It seems like everyone has a master’s degree in the field of cryptocurrency these days. Or, at least, they have a well-sustained opinion they stuck with through thick and thin. The talk is about something other than those actually studying cryptocurrency and blockchain in higher education institutions like the University of Oslo, the University of Nicosia, or MIT. It’s about self-made gurus who believe that knowing Bitcoin and Ethereum by heart is enough to deem themselves knowledgeable about the whole crypto market.
It’s essential to differentiate the flagship crypto from altcoins and platform coins like ETH and BNB. You may buy Bitcoin online with your credit or debit card, among other methods, which doesn’t differ from purchasing other cryptocurrencies. Or you may check the ETH price chart continuously and figure out when to buy and when to drop the coins. But that’s it – cryptocurrencies differ immensely, having few things in common. There aren’t three or four types of crypto, like stablecoins, security tokens, and utility tokens, that most are familiar with for the abundant coverage received from media outlets. In reality, there are 12 main types of cryptocurrencies. And yes, NFTs are one of them.
Are you curious about those cryptocurrencies diversifying investors’ portfolios that stand in the dark and see their light stolen by the most mediatized ones? This rundown will lighten seven of them, so let’s begin!
Digital Currencies
Broadly known as digital currencies, some cryptocurrencies exist to serve the exact necessity of working like the digital variant of money – only that they’re decentralized. Satoshi Nakamoto, the pseudonymous developer or crew of developers known for having given way to Bitcoin, brought to life the dream of many previous attempters at blockchain and cryptocurrency. The goal was to create a decentralized financial system where the power returns to the average individual, for governments and banks, would no longer have a hold over some payment and investment vehicles. All said and done – Bitcoin emerged in 2008 as the first successful crypto project, valuing almost nothing in its nascent days.
Bitcoin and Litecoin are digital currencies that work without being manipulated by central banks, powered by blockchain and formatted electronically and digitally. They share a few similarities with every other cryptocurrency: they don’t exist physically and can be transferred from one investor to another.
Platform Coins
If Bitcoin and Litecoin focus on serving as digital currencies and stores of value, the story differs regarding the creation judgment behind Binance Coin and Ethereum. These two cryptocurrencies focus on being platform coins that can be used to pay for trading fees and a number of services. With Binance Coin, also known as BNB, you can pay fees on one of the largest crypto exchange platforms worldwide.
Ethereum is an altcoin and platform coin, endowed with this title for the decentralized services available to developers. Devs can create and set out smart contracts and decentralized applications (dApps), two of the utilities that pushed Ethereum to the peak of fame. DApps range from social networks to gaming apps and from financial services to supply chain management solutions, revolutionizing numerous industries through their security feats and decentralized nature. On the other hand, initially introduced by Ethereum, smart contracts are self-executing agreements that activate automatedly when certain pre-established criteria are met, running like programmed apps and agreements but eliminating the risk of fraud, censorship, downtime, or third-party prying.
Privacy Coins
Privacy coins aim to make transactions private through stealth addresses, ring signatures, and cutting-edge zero-knowledge proof, so people’s transactions aren’t everyone’s business anymore. Monero, launched in 2014 and reputed as the leader in privacy in cryptocurrency, enables privacy-preserving smart contracts (PPSC) and provides flexible privacy options. Zcash, on the other hand, emerged on Bitcoin’s original codebase and managed to give way to superior cryptographic techniques to improve transactions’ privacy. It stands out through its ability to conduct public and private transactions depending on user needs.
Some of the main functionalities of privacy coins include enhanced cryptography, untraceability, and anonymity, and alternatives continue with Dash, ZEC, Bytecoin, and DCR, among others.
Stablecoins
Stablecoins enjoy plenty of media coverage, making it probable that you’re already familiar with them. Nevertheless, it’s worth mentioning the stablecoin that launched the trend but had a short lifespan: BitUSD. This crypto-supported stablecoin emerged in 2014, being tied to the U.S. dollar. Four years in, it lost its peg to the currency, never managing to return.
On the other hand, Tether coin was launched the same year, only that it succeeded in lasting.
Tether is one of the most popular stablecoins, boasting a market cap of over $114BN and a listing price of around $60. USD Coin follows in its footsteps with a market cap of $34BN, contributing to the global crypto market cap of over $2.3TN at the time of writing.
Utility Tokens
Utility tokens are a type of crypto that serves a particular function within the blockchain realm. They are called this way owing to the service or product offered on the platform. The most common cryptos are Chainlink, Decentraland, and Basic Attention Token, all of which are used in certain transactions and for specific fees.
They’re handy when companies look to develop coupons that owners can exchange to use the businesses’ offerings at a future date.
Security Tokens (Tokenized Stocks)
Resembling tokenized stocks, in theory, security tokens work much like certificates that grant and prove ownership. They are virtual, liquid contracts of some of the assets held, which differs them from other cryptos.
What’s captivating is that they fuse crypto assets and conventional financial tools, bringing all the perks of blockchain. As an investor, you’re guaranteed that your ownership rights and interests are detailed on the blockchain.
Governance tokens
Aave, Compound, Uniswap, and Decred are just some of the multiple governance tokens out there. They stand out from the rest of crypto through their ability to empower owners to participate in decision-making processes within different projects on decentralized ledgers. Generally, they’re used in autonomous organizations (DAOs) and decentralized finance (DeFi) projects, but their utility extends to portfolio diversification solutions and trading, among other things.
Last ones
The seven types of cryptocurrencies are some of the most notable ones. Other alternatives include the following ones, some of which you’ve undoubtedly heard people mutter about.
- Niche and experimental tokens (Shiba Inu, Dogecoin)
- Central Bank Digital Currencies (CBDCs)
- Cross-chain tokens (Cosmos, Polkadot)
- Non-fungible tokens (NFTs)
- DeFi tokens.
