What Are the Different Types of Cryptocurrencies? A Beginners Guide

Cryptocurrency has sparked a world monetary revolution, creating completely new methods to buy, save and spend. Relying the place you’re in your crypto journey, you will have by no means delved a lot deeper than Bitcoin or Ethereum. However there’s a large universe of cryptocurrencies on the market past the most well-liked cash. Having a lot to discover can really feel intimidating, so let this submit function your guided tour by means of the crypto panorama. Seize your safari hat, and skim on for an in depth overview of the several types of cryptocurrency, their distinctive options and functions and the progressive blockchain expertise that underpins them. 

What are the several types of cryptocurrencies?

It’s estimated that round 10,000 totally different cryptocurrencies exist at this time, although most are obscure or area of interest cash with small communities and restricted worth. If 10,000 doesn’t appear to be that many, think about that again in 2009 there was precisely one cryptocurrency: Bitcoin. 

Nearly day-after-day new cryptocurrencies are created, whereas others fade into obscurity. During the last 15 years, vital breakthroughs in blockchain expertise have led to the creation of quite a lot of totally different classes of cryptocurrency. Let’s check out a few of them.

Bitcoin (BTC)

In the event you’ve heard of cryptocurrency, likelihood is you’ve heard of Bitcoin, which launched the world to digital cash. Launched in 2009 by a pseudonymous creator known as Satoshi Nakamoto, Bitcoin was designed as a decentralized, peer-to-peer community for sending cash all over the world exterior conventional banking system guardrails. It was the primary cryptocurrency to garner widespread acceptance, and stays by far probably the most helpful cryptocurrency out there. Thought-about by many as a type of “digital gold”, Bitcoin is fashionable as each an funding and a retailer of worth. It’s accepted as a type of fee by many retailers and repair suppliers worldwide.

Altcoins

A portmanteau of “various” and “coin”, any cryptocurrency aside from Bitcoin (and a few say Ether as effectively) is technically thought-about an altcoin. Altcoins first got here on the scene in 2011 with Namecoin and the way more fashionable Litecoin, which later turned often known as “digital silver” to Bitcoin’s gold. Each sought to enhance upon sure elements of Bitcoin, which to that time was nonetheless the one crypto in existence. The earliest altcoins had been immediately primarily based on Bitcoin’s underlying expertise, and designed to meet the same goal as decentralized peer-to-peer funds networks. Nonetheless every happened to handle a perceived shortcoming of the market chief, from gradual transaction occasions to an absence of privateness. A number of the finest recognized altcoins at this time embody Litecoin (LTC) and XRP (XRP)..

Stablecoins

Not like many cryptocurrencies whose costs can quickly fluctuate, stablecoins are particularly designed to keep up a relentless worth, usually 1:1 with the US greenback. Stablecoin issuers obtain this by holding a reserve of bodily belongings ({dollars}, gold, and so on.) equal to the quantity in circulation. These reserves are routinely audited, with the outcomes made public for transparency functions. Stablecoins make an excellent entry level into the world of cryptocurrency. Their regular worth presents peace of thoughts, they usually permit you to inexpensively discover additional reaches of the cryptocurrency ecosystem by means of swapping. Stablecoins are extraordinarily fashionable, claiming two spots on the ten most precious cryptocurrencies by market cap record as of March 2024 with Tether (USDT) and USD Coin (USDC).

Utility tokens

Utility tokens carry out particular capabilities inside the blockchain of their respective ecosystems, granting holders entry to sure options or capabilities, similar to incomes crypto rewards. Utility tokens additionally play an important position in supporting blockchain networks by offering compensation for processing transactions or different community companies. Utility tokens are additionally used as a way of change for items and companies inside their communities. A number of the better-known utility tokens embody Funfair (FUN) and Fundamental Consideration Token (BAT).

Safety tokens

Typically known as fairness tokens, safety tokens function a digital certificates of possession of an asset, or a portion of an asset, on the blockchain. Any real-world asset might be “tokenized” by way of the blockchain, with the ensuing tokens conferring possession among the many holders. Safety tokens are the cryptocurrency world’s equal to buying and selling shares, the place a portion of an asset (an organization) is split up into slices (shares) and made accessible to buy by traders. Additionally much like inventory buying and selling, safety tokens should be registered by the Securities and Change Fee.

DeFi tokens

Probably the most fashionable improvements of crypto and blockchain expertise is decentralized finance, or DeFi. DeFi presents customers a whole vary of economic companies, from loans to lending to insurance coverage, all ruled by automated sensible contracts. This implies no involvement required from legacy institutional suppliers, even for high-value transactions the place individuals don’t know one another. Most DeFi protocols situation their very own cryptocurrencies, commonly known as DeFi tokens, which give holders entry to those companies on their community. Some examples of DeFi tokens embody DAI, UNI and LINK.

Non-fungible tokens (NFTs)

You most likely keep in mind NFT mania from 2021 when CryptoPunks and Bored Apes had been all the fashion on social media. However the underlying expertise behind non-fungible tokens has many legitimate use instances. By “minting” an NFT, a digital file is imbued with a novel fingerprint (hash), a token title and an emblem. This newly created, one-of-a-kind asset can then be saved on the blockchain, traded or offered on the proprietor’s discretion. The true and rightful proprietor will at all times be determinable by the everlasting file on the blockchain. Not like different cryptocurrencies, NFTs are “non-fungible”, which means they will’t be exchanged 1 for 1.

Wrap up on the several types of cryptocurrencies

Whereas from an outsiders view, cryptocurrency could seem like a monolith, the world of crypto is made up of 1000’s of belongings with their very own innerworkings, capabilities, and communities. . It’s a sprawling multiverse of initiatives, companies, instruments, communities and funding alternatives. However there’s no proper or flawed solution to begin exploring crypto. Hopefully now that you just’re now armed with a greater understanding of among the several types of cryptocurrencies you’ll be assured to enterprise out past Bitcoin.