where as there are many
different tokens like DAI, LINK, and CryptoKitties which utilize Ethereum blockchain.
• These tokens can serve a many functions on the platforms for which they are built, E.g
– participating in decentralized finance (DeFi) mechanisms,
– accessing platform-specific services, and
– playing games.
Difference
 How Crypto-Tokens Work?
• The token is given a numerical value to represent a monetary digital asset.

• Crypto tokens are programmable, permissionless, trustless, and transparent.

• The token can be programmed to represent any tradable asset or utility that resides on the
blockchain and allows the holder to use it for investment or economic purposes.
• An asset can really be anything from hours and shares, to a basket of goods.
• The person owning the token essentially holds a key that lets them create a new entry on the
public blockchain ledger.

Tokens are of classified as Two types:

• Fungible: Digital assets that can be exchanged for other assets of same type are known as
Fungible tokens Ex: Exchange of a dollar bill with other dollar bill.
• Non-Fungible Tokens (NFTs): They are advanced resources that can be used to trade for
different resources. Ex. Digital Collectibles, Games, essays, Domain name etc
How Crypto-Tokens Work?
 Fungible Token
• A fungible token is a digital asset that can be interchanged with another token of
the same type and value. Each unit is identical and holds the same worth as another
unit of the same token.
• Examples:
• Cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH)
• Stablecoins like USDT (Tether) and USDC
• Game currencies (e.g., V-Bucks in Fortnite)
• Key Features:
– Interchangeable (1 BTC = 1 BTC)
– Divisible (can be broken down into smaller units, like 0.001 BTC)
– Used as a medium of exchange
• Represents utility, governance, or assets in a system
 Non-Fungible Token (NFT)
• A non-fungible token (NFT) is a unique digital asset that represents ownership of
a specific item or piece of content. Each NFT has distinct characteristics and cannot
be exchanged on a one-to-one basis with another NFT.
• Examples:
• Digital Art (e.g., Beeple’s "Everydays: The First 5000 Days")
• Collectibles (e.g., CryptoPunks)
• Gaming Assets (e.g., unique skins, weapons, or virtual land in Decentraland)
• Music & Videos (e.g., tokenized albums or exclusive concert passes)
• Key Features:
• Unique (each NFT has distinct metadata)
• Indivisible (cannot be split into smaller parts like cryptocurrencies)
• Proof of Ownership (recorded on a blockchain)
 Types of Crypto-Tokens
• Utility token:
– It is a type of token that is used to access a particular product or service within a blockchain-based ecosystem or platform.
Utility tokens do not provide any ownership or investment stake in a project.
– Ex: Ethereum's gas token, which is used to pay for transaction fees on the Ethereum network or Binance Coin, which is
used to pay for trading fees on the Binance cryptocurrency exchange.
• Reward token:
– It is a type of utility token used to incentivize and engage individuals/ users in loyalty programs.
– Ex. The media and communication company, has announced the launch of its new BMJ Reward Token, a blockchain-
based reward program that offers membership rewards for subscribers of its paid newsletter, Bitcoin Market Journal
(BMJ).
• Asset token:
– It is a type of utility token that represents ownership of an object that has some characteristic. Ex. Asset-backed tokens can
be linked to the value of commodities such as oil, natural gas, precious metals like gold and silver, agricultural products
car, property or Fiat currency etc. Ex. stablecoins, like Tether (USDT) and USD Coin (USDC).
• Security token:
– A security token represents rights of ownership, transfer of value, or promise of returns that are tokenized on a blockchain.
It is intended to be treated as an investment instrument.
– A security token is intended to be used the same way a stock, bond, certificate, or other investment asset is used.
 Crypto-Tokens

Utility tokens
Shiba Inu USD Coin Binance USD
Asset tokens Chainlink
Tether

Wrapped Bitcoin LEO Token

MANA

Dai

Lido Staked Ether FTX Token

BAT
 Examples of Crypto-Tokens
• Examples of Tokens:
– Basic Attention Token which incentivises users to pay attention to ads - capitalising on the idea of
an attention economy.

– Transferring the ownership of a house is a massive administrative and very costly process -
dependent on various intermediaries. Tokens (in combination with smart contracts) allow us to
program and automate these kinds of transactions.”

– They can be used to raise funds or to give access to particular services.

– Some tokens can even represent coins on a different network. Such tokens are called “wrapped
tokens” and follow the price of the underlying asset.

– Used for playing blockchain-based metaverse game Alien Worlds, here users will need the game’s
token, TLM.

– They can represent certificates, in-game items, etc.

 Creating Crypto-Token
• Write a smart contract to create a token
 Creating Crypto-Token
• Import token in Metamask
 Smart Contract Standards For Tokens
• Smart contract standards are rules that a smart contract must follow in order to function as
intended on the underlying blockchain network.

• These standards are application-level specifications, such as

– token standards,
– name registries, and
– library-package formats.

• Token standard, is a subset of smart contract standards and is a guide for the creation,
issuance, and deployment of new tokens on the underlying blockchain.

• Most blockchain smart contracts currently use Ethereum, with the most common token
standards being ERC-20, ERC-721, ERC-777, and ERC-1155.
 ERC: Ethereum Request for Comment
• Token standards dictate what data a token stores, its behavior, the actions it is capable of,
and how investors can interact with the token..

• Ethereum Request for Comment (ERC) is essentially a set of technical documents

containing guidelines on developing a smart contract.
• They define a specific set of functions for each token type and facilitate the interaction
between applications and smart contracts.

• Anyone can create an ERC by going through the process of an Ethereum Improvement
Proposal (EIP), which is a document with the proposed features and processes for the
Ethereum blockchain network.

• Once a developer submits their proposal, it will be assessed and scrutinised by Ethereum’s
core developers and then may be accepted, finalised, and implemented.
• As soon as this process is complete, the initial document becomes an ERC standard that
other developers can use to create their own tokens.
 ERC Standards
• Various ERC standards:

Standard Year Details

ERC-20 2015 Fungible token standard that provides basic
functionality to transfer tokens, as well as allow
tokens to be approved
ERC-777 2017 Standard that defines all the functions required
to send tokens on behalf of another
address, contract or regular account
ERC-721 2018 Non-fungible token standard
ERC-1155 2018 Standard for contracts that manage multiple
token types
Thank You