While Bitcoin was the first functioning public cryptocurrency, it is not the only type, and there are certainly many variations of cryptocurrency. We can identify at least four types of cryptocurrencies based on how they are formulated or code designed, the application or use case, and other factors.
You can find coins, payment tokens or altcoins, security tokens, non-fungible tokens or NFTs, decentralized finance tokens, utility tokens and other categories.
This tutorial teaches about different types of cryptocurrencies and tokens. We also include information such as how cryptocurrencies are differentiated, how they can be used in different ways.
Why are cryptocurrencies different?
Although the term cryptocurrency is used to define all different types of cryptocurrencies or digital currencies, it is usually interchanged with coins. Although many of them do not serve as a unit of account, store of value and medium of exchange they are generally considered to be, Bitcoin does.
However, coins can be distinguished from altcoins. The term altcoins is also a general reference to all types of cryptocurrencies except bitcoin, in which they are viewed as alternatives to bitcoin.
Coins
Coins can be distinguished from altcoins because they are based on their blockchain. On such blockchains, they act as native tokens as well as gas or fuel payment tokens, although the blockchain may pay for gas in a different cryptocurrency.
Altcoins
Although these can be considered coins, they are all considered to be alternatives to Bitcoin as the first cryptocurrency. Also known as shitcoins, except for Ethereum, most were first forked from Bitcoin.
Tokens
Tokens are digital representations of a particular asset or utility in the blockchain. All tokens are known as altcoins, but they differ by sitting on top of other blockchains and not being native to the blockchain they sit on.
Types of Crypto
Utility Tokens
Utility tokens are thought of as coupons or vouchers but are essentially digital units representing value on the blockchain. In other words, a token provides specific access to a product or service operated or managed by the token issuer.
Security Tokens
These are securitized cryptocurrencies that derive value from external assets that can be traded under financial regulation as security. Therefore, it is used for securitized tokenization of properties, bonds, stocks, real estate, property and other real world currencies.
Payment Tokens
As the name suggests, payment tokens are used to buy and sell goods and services on digital platforms without intermediaries, as in traditional finance and banking sectors. Of course, most cryptocurrencies and tokens fall into this category, whether security or utility.
Exchange Tokens
What exchange tokens are can be debated but are named for issuance and use by cryptocurrency exchanges, which are crypto marketplaces for buying and selling and swapping tokens.
Non-fungible Tokens
A non-fungible token is a unique, irreplaceable commodity that cannot be traded for another, and is a digital certificate of ownership of a type of asset on the blockchain.
It is developed using the same technology used to develop other types of tokens but is primarily used to represent digital content such as art, photos, video, audio, collections, real estate, virtual worlds, memes, GIFs, posts and tweets, fashion happens , music, pictures, drawing, pornography, educational, political items, film, memes, sports, games or digital files of value but on blockchain.
DeFi Tokens Or Decentralized Finance Tokens
Decentralized finance refers to financial applications or dApps built on a blockchain or distributed ledger, which distributes them and which provides control of finances and money directly to the user while allowing them to transact globally with peer-to-peer methods and globally. gets admission.
Stablecoins – Fiat And Other Types
As the name suggests, these are fixed value tokens in nature because their value is somewhat predictable in that it remains the same almost all the time. Stable tokens, or stablecoins as they are primarily called, are backed by a stable or fair value-stable asset such as fiat. So we have dollar and euro-stable or backed stable coins, gold and other precious metals, oil and commodity-backed tokens.
Asset-backed Tokens
Asset-backed tokens are a category of cryptocurrencies whose underlying value is backed by real-world assets that can be other currencies, stocks, bonds, real estate, gold, and precious metals. They are used to digitally represent and trade for these underlying assets but on the blockchain.
Privacy tokens
As the name suggests, these are cryptocurrencies used for privacy applications because their code encourages better privacy than Bitcoin and mainstream cryptos.
Frequently Asked Question
1.Which crypto will boom in 2022?
Ans: Lucky Block – Overall Best Crypto to Invest in June 2022 DeFi Coin (DEFC) – The Best New DeFi Cryptocurrency. Stakemoon – Crypto with great staking rewards. Bitcoin – Currently the best ‘buy the deep’ crypto.
2.What are the top 5 types of cryptocurrencies?
Ans: Largest cryptocurrency by market cap
Bitcoin (BTC) price: $23,935. Market cap: $457 billion.
Ethereum (ETH) price: $1,782.
Tether (USDT) Price: $1.00.
USD Coin (USDC) Price: $1.00.
Binance Coin (BNB) price: $327.18.
3.What is the safest cryptocurrency?
Ans: Coinbase – The Safest High-Volume Exchange
Coinbase is one of the biggest crypto exchanges in the world and one of the best reputations for security. The exchange keeps nearly 99% of its users’ digital assets in offline cold storage.
4.How do I choose a cryptocurrency?
Ans: Here are four important factors:
1.Market capitalization. Ranking cryptocurrencies based on market capitalization is one way to select them for investment.
2.Total coins mined and current supply. Check if there will be a limited supply of a particular cryptocurrency.
3.white paper.
4.Use cases.
5.How Much Should I Invest in Crypto?
Ans: In theory, there is no minimum you need to invest in any cryptocurrency, including meme currencies. Many companies offer fractional purchases of cryptos, and even for those that don’t, many cryptos trade for less than $1 each, making them accessible to any investor.
Conclusion
Here, we discussed different types of cryptocurrencies. For those wondering how many types of cryptocurrencies there are, we have listed 9 common types. Of all the types of cryptocurrencies, the main ones are payment tokens.
