What Is Modern "Crypto" Anyway?

Updated: November 4, 2025

Key Points

• Not all "cryptos" are the same. There are multiple dimensions to classify crypto: the type of issuer, the role or application, the type of regulatory approach, etc. Each of the dimensions carries certain implications for issuers, investors, and academics. 

• The "crypto" topology richness is the sign of maturity. No doubt that the growth of the variety of tokens and the volume of tokens in each of the categories is a sign of industry maturity.

• Any crypto ≠ decentralized crypto. Depending on the type of issuer and the mechanisms of how robust the token protocol is against a single actor, cryptocurrencies may be more centralized, e.g., platform tokens, or decentralized, e.g., tokens of major open-source L1 blockchains. Crypto should not be synonymous with "decentralization."

Introduction

On October 22, a16zcrypto released their annual State of Crypto report. The mere existence of such a report from a major venture fund signifies the maturity of the crypto space and its becoming an industry. As the authors themselves write in the report, "Nothing signals crypto’s maturity in 2025 more than the rise of stablecoins." Indeed, stablecoins became the "killer app" of crypto, at least as of today. I wrote a piece about why stablecoins adoption via the US model is "genius." In this blog, I will raise a point of what we consider crypto.  

So, What Do We Call Crypto Today?

For most market participants, the original vision of crypto is Bitcoin. Under the pressure of the market forces, Bitcoin, as a peer-to-peer, distributed payment system, has branched out into many different variations: security tokens, utility tokens, non-fungible tokens (NFTs), and stablecoins. Crypto, or digital tokens, also varies by the type of issuer (private or public), the role (governance, payment, or collectible), and the type of regulatory approach to it (commodity or security).

Therefore, referring to something as crypto can drop a pin anywhere on this continuum of token types. What is most frequently reported in the media, e.g., stablecoins, are cases of payment tokens that are privately issued by a firm and centrally governed. By contrast, what is typically associated with the word crypto is “Bitcoin,” a payment token publicly issued by the open-source community and governed by collective decision-making. Hence, there is an equivocation about the meaning of "crypto". It's like saying food and meaning "grilled cheese" or "broccoli" at the same time - same concept but different gastronomical experience. 

The most reasonable explanation for why we refer to any of these varieties of tokens as crypto is that we justify the use of the term by the cryptographic technology used to engineer the tokens. However, even then, the use of cryptography is heterogeneously justified across different cases. For example, in the cross-border payments case, when the tokens represent actual monetary value and are linked to the US dollar, security is required, and cryptography endows this security. On the other hand, buying a memecoin for $0.0001 probably does not justify the development hours invested in cryptographic innovation.

Why It Matters

Practically, the precision of definition matters for regulation. If we want due process in who, how, and when cryptocurrencies can be issued, we need to distinguish between cases that may financially affect citizens and entertainment cases. For citizens, it is important to distinguish between the crypto products based on the appropriate labels to correctly assess their risk-return profiles. For example, the investor should clearly understand the implications of investing in the centralized token issue, e.g., COIN, vs the decentralized governance token, e.g., MKR. In other words, different crypto tokens can lead to a different set of limitations on the issuer end, including the limited liability for the token valuation, and the extended scope of responsibilities on the investor end, such as active voting participation. 

Academically, the definition matters because the causal mechanisms behind each type are different and need to be distinguished for a comprehensive explanation. For example, the fully decentralized tokens, like BTC or LTC, can be linked theoretically to the context of crowdsourcing of innovative effort, incentive-based market mechanisms, "free market" for trading, and no risk of policy intervention. On the other hand, the product tokens, like BNB or XRP, can be linked to the context of platform economics, network effects, platform policy changes, etc. The important mental distinction for a researcher should be whether they compare "apples to oranges" when broadly labeling digital artifacts that use cryptography as "cryptos."

Cong and Xiao (2020) give a more in depth overview of classification of tokens, related academic theories, and regulatory implications. It is important however to note that the crypto landscape has evolved much since 2020 and the scope of applied theories to explain market behavior of either crypto cohort may have sharpened. So, the reclassification and new precise matching with the theoretical foundations is due.

On Decentralization of "Cryptos"

One important dimension that should be highlighted is the centralization level of the issuing entity. The idea of blockchain and crypto is frequently associated with decentralization and liberalization from the central authorities. However, in its evolution, crypto has been well adopted by the for-profit firms, hierarchical and with centralized leadership by design. According to research data, more than 30% of all crypto-related open-source projects are associated with a centralized for-profit entity. In other words, these projects are governed by the hierarchical management team, aim to generate profit for their stakeholders, and have agency to shape the product to fit the needs of the paying customers. While the open-source part of it may seem to create decentralization over the software architecture, the true agency for changes may be gated by the permissioned code commit rights and, hence, not democratized fully. 

Another impediment on the way to decentralization is the lack of participation, even when democratic voting rights are given to the token holders (Haaren and Klapper, 2025). Hence, the problems with decentralization are rooted in the two large causes: (1) lack of permission to decentralize, or (2) lack of incentive to sustain decentralization. The pervasiveness of these issues creates barriers to putting the equality sign between the two, i.e., crypto ≠ decentralization.

Conclusions

The morale of the story is to be cautious with naming and the underlying meaning. By equivocating the different meanings that were assigned during the term evolution can be misleading in some cases, i.e., the case of "crypto," and lead to some improper conclusions on the theoretical level and inappropriate financial decisions on the practical level. Reflecting on the current state of the industry is necessary for decision-making and calls for the need to update the classification of cryptos.

References:

1. Cong, L. W., & Xiao, Y. (2020). Categories and functions of crypto-tokens. SSRN. https://doi.org/10.2139/ssrn.3814499

2. Haaren, M. van, & Klapper, H. (2025). Decentralized autonomous organizations: Can decision structures enhance participation? In Proceedings of the Hawaii International Conference on System Sciences (HICSS). https://doi.org/10.24251/HICSS.2025.556 

Please cite this article as: 

Petryk, M. (2025, November 4). What Is Modern "Crypto" Anyway?. MariiaPetryk.com. https://www.mariiapetryk.com/blog/post-26