Learning Objectives:

  • Identify different types of tokens and their functions.

  • Understand tokenomics and its role in DeFi ecosystems.

  • Explain the role of price oracles in DeFi.

7.1 Types of Crypto Assets

The DeFi textbook categorises crypto asset types including security tokens, utility tokens, non-fungible tokens (NFTs), and stablecoins :

  • Security Tokens: Represent ownership in an underlying asset, often subject to securities regulations .

  • Utility Tokens: Provide access to a specific product or service within a blockchain ecosystem .

  • Non-Fungible Tokens (NFTs): Unique digital assets representing ownership of a specific item or piece of content .

  • Stablecoins: Designed to maintain a stable value relative to a reference asset .

7.2 Tokenomics

Tokenomics refers to the economic design of a token ecosystem, including token supply, distribution, and utility. Key considerations include:

  • Supply Mechanics: Total supply, inflation rate, and mechanisms for burning tokens.

  • Distribution: How tokens are allocated to founders, investors, and the community.

  • Utility: The use cases for the token within the ecosystem.

  • Incentives: How the token aligns incentives among participants.

7.3 Price Oracles

Price oracles provide external data to smart contracts, enabling them to access real-world information such as asset prices . Oracles are critical for many DeFi applications, including lending protocols, derivatives, and stablecoins. However, oracle manipulation is a significant security risk in DeFi .

 

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