What Are Utility Tokens
Utility tokens are digital tokens that are used for a blockchain-based product or service. They run on a blockchain platform, or in other words, are part of a blockchain economy. Most utility tokens are ERC20 tokens that run on the Ethereum blockchain but with the continued release of other blockchain platforms. Other token types like TRC10 and TRC20 tokens have emerged as well.
An example of a utility token is Golem . Golem is a platform where users can pay GNT to rent computing power for memory-intensive tasks.
Aside from GNT, other examples of utility tokens include Basic Attention Token , Civic , OmiseGo and 0x .
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What Altcoins Are Here To Stay
Its hard to say which altcoins could have lasting value, compared to the ones enjoying their moment in the spotlight. A somewhat grave example of cryptos fleeting value is the recent rise of the Omicron cryptocurrency, which rose in value 1,000% after news of the breakthrough coronavirus variant hit and then promptly fell by nearly just as much.
In general, altcoin investing isnt necessary for anyone taking a whole-market and/or passive investing approach. However, if you plan to engage with crypto and learn more about DeFi, you may want to start educating yourself on the types of altcoins and their uses.
Lastly, as blockchain technology becomes more ubiquitous, consider a future in which consumers exchange altcoins for functions like paying for service fees or file storage. Ten years ago, not many predicted wed be using our cellphones to send digital payments to our friends and family, yet today apps like Venmo and CashApp are used everywhere. Likewise, expect crypto tech to continue shaping the way we send, receive, and utilize money but dont worry about getting too lost in the hype if youre more interested in slow and steady long-term investing.
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What Are The Different Types Of Cryptocurrency And Tokens
All hail to this brave new crypto world! You may or may not have heard of Ethereum, but surely you know something about Bitcoin. But, what if I tell you that there are many other types of cryptocurrency out there? Ranging from web3 tokens, ICO tokens, ERC20-tokens, DeFi tokens to stablecoins, youll be surprised what this dynamite crypto space has to offer.
With the altcoin season on the bull and Bitcoin prices continue to surge, especially when Elon Musk changes his . The crypto market like a colossus and the industry will continue to blossom into something even more substantial.
So, if youre curious about whats next after Bitcoin, read on as we dissect the different types of cryptocurrency. Perhaps, youll also find some insights to diversify your investment portfolio.
What Is A Token In Cryptocurrency
Finally, numerous crypto projects issue tokens built on the foundation of a pre-existing cryptocurrency. These can represent a stake in the cryptocurrency company or to purchase a specific service.
A token is a specific type of cryptocurrency. It is a fork of another cryptocurrency created to represent a particular project. There are different types of crypto tokens:
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Whats The Chance Of Society Adopting A Blockchain Economy
A blockchain economy is where assets and cryptocurrencies are widely used and accepted, eventually taking the place of current monetary systems and brick & mortar financial institutions. The chances are looking good for adopting the system globally. Gartner even predicts that 20% of large companies will use blockchain by 2024.
That being said, its still early days for blockchain technology and too soon to tell if society will be adopting one 100% anytime soon. However, it has the potential to change the way we interact with the digital world forever. Its definitely worth keeping an eye on, though, as some experts are predicting that blockchain will radically transform the global economy in the future.
Other Types Of Cryptocurrency
In addition to the ones on this list above, there are other digital currencies, such as:
- Mining Rewards: With this type of cryptocurrency, miners are rewarded for their efforts in validating transactions with a small amount of the cryptocurrency.
- Transaction Fees: With this type of cryptocurrency, users are charged a small fee for each transaction that they make.
- Initial Coin Offerings : With this type of cryptocurrency, companies issue new crypto coins or tokens in order to raise funds for their project.
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Add Value To Your Account
Depending on how you choose to pay, you may have to fund your account before purchasing any crypto. If you’re using fiat currency, most exchanges allow debit and bank transfers. Some also allow you to fund a purchase with your credit card, though this can be a risky move with a volatile asset like cryptocurrency because interest costs can deepen your losses if your investments decline in value.
If you already own cryptocurrency, you can transfer it into your account from a digital wallet or another platform, then use it to trade. Just be sure to verify that your crypto exchange allows trading between the assets you’re looking at. Not all cryptocurrencies can be directly traded for one another, and some platforms have more trading pairs than others.
Another thing to note is that exchanges fees vary depending on what you’re buying and how you’re buying it, so review these details carefully.
What You Need To Know
There are now more than 3000 cryptocurrencies in existence, with each falling into one of the three major categories: altcoins, tokens, and Bitcoin.
In this article, we will explain the differences between these cryptocurrencies. We will also look at some of the common subtypes used for cryptocurrencies, such as stablecoins and privacy coins.
After reading this, you should have a good understanding of all the major types of crypto and be able to differentiate between them easily. Lets get started!
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What Are Payment Currencies
As the name suggests, these assets are mainly for payments and are hence called payment currencies. For example, you could use payment currencies to pay for goods or services, pay your bills, cash out from digital currencies to local fiat currencies like the dollar, etc.
While every digital asset can theoretically be used to pay for things, merchant adoption or acceptance by providers of goods and services is more widespread for payment currencies.
In particular, cryptocurrencies like Bitcoin , Litecoin , Bitcoin Cash , and others are popular and well-known payment currencies.
Which Cryptocurrencies Are The Most Popular
Before we dive into the exciting world of different types of cryptocurrency, lets first take a step back and ensure that we know exactly what we mean when we use the terms cryptocurrencies and altcoins.
Cryptocurrencies are digital assets that have different purposes, but they are mainly designed to operate like traditional currencies. The crypto part of cryptocurrencies comes from the fact that they are designed with powerful cryptography systems. These systems ensure the security of cryptocurrency transactions, verify asset transfers, and control the creation of more units.
Another important distinction between cryptocurrencies and traditional currencies is that cryptocurrencies are decentralized. This means that they are independent of a central banking system, and so their value cannot be manipulated by governments or financial institutions. To achieve this, a technology known as blockchain is used. Blockchain is a distributed ledger that operates over a massive network of computers and it acts as a public database of financial transactions.
Altcoin is a term that refers to all cryptocurrencies other than Bitcoin. It was coined from the idea that all these other types of cryptocurrencies are alternatives to Bitcoin. The various types of altcoins that exist include mining-based cryptos, security tokens, stablecoins, and utility tokens.
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Main Types Of Cryptocurrency
Bitcoin is considered the first cryptocurrency created, and everything else is collectively known as an “altcoin” . While it’s difficult to say which cryptos are the best ones, Bitcoin and some of the largest altcoins out there are top-tier options because of their scalability, privacy, and the scope of functionality they support.
Coin |
|---|
$20.1 billion |
Table by author. Data source: coinmarketcap.com. *As of 5/17/2021.
There really isn’t one “best” cryptocurrency since each has different features built in based on what the developer designed it for. Here’s an overview of some of the most popular digital coins and how each is being used.
The Most Common Cryptocurrencies
Bitcoin is regarded as the initial cryptocurrency, and additional cryptocurrencies are referred to as altcoins . Its tough to tell which cryptocurrencies are the best, but Bitcoin and other of the most popular altcoins are top-tier possibilities due to their scalability, anonymity, and range of usefulness.
There is no best currency because each has its own set of characteristics based on the needs of the creator. Heres a summary of a few of the most widely used crypto assets and how theyre used.
- Bitcoin
Bitcoin is the first decentralized cryptocurrency that makes use of blockchain technology to allow decentralized payments and transactions. Rather than relying on a central bank or 3rd parties to validate transactions , Bitcoins blockchain behaves like a public ledger for all the transactions made on this blockchain.
The ledger can assist avoid scams and other unauthorized manipulation of the currency by allowing a party to show they own the Btc theyre attempting to use. Peer-to-peer funds transfers can be made faster and cheaper with a decentralized currency than with standard currency exchanges through a 3rd-party entity.
- Ether
The Ethereum networks token, Eth, is utilized to conduct transactions. Ethereum is a platform that leverages blockchain technology to allow the construction of smart contracts and other dApps .
- Binance Coin
- USD Coin
- Solana
- Ripple
- Cardano
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What Are Privacy Coins
Some digital assets are created with a focus on privacy. In privacy coin transactions, only the sender and receiver know the number of coins transacted. The balance of a privacy coin wallet address is only known by the owner of the wallet. This is in contrast to blockchains like those of Bitcoin, which show transaction amounts for each transaction as well as wallet address balances.
Crypto assets like ZCash , Monero , PIVX , and so on are examples of privacy coins.
Coins Or Tokens: Which Is The Better Investment
There are no simple answers regarding which type of crypto is a better investment, coin or token.
What truly matters are the tokenomics, key metrics and the team behind a particular project. Coins and tokens might both have excellent, or alarming foundations.
Tokens may have considerably more specific use cases than coins, whereas coins have their underlying blockchains.
Bearing in mind that blockchains are much more difficult and challenging to build than a dApp, we may only presume that coins could have stronger fundamentals and thus more solid long-term price growth perspectives.
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What Are Blockchain Economies
Blockchain economies, also known as blockchain platforms, take the functionality of blockchain technology further than just payments.
These platforms allow you to create your own digital assets , decentralized applications , etc. on their platform. Therefore, blockchain platforms become their own blockchain economies with different assets, applications, and more.
Some blockchain economies you may have heard of include Ethereum , Ethereum Classic , EOS , NEO and Tron .
Common Terms Used To Categorise Cryptocurrencies
While we are on the topic of different types of cryptocurrency, we may as well look at some of the various subtypes that you will likely come across in the crypto world.
Here are four terms commonly used to categorise cryptocurrencies that have specific characteristics:
Privacy Coins – Cryptocurrencies that focus on providing private transactions, such as Monero, Zcash, and Dash.
Stablecoins – Cryptocurrencies that are pegged to stable assets such as fiat currencies to reduce price volatility dramatically. Prime examples include Tether, Dai, USD Coin, and Paxos.
Exchange Tokens – Cryptocurrencies created by crypto exchanges to be used primarily on their own trading platform and services. Prime examples include Binance Coin, Huobi Token, and KuCoin.
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Investment Strategies For Different Kinds Of Cryptocurrency
While the exact options may vary and combine to some extent, different investment strategies have proved the most appropriate for each kind of altcoin. That said, your investment strategy can include the different types of altcoins for even better results.
- Regular altcoins can be bought with the expectation of price growth or staked in a liquidity pool to bring some yield over time in addition to holding â remember to use fundamental analysis to choose the right coins!
- Stablecoins can be lent with a certain APY to traders or other crypto users who require them for recurring operations. The high demand underpins their higher APY compared to other cryptocurrencies and fiat deposits. For example, Cabital offers leading interest rates for deposits in USDT, one of the most popular stablecoins out there.
- Project tokens are an investment themselves. They are the closest thing the crypto world has to shares and stocks, but they are by far the riskiest investment option and mainly suited to investors with a high risk appetite.
Hard Forks Vs Soft Forks And Why They Matter
Sometimes, a cryptocurrency whether Bitcoin or an altcoin forks. The concept is similar to reaching a literal fork in the road, where you have to pick one direction or the other. But with crypto forking is more complicated , as it involves the nodes or computers that store, maintain, and validate the blockchain. Also, there are hard forks and soft forks.
In simplest terms, a fork creates a divergence in the blockchain protocol. A fork typically happens when the blockchain needs an upgrade or update theres evidence of hacking or fraud or a large enough group of miners decide to change the networks protocol.
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The Most Popular Cryptocurrencies
There are thousands of cryptocurrencies, most with very little value and unclear potential. Many advisors recommend investors stick to Bitcoin and Ethereum if any and pass on the smaller cryptos.
Leading cryptocurrency news outlet CoinDesk maintains a Coindesk 20 list of the most popular cryptocurrencies currently being bought and sold. This list includes cryptocurrency assets and networks by their most common names. Some, like Bitcoin , have one name for both the blockchain network and the cryptocurrency. Others, like Ethereum, are named for the broader blockchain network, but have a different name for their associated native cryptocurrency .
Updated quarterly, the list ranks cryptocurrencies based on dollar volume and other data from third-party cryptocurrency exchanges, where people can buy and sell different cryptocurrencies.
Note: This list was last updated using the Coindesk 20 on Nov. 30, 2021.
What Are The Different Types Of Cryptocurrency
Find out about the different types of cryptocurrency and the investment strategy for each.
Ever since the creation of Litecoin, Bitcoin was no longer the worldâs only cryptocurrency. Lots of other alternative coins, also known as âaltcoinsâ, followed after Litecoin. Currently, there are over 6,000 altcoins. It is quite likely that more of them are being created right now, even as you read these words.
So, what are the most widespread types of cryptocurrencies right now? Read on to find out about the different kinds of cryptocurrency and how investing in these can help you to diversify your crypto investments.
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Where To Buy All Types Of Cryptocurrency
With so many cryptocurrencies out there right now, there is no single place that grants access to all of them. However, Coinbase is one of the largest trading platforms and currently supports 50 cryptocurrencies . Binance is another top trading platform and is where Binance Coin and tokens can be traded.
If you’re looking to buy company stock and cryptocurrency from a single place here are the apps worth checking out:
These trading apps don’t support all account types like a full-service stock broker, but they have lots of functionality that combines basic crypto and stock trading with digital banking capabilities.
This is just the tip of the cryptocurrency iceberg. There are thousands of different digital currencies utilizing blockchain technology being used for an incredibly diverse list of applications within the digital economy. Bitcoin is far and away the most popular crypto because it has picked up momentum among a young generation of consumers, but developers are always innovating new blockchain tech and uses for it. These developments give other platforms such as Ethereum a lot of value as they get put to use building new software. For investors trying to peer into the future, that could hold a lot of appeal since decentralized blockchain could erase third parties from business transactions and make payments around the world more efficient.