Types of Cryptocurrency: What Kinds of Cryptocurrencies Exist?

Most people think of Bitcoin when they hear the word “cryptocurrency.” The most interesting thing about Bitcoin is that its creator, Satoshi Nakamoto, didn’t want to make a currency at all. Instead, he wanted to make a “peer-to-peer electronic monetary system.” But this decision was the last thing that was needed to make digital money, which had been in the works for a long time.

The Main Types of Coins

At least 3,000 cryptocurrencies have already been made in the world, and they have been put into groups on their own, so you can see how different they are. Most coins are based on either Bitcoin or Ethereum (the phenomenon is called “forking“). The fork takes the cryptocurrency’s core code and updates it by adding new features that the network members think are important.

One of the most popular ways to group cryptocurrencies lists the following:

Currencies Coins

Most cryptocurrencies fall into this category, which is made up of money systems that let you exchange amounts of money. People often just call them “coins.” They can be used to buy goods and services just like regular money, but they are not controlled by a single group, they are anonymous, and they are easy to use.

Here are two examples of very well-known blockchain coins:

Bitcoin:

The first and most popular cryptocurrency; can be used to buy anything in the virtual world; uses immutable blockchain technology to prevent “double spending” and fraudulent transactions; limited supply prevents inflation.

Litecoin:

It was the first Bitcoin fork. It lets you make fast transactions with low fees. It uses the Scrypt mining algorithm, which is more resistant to ASICs. It is thought to be one of the most convenient options on the market.

Platform Coins

“During the gold rush, the people who made shovels made the most money,” said one blockchain investor.

The idea is that maybe the best way to invest is in tools that people who use cryptocurrencies can’t do without. In this case, “shovel manufacturers” are cryptocurrency exchanges, exchangers, and platforms for developers. Let’s think about the second one for now.

Cryptocurrency Exchanges

In recent months, a lot of cryptocurrency exchanges have started to issue their own coins. This is done to increase the liquidity of the other coins on the exchange and make it easier for less popular coins to trade. After all, you can’t exchange one coin for another, and investors don’t want to take a chance on it. But the risk is much lower if the exchange guarantees that you can always sell this coin for an exchange token.

Even though the main reason for these tokens is to make trading on the exchange easier (including saving on commissions), over time, and this shouldn’t be a surprise, they have become their own investment opportunities. The truth is that they are guaranteed to have cash on hand and have the help of large, trustworthy organizations called exchanges.

The other problem with these coins is that it is unlikely that their value will ever go up much. It’s unlikely that many stores will accept them as a form of payment. Binding to a certain site also means that the position of this site is very important. Exchanges fell apart because of an attack by hackers? All of her tokens will fall at the same time.

In general, the price of exchange tokens tends to move in the same direction as the market. A lot of people are getting into cryptocurrency, which means that more and more people are using exchanges and getting the chance to use tokens to move money from one coin to another.

Tokens from KuCoin, Binance, and Huobi are the most well-known ones right now.

Utility tokens

In another way, these tokens are called “App Coins” because they are closely tied to the usefulness of one or more decentralized applications for which the team opens an ICO. Almost all of these “useful” tokens have a limited supply, and the team is trying to promote it as an investment option after the ICO, since the price of the token will go up if the app becomes popular.

But these kinds of tricks are now closely watched by the US Securities and Exchange Commission. If you want to work with the economy, you need to know a lot about it.

Security Tokens

During the ICO, “Security Tokens” are given out to investors. Dividends and profits are based on them, and they can also be used to buy other assets. Some countries, like the USA, don’t allow these kinds of currencies.

But not everyone knew about it. Some companies, riding the excitement of blockchain startups, gave out these tokens, which got them in trouble with the US SEC.

Crypto Commodities

Crypto Commodities is a general term for a tradeable or fungible asset that can represent a good, function, or contract in the real or virtual world using special coins.

For instance, an app developer can pay for hosting with tokens, and a user can pay to watch online content on a blockchain platform. Traders can use them to make deals, and they can also be used to support real contracts in a virtual way.

Stablecoins

“Stable coins” are cryptocurrencies that are tied to a stable asset, like the dollar or gold, to make them less volatile. Tether is the best-known type of cryptocurrency like this, but more and more are being made all the time.

The Bottom Line

With all the pros and cons of cryptocurrencies, it is clear that they will be around for a long time and make the world better. It’s already taking place. People all over the world are buying Bitcoin to protect themselves from their national currency going down in value. Banks and the government know that they are in danger, so they are trying to stop the process. However, they can no longer stop it. All they can do now is delay it.