Bitcoin, cryptomoney and tokens: a taxonomy of the new economy

Don’t mix tea towels and napkins – 2 years ago, I proposed my attempt to develop a typology of tokens to better define and understand digital assets.

Since then, water has flowed under the bridge. Shitcoins have collapsed, exchanges have been hacked and others have taken their respective place in the crypto ecosystem. As the crypto-actives market has strongly changed, I propose a new classification of digital assets.

The Token Classification Framework

Since the emergence of Bitcoin Code and the crypto-actives that followed, the term most commonly used to refer to them has been “crypto-currencies”. Among them, Bitcoin is the asset that has received the most attention.

Cryptomoney, crypto-actives, tokens or securities?

Bitcoin is a cryptomony strictly speaking, but not all digital assets fall into this category. Most of them are tokens. Semantically speaking, the most appropriate term to define this new class of assets would be “crypto-actives” – or crypto-assets. This pitfall is quite common in innovative fields. However, the lack of terminology and clear definitions prevents a nuanced discourse and relevant analyses. In order to understand and explain all the nuances of this ecosystem, we need to dissect and classify it.

The same properties and use cases can be found in many assets of the crypto ecosystem. These similarities have been used to establish a classification of digital assets. However, no typology has yet been established and used by all the actors of the crypto ecosystem. Financial regulators, institutional players, traders and researchers each have a different point of view on the issue.

The classification of digital assets only caught the authors’ attention after the wave of ICOs in 2017. Since then, several works on the classification of numerical assets have been undertaken and, in my opinion, the most successful is Thomas Euler’s Token Classification Framework.

A model adapted to a protean asset class

This multidimensional model forms a decision tree for mapping digital assets according to their characteristics. The first step in this classification was to establish five dimensions for the tokens: purpose, utility, legal status, underlying value and technical layer.

The purpose of the asset. What is the purpose of the asset, is it simply a means of exchange or is it necessary for the operation of a network?
The utility of the asset. Does the asset provide access to a service, participate in a network, or has no particular utility?
The legal status of the asset. How will the asset be treated in different jurisdictions, as a mere crypto asset or as a financial security?
The value of the asset. Does the asset have an underlying value because it is backed by an asset or is it a financial security?

The technical layer. Is the asset native to its own blockchain or is it implemented on another blockchain such as Ethereum?

Then, in each of these dimensions, a given asset can correspond to one of the 3 sub-dimensions. However, some assets, because of their unique characteristics, may correspond to several sub-dimensions. This is the beauty of cryptopheresis: assets with unique characteristics offering innovative use cases. Note that some assets may also not have one of the dimensions of the model!