ALL0-9$ABCDEFGHIJKLMNOPQRSTUVWXYZ
« Index
 

Token Classification System

DeFi Strategies • Yield Models • Token Income

system overview

Token Classification System — A Framework for Understanding Digital Assets

This system categorizes digital tokens by their technical structure, economic role, and real-world backing. It helps users distinguish between native protocol tokens, smart contract-issued tokens, real-world redeemables, and derivatives like synthetics and stablecoins. Each category informs how the token behaves, what risks it carries, and where it fits in a layered Web3 ecosystem.

Use Case: Provides a master index to understand where tokens belong across DeFi, NFT, payment, staking, and real-asset systems.

Key Concepts:

  • Tokenomics — Economic design governing token supply, demand, and distribution
  • Asset Classification — Sorting tokens by backing, origin, and function
  • Technical Origin — Whether a token is native to its chain or contract-issued
  • Use Case Layers — Mapping tokens to their functional role in the ecosystem
  • On-Chain Structure — The protocol-level architecture defining token behavior
  • Token Behavior Index — Companion index mapping monetary models across supply types
  • Token Standards Index — Technical standard reference across chains and protocols
  • Token Supply Models — Structural blueprints behind inflationary, deflationary, and fixed supply
  • Native Asset — Base-layer tokens issued by the blockchain itself
  • Non-Native Asset — Smart contract tokens hosted on another chain
  • Stablecoins — Fixed-value tokens across fiat-backed, crypto-backed, and algorithmic models
  • Governance Token — Tokens granting holders protocol voting power
  • Redeemable Asset — Tokens backed 1:1 by physical assets with delivery option
  • Synthetic Assets — Price-tracking tokens without underlying ownership
  • Token Utility — The practical function sustaining demand beyond speculation

Token Classes:

  • 1. Native Asset
    • Issued by the base layer of a blockchain (e.g., $BTC, $ETH, $XRP, $FLR)
    • Used for transaction fees, security, staking, or network consensus
  • 2. Non-Native Asset
    • Issued via smart contract or IOU on a host chain (e.g., $USDC, $BAD, $EXFI)
    • Follows standards like ERC-20, XLS-20, or SPL
  • 3. Wrapped Asset
    • Represents a token from another chain, locked and re-issued on the host chain
    • Examples: $wBTC, $wETH, $WXRP
  • 4. Synthetic Asset
    • Tracks the price of a real-world or crypto asset without owning the underlying
    • Minted via collateralized smart contracts (e.g., $fXRP, $sUSD, $sBTC)
  • 5. Redeemable Asset
    • Backed 1:1 by physical assets like gold or silver
    • Redeemable for physical delivery (e.g., $KAG, $KAU, $PAXG)
  • 6. Stablecoin
    • Designed to maintain a fixed value, usually $1
    • Includes fiat-backed ($USDC), crypto-backed ($DAI), and algorithmic ($FRAX)
  • 7. Governance Token
    • Grants voting power over protocol decisions and upgrades
    • Examples: $COMP, $UNI (planned governance extensions)
  • 8. Utility Token
    • Used inside a specific dApp or platform for access, fees, or services
    • Examples: $ACH, $LOOKS, $AUDIO, $PNF
  • 9. Meme Token
    • Created for cultural, social, or viral appeal, not technical use
    • Examples: $DOGE, $SHIB, $BAD, $FUZZY

Summary: The Token Classification System maps every digital asset to its structural category — native, contract-issued, wrapped, synthetic, redeemable, stable, governance, utility, or meme. Classification determines risk, role, and rotation strategy. Know what you hold before you hold it.

Class Backing Value Source Bear Market Resilience
Native Asset Protocol-level issuance Network utility (gas, staking) High — required for chain function
Non-Native Asset Smart contract on host chain dApp utility or issuer backing Variable — depends on issuer health
Wrapped Asset Locked collateral on origin chain Mirrors underlying asset Medium — bridge risk applies
Synthetic Asset Collateralized smart contract Oracle price feed Low-Medium — oracle + liquidation risk
Redeemable Asset 1:1 physical vault reserves Commodity price (gold, silver) Highest — physical floor exists
Stablecoin Fiat, crypto, or algorithm Peg maintenance mechanism High if fiat-backed, variable otherwise
Governance Token Protocol treasury + voting rights Decision-making power Medium — governance activity declines in bears
Utility Token Platform access or service User demand for the dApp Medium — depends on retention
Meme Token None — community sentiment Viral attention and culture Lowest — collapses without hype

Token Classification Decision Reference

identifying a token’s class by asking the right structural questions

Question If Yes If No
Is this the chain’s base-layer token? Native Asset Continue below
Is it redeemable for a physical commodity? Redeemable Asset ($KAG, $KAU) Continue below
Does it maintain a fixed peg (usually $1)? Stablecoin Continue below
Does it track another asset’s price via oracle? Synthetic Asset Continue below
Is it a token from another chain wrapped via bridge? Wrapped Asset Continue below
Does it grant protocol voting rights? Governance Token Continue below
Is it required for dApp access or platform function? Utility Token Continue below
Is its value primarily driven by community and culture? Meme Token Unclassified — research further

Classification Rule: Every token fits at least one class — and some fit multiple. $ETH is a native asset that also functions as a gas utility and deflationary burn mechanism. $FLR is a native asset with governance and staking roles. $KAG/$KAU are redeemable assets that also function as sound money. Classification isn’t about labels — it’s about understanding what actually backs your position.

Token Classification Portfolio Framework

building a portfolio by class — not just by ticker

Step 1 — Classify Every Holding
List every token in your portfolio and assign its class. If you can’t identify the class, you don’t understand the asset well enough to hold it. Native assets form the foundation. Redeemables provide the floor. Everything else is layered on top with purpose.
Step 2 — Weight by Risk Profile
Core: Native assets + redeemables (60%+). Growth: Governance + utility tokens (20–30%). Speculative: Meme + synthetic (10% max). This isn’t rigid — but if meme tokens outweigh native assets in your portfolio, the classification system is telling you something.
Step 3 — Identify Class Gaps
No redeemable asset? You have no physical floor. No stablecoin position? You have no dry powder for dips. No governance token? You have no protocol voice. Classification reveals structural gaps in your portfolio that ticker-watching never will.
Step 4 — Rotate by Class Through Cycles
In expansion, grow the utility and governance layer. At peak, reduce meme and synthetic exposure. In contraction, consolidate into native assets and redeemables. Store in Ledger or Tangem. Classification is your rotation compass.

Token Classification Audit Checklist

verifying that every position is classified, understood, and intentionally held

Classification Clarity
☐ Every token assigned to at least one class
☐ Dual-class tokens identified (e.g., native + governance)
☐ Backing model verified for each position
☐ Synthetic vs redeemable distinction understood
☐ Wrapped asset bridge risk documented
☐ If you can’t classify it — you shouldn’t hold it
Portfolio Balance
☐ Native assets form core position (BTC, ETH, XRP, FLR)
☐ Redeemable layer active ($KAG/$KAU)
☐ Stablecoin dry powder available for rotation
☐ Governance tokens staked for voting weight
☐ Meme exposure capped and exit-planned
☐ Balance by class — not by excitement
Risk Awareness
☐ Synthetic positions monitored for oracle health
☐ Wrapped assets bridge-risk assessed
☐ Stablecoin peg stability verified
☐ Non-native token issuer health reviewed
☐ Utility token demand metrics tracked
☐ Every class carries a different failure mode
Custody by Class
☐ Native assets on Ledger/Tangem hardware
☐ Redeemable metals on Kinesis with yield active
☐ DeFi positions accessed via Bifrost (FLR)
☐ Staking via Cyclo for liquid staking
☐ Dividends via SparkDEX
☐ Custody should match the class it protects

Capital Rotation Map

token class allocation across market phases

Phase Market Behavior Class Strategy
1. BTC Accumulation Quiet, disbelief Stack native assets + redeemables — maximum conviction classes
2. ETH Rotation Early optimism builds Add governance + utility tokens — ecosystem participation begins
3. Large Alt Season Momentum accelerates Selective meme + synthetic exposure — tightly sized with exit plan
4. Small/Meme Mania Euphoria, “easy money” Peak meme class risk — begin rotating to stables and redeemables
5. Peak Distribution “This time is different” Exit all speculative classes — consolidate to native + redeemable + stable
6. RWA Preservation Capitulation, reset Full preservation — $KAG/$KAU + BTC + Ledger cold storage
Classified Conviction: Every token in your portfolio belongs to a class — and every class behaves differently through the cycle. Native assets survive bears. Redeemables like $KAG/$KAU provide the physical floor. Governance tokens give you voice. Utility tokens give you access. Meme tokens give you nothing but a story and a prayer. Classify first. Size second. Rotate third. Store everything that matters in Ledger and Tangem. When the market strips away the narrative, only the class survives.
 
« Index