What Are the Different Types of Cryptocurrencies? A Beginners Guide

Cryptocurrency has sparked a world monetary revolution, creating fully new methods to buy, save and spend. Relying the place you might be in your crypto journey, you might 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 preferred cash. Having a lot to discover can really feel intimidating, so let this put up function your guided tour by means of the crypto panorama. Seize your safari hat, and browse 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 completely different cryptocurrencies exist at present, 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, take into account that again in 2009 there was precisely one cryptocurrency: Bitcoin. 

Just about day by day new cryptocurrencies are created, whereas others fade into obscurity. During the last 15 years, important breakthroughs in blockchain expertise have led to the creation of a wide range of completely different classes of cryptocurrency. Let’s check out a few of them.

Bitcoin (BTC)

Should 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 world wide outdoors conventional banking system guardrails. It was the primary cryptocurrency to garner widespread acceptance, and stays by far probably the most precious cryptocurrency out there. Thought-about by many as a type of “digital gold”, Bitcoin is well-liked 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 “different” and “coin”, any cryptocurrency aside from Bitcoin (and a few say Ether as nicely) is technically thought of an altcoin. Altcoins first got here on the scene in 2011 with Namecoin and the much more well-liked Litecoin, which later turned often called “digital silver” to Bitcoin’s gold. Each sought to enhance upon sure features of Bitcoin, which to that time was nonetheless the one crypto in existence. The earliest altcoins had been immediately based mostly on Bitcoin’s underlying expertise, and designed to satisfy an analogous goal as decentralized peer-to-peer funds networks. Nonetheless every took place to handle a perceived shortcoming of the market chief, from gradual transaction instances to a scarcity of privateness. A number of the greatest identified altcoins at present embody Litecoin (LTC) and XRP (XRP)..

Stablecoins

Not like many cryptocurrencies whose costs can quickly fluctuate, stablecoins are particularly designed to keep up a continuing worth, usually 1:1 with the US greenback. Stablecoin issuers obtain this by holding a reserve of bodily belongings ({dollars}, gold, and many others.) equal to the quantity in circulation. These reserves are routinely audited, with the outcomes made public for transparency functions. Stablecoins make an incredible entry level into the world of cryptocurrency. Their regular worth provides peace of thoughts, and so they can help you inexpensively discover additional reaches of the cryptocurrency ecosystem by means of swapping. Stablecoins are extraordinarily well-liked, claiming two spots on the ten Most worthy 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, akin to incomes crypto rewards. Utility tokens additionally play an important function in supporting blockchain networks by offering compensation for processing transactions or different community companies. Utility tokens are additionally used as a way of alternate for items and companies inside their communities. A number of the better-known utility tokens embody Funfair (FUN) and Primary 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 just like inventory buying and selling, safety tokens should be registered by the Securities and Alternate Fee.

DeFi tokens

One of the crucial well-liked improvements of crypto and blockchain expertise is decentralized finance, or DeFi. DeFi provides customers a whole vary of economic companies, from loans to lending to insurance coverage, all ruled by automated good contracts. This implies no involvement required from legacy institutional suppliers, even for high-value transactions the place contributors don’t know one another. Most DeFi protocols problem their very own cryptocurrencies, generally called DeFi tokens, which offer 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 bear 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 identify 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 report on the blockchain. Not like different cryptocurrencies, NFTs are “non-fungible”, that means they will’t be exchanged 1 for 1.

Wrap up on the several types of cryptocurrencies

Whereas from an outsiders view, cryptocurrency might look 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 incorrect strategy to begin exploring crypto. Hopefully now that you just’re now armed with a greater understanding of a few of the several types of cryptocurrencies you’ll be assured to enterprise out past Bitcoin.