What are the differences between various digital assets?

Customisable business insurance
10 June 2021
5 minute read

With so many digital currencies these days, it can be daunting to keep abreast of all of them, especially as various companies state conflicting numbers. Coingecko.com claims there are 7,096, while Statista says there are over 4,500.

Digital Assets have been issued by governments, publicly traded companies such as J.P. Morgan’s JP Coin but the vast majority have been issued by private companies – many of which are start-up firms from all over the world.

If you’re interested in learning more about which digital assets are out there and the differences between them, you’ve come to the right place. This article will run through which ones you should know about and what’s special about them.


The Economist is saying of Central Bank Digital Currencies (CBDC): “govcoins are a new incarnation of money. They promise to make finance work better but also to shift power from individuals to the state, alter geopolitics and change how capital is allocated.”

China is well on their way to rolling out a CBDC named the Digital Yuan, which is currently being tested in more villages and towns around the country. And recently, Mastercard announced that it’s in talks with the Chinese authorities to accept the Digital Yuan on its payment platform.

Some CBDC’s such as the Bermudian Sand Dollar – the worlds’ first national wide CBDC – use Blockchain technology, while others like the Digital Yuan don’t.

DeFi tokens

CNBC defines decentralised finance, or DeFi, as: “a system of applications that aim to recreate traditional financial instruments with cryptocurrency”. Since the start of 2021, the size of the DeFi market has grown considerably.

There have been a range of tokens created for the DeFi sector with the objective to enable decentralised financial services without the need of a third party, such as a bank or the other intermediaries. DeFi tokens rely on smart contracts i.e. computer coding and are designed to offer participants the ability to earn interest, get loans and trade without relying on a third party.

This is a fast-moving sector and DeFi tokens can fall and rise very fast, which is why we're now seeing firms such as Novum Insights being set up to offer insight to the challenges and opportunities. Returns are being offered as high as 84,000% p.a or 230% per day, meaning your £1,000 could become worth £3,300 in a day, so it’s of little surprise that DeFi tokens have attracted so much interest.

Non-fungible tokens

In their simplest form, Non-Fungible Tokens (NFTs) can be described as digital collectibles. Typically, NFTs are tied to art, photographs, pictures, music, or videos. They’re called “non-fungible” as they’re unique and therefore can’t be replaced with something else.

NFTs have recently been in the news as the auction house Christies, sold a NFT for $69million, making the artist Beeple the third highest living artist ever. In the first quarter of 2021, it’s claimed that over $2billion of NFTs have been sold.

Security tokens

Investopedia’s definition of traditional securities is: “financial instruments that hold some type of monetary value and represent ownership (stock), a creditor relationship (bond), or the representation of rights to ownership (option). They can provide a variety of financial rights to the owner of the securities, such as equity, dividends, or interest”.

Security tokens are digital representations, including fractions of an asset, such as real estate, commodity, an equity, a bond, and non-physical assets, like data and AI. The value of traditional securities and security tokens is linked to an underlying asset and subject to existing security regulations.

We are already seeing equities such as Coinbase, Tesla, Twitter and the like that are traded on traditional stock exchanges being offered in a digital format. The reason for this is that digital security offers:

  • Instant transaction settlement
  • Lower fees due to the removal of intermediaries
  • Greater transparency and therefore potentially stronger compliance controls and reporting
  • 24/7 trading
  • Ability to pay dividends based on the time period held as opposed to arbitrary interim and final dividend payments dates
  • Potential access to global investors that are not restricted to national stock exchanges


Stablecoins are typically linked/pegged to a fiat currency such as dollars, euros, pounds or Yen, but instead of being issued by a government, they are issued by a company.

The most well known but yet-to-be-issued Stablecoin is Facebook’s Diem, which is awaiting approval from Swiss authorities and is meant to be linked to a basket of global fiat currencies. However, as a trial, The Diem Association is now expected to launch a $ backed stablecoin later this year.

As more security tokens are issued, there will be a growing demand for the income generated from property, the coupons from bonds and the dividends from equities to be paid digitally using Stablecoins. The biggest three Stablecoins are Tether, USD and Binanace Coin.

Utility tokens

Utility tokens can be seen as similar to loyalty points such as Airline rewards or credit card points and often offer access to a company’s (future) product or service — similar to a voucher.

Utility tokens are not meant to be investments, otherwise they would be a security token, but as purchases. Therefore, the more demand for the utility the token gives access to, the more valuable the token will be.

In order to avoid security regulation, the majority of Initial Coin Offerings (ICOs) have structured themselves, or at least tried to, as utility tokens.

People often get confused between what a security token is and what a utility token is, so the following example may help. Let’s say you owned a theatre and wanted to encourage more customers. To do this, you issued an ICO and the buyers were entitled to free drinks, discounted tickets, priority booking or extra comfy chairs – you would be selling a utility not a security. However, let’s assume that you owned a building and wanted to convert it into a theatre and issued an ICO to pay for the building works, there is a strong possibility that regulators could claim that the money you had raised was in fact a security as it had been used to invest in to building, equipment and furnishing a theatre.

EOS, which raised $4+ billion, has landed more money than any other ICO to date, but Bitcoin still remains as the biggest utility token.

The size of the market

The size of the digital assets market – excluding security tokens – is $2.4 trillion. However, as we see the infrastructure such as banking, custody, insurance exchanges and greater legal clarity around regulations, we will see more institutions begin to engage with digital assets.

Indeed, we could see security tokens become the second largest type of digital assets after CBDC, especially if we see banks and potentially governments start using them to issue bonds using Blockchain technology. This is because companies and governments issue huge volumes of bonds – $4.6trillion – and that was just in the first half of 2020.

Digital assets have come a long way since the heady frenzy and brouhaha during 2017/2018 with ICOs. Now, the markets are much more mature and investors are challenging many aspects and vested interests of traditional markets – even the currencies of nations.

As ever, change by some will be fought and resisted. But, eventually, we will see more and more assets being digitised and much of the current financial markets will become more transparent and available to the masses – not just the few.

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