Understanding Crypto · Lesson 6 · Beginner
Three subclasses, four attributes
You can classify an asset as a cryptocurrency, cryptocommodity or cryptotoken and derive its value drivers.
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Three subclasses
Umbrella term cryptoasset, analogous to currency, commodity, finished product: cryptocurrencies fulfill all three functions of money, cryptocommodities are raw building blocks like compute, storage, bandwidth (ether as gas), cryptotokens are consumer-ready finished products, younger and riskier.
Three subclasses of cryptoassets
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Four attributes
Largely fixed from genesis: governance (who decides), supply schedule (BTC max 21 million), use cases, basis of value. Liquidity, volume and market behavior are NOT fixed, they mature over time.
Test yourself
Ether as fuel for smart contracts. Which subclass?
- Cryptocommodity
- Cryptocurrency
Which attribute is largely fixed from genesis?
- Supply schedule
- Daily trading volume
What distinguishes a cryptotoken from a cryptocommodity?
- Tokens are consumer-ready finished products, commodities are raw resources
- Tokens have more coins
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The key points at a glance
- Three subclasses: cryptocurrency, cryptocommodity, cryptotoken.
- Four economic attributes, largely fixed from genesis: governance, supply schedule, use cases, basis of value.
- Liquidity and volume are not fixed, they grow with maturity.
Deep dive
Greer's superclasses: where crypto assets sit
Behind Burniske and Tatar's three-way split stands Robert Greer's 1997 asset class theory. Crypto assets sit between commodities and stores of value, much like precious metals. Ether is consumed as gas, BTC in part merely held like a gold bar.
- Capital assets: stocks, bonds, valued via net present value
- Consumable/transformable: commodities, valued via supply and demand
- Store of value: art, currencies, precious metals, no yield
Deriving the value drivers per subclass
From the class you derive the relevant fundamentals. Tokens presuppose working commodity infrastructure and are therefore structurally younger and riskier. Whoever values a token like a currency makes the apples-to-oranges mistake.
- Cryptocurrency: by the three money functions and adoption as money
- Cryptocommodity like ether: by demand for compute, storage, bandwidth
- Cryptotoken: by adoption of the specific end product
- Dogecoin needs over 100 billion units for tipping, fatal as digital gold
Governance and supply schedule as fixed value drivers
Governance is the most underrated feature: no central actor controls the whole thing, and risk arises from that. The BTC block size dispute in 2017 led to forks and volatility, and whoever understands the distribution of power is not surprised by it.
The supply schedule is largely fixed from genesis, about 21 million for BTC. A retroactively changed monetary policy is a warning sign, as are premine and instamine. On Dash, around 45 percent of every block reward went to masternodes, and only about 15 percent was freely tradable. So always check the free float.
Sources: Burniske/Tatar
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