Different Types of Cryptocurrency Explained

Cryptocurrency is a digital payment system that does not rely on banks to verify transactions. Cryptocurrency payments exist purely as digital entries to an online database. When cryptocurrency funds are transferred, the transactions are recorded in types of cryptocurrency exchanges a public ledger. A cryptocurrency is not a type of currency that can be used in the real world. So in order to buy/sell using a cryptocurrency, it has to be converted from a digital form to some existing currency that is used in the real world.

Most well-known cryptocurrencies, including Bitcoin, are unstable assets due to their constant volatility. One bitcoin might have a vastly different value today compared to next week. As a result, holders can’t rely on them to achieve long-term stability. These assets aren’t permanent; old crypto assets can be removed or deleted, and users can create new ones depending on supply and demand.

But the number of coins that can be mined are unlimited (versus the 21 million-coin cap on Bitcoin). Like American dollars, tokens represent value, but they are not exactly valuable themselves, in the same way a paper dollar’s value may not be $1. Crypto coins are strings of computer code that can represent an asset, concept, or project — whether tangible, virtual, or digital — intended for various uses and with varying valuations. Originally, these coins were meant to function as a type of currency.

What Are All the Different Types of Cryptocurrency

AVAX is so fast that it completes around 6500 transactions per second. While Solana was founded in the year 2017, the coin was launched in 2020. Like Ethereum, Solana also helps users to create https://www.xcritical.in/ smart contracts enabling them to build NFTs and other applications. Binance Coin is an example of a utility and exchange token created to offer discounted trading fees on the Binance exchange.

The data hosted on the TRON network is free with no central authority. Shiba Inu cryptocurrency (SHIB) is what’s known as a “meme coin,” or a cryptocurrency based on a meme. A meme coin is a cryptocurrency or crypto token based on a viral joke or cultural reference. Projects built around meme coins rely heavily on social media hype to attract new users/investors.

What Are All the Different Types of Cryptocurrency

It is to be noted that the Tether is backed by an equivalent number of U.S. dollars, which means it experiences the same kind of pricing volatility. As other cryptocurrencies fluctuate in value, tether’s price is usually equivalent to $1. Another example of a token is Binance’s Binance Coin (BNB), which was created to give the holder discounted trading fees. As this type of token grants access to a cryptocurrency exchange, you will sometimes hear it referred to as an Exchange Token. Cryptocurrencies are blockchain-based digital assets that can be used as money, and rely on cryptography to prevent counterfeit or fraudulent transactions.

What Are All the Different Types of Cryptocurrency

Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. Solana is one of the most competitive Ethereum killers which has the fastest TPS amongst all the major blockchain. The Solana blockchain runs with a transaction speed of 3,000 TPS using a hybrid proof-of-history (PoH) and proof-of-stake (PoS) consensus mechanism. ETH, launched in 2015, currently trading around at the levels of $1,500 as of January 2023. In addition to having the full faith and credit of the issuing country, buyers of CDBCs would also not have to worry about fraud and abuse that has plagued many other cryptocurrencies.

Learn how these often involve derivatives such as futures contracts. Volatility profiles based on trailing-three-year calculations of the standard deviation of service investment returns. Learn about the leading cryptos that are next to explode this year. This guide will explain everything you need to know about taxes on crypto trading and income. Another pivotal period was in 2017, when Bitcoin reached a priced of $10,000 and continued to grow. This growth resulted in part from a gradual increase in the number of places where Bitcoin could be spent, as well as traded.

  • Since these apps are decentralized, creators and developers can’t sell user data and don’t hold the power to make decisions within dApps once they’re created.
  • Having said that, market capitalization is not necessarily a reflection of how many cryptocurrencies there are.
  • As of January 2023, Litecoin is traded around at the levels of $87.84.

Developers can build all sorts of transactional tools, services and communities using the more transactional blockchains. Over the past decade, several new cryptocurrencies have come and vanished, not all of them have survived in this evolving space of the crypto world. In this guide, we have discussed some of the more common types of cryptocurrencies. This is by no means a conclusive list, but it is a solid introduction for anyone starting their journey and looking for a way to balance their digital asset portfolio. Security tokens are digital equivalents of traditional securities existing on a blockchain.

This token has a fascinating history of being minted in a whopping number of 1 quadrillion. SHIB runs on the Ethereum blockchain and helps its community build apps and plans to launch its own NFT platform in the future. Cardano was launched in 2017 after two years of development by Charles Hoskinson, a co-founder of Ethereum. He states that ADA is way more advanced and secure compared to Ethereum.

Well, Ethereum and NEO were not designed to be used as a digital currency. Instead, they were designed as huge platforms for building apps on a blockchain. NEO, formerly called Antshares and developed in China, is aggressively looking to become a major global crypto player. Its focus is smart contracts (digital contracts) that allow users to create and execute agreements without the use of an intermediary. The main feature that investors find appealing is the similarities between Ethereum and NEO.

Ether is an example of a token, which is used to make transactions on the Ethereum (ETH 1.18%) network. Uniswap is the largest decentralized crypto exchange (DEX) running on the Ethereum blockchain. Uniswap is a protocol on the Ethereum blockchain for swapping all ERC-20 tokens. Unlike centralized exchanges, which are set up to charge transaction fees, Uniswap is designed more as a tool for the community to trade tokens without platform fees or middlemen. The platform was built to create a decentralized Internet and serves as a tool for developers to create dApps, acting as an alternative to Ethereum.

Like Bitcoin, some cryptocurrencies have a limited supply of coins — which helps create demand and reinforce their perceived value. For example, there is a fixed number of bitcoins that can be created — 21 million, as decided by the creator(s) of Bitcoin. Tokens can be used as part of a software application — such as granting access to an app, verifying identity, or tracking products moving through a supply chain. They can also represent digital art — as with non-fungible tokens (NFTs). There have even been experiments using NFTs to represent physical assets, such as real-life art, and real estate. Although some people use the terms crypto, coins, and tokens interchangeably, they are not the same things.

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