Types of Cryptocurrency, Tokens, Most Popular Coins

Many people have become fascinated by crypto currency because of the innovative technology behind its blockchain. It’s impressive that blockchain and the concept of decentralisation can be applied not just to finance, but to a wide range of other products, services, and activities. In this article we shall learn about cryptocurrencies and the different types of cryptocurrencies. 

Types of Cryptocurrency 

Despite the term cryptocurrencies being used to define all types of cryptocurrency or digital currencies, coins are commonly used to refer to them. While Bitcoin serves as a unit of account, a store of value, and a medium of exchange, many of them do not.

In spite of the fact that most cryptocurrencies are based on blockchain technology, they differ in several striking ways. Cryptocurrencies are classified into three distinct types: 

  • Coins – Coins are created on blockchains, much like traditional money, and are used as money. Besides storing value, it can also be used for exchanging goods and services between parties. Bitcoin and Litecoin are examples of coins. 
  • Altcoins – A majority of altcoins were launched to improve on Bitcoin in some way, and altcoins began as a shorthand term for alternatives to Bitcoin. There are many altcoins, including Namecoin, Litecoin, Peercoin, Ethereum, and USD Coin. 

The majority of altcoins share some of Bitcoin’s characteristics, but each altcoin has its own unique characteristics. The process of producing and validating blocks of transactions varies between altcoins. New features, such as smart contracts, or an advantage, such as less volatility in prices, might be offered by some.

  • Tokens – A token is a digital representation of a particular asset or utility on a blockchain. We can transfer some of them from one chain to another, since they facilitate smart contracts on blockchain networks like Ethereum. The tokens are embedded in self-executing computer programs or codes and do not require a third party to operate. The tokens are also fungible and tradable. Loyalty points, commodities, and even other cryptocurrencies can be represented with them.

Tokens are distributed and initially raised capital through Initial Coin Offerings (ICOs) and Initial Exchange Offerings (IEOs). They can, however, be issued without an IEO or an ICO.

Types of Cryptocurrency

Insights of Cryptocurrency

Unlike traditional coins, crypto coins are strings of computer code that represent various assets, concepts, or projects – whether tangible, digital, or virtual – intended for various purposes. This type of coin was originally intended to serve as a form of currency.

A crypto currency is not a fiat currency, such as a dollar, euro, or yen. As a store of value, fiat money is tangible, governed by central authorities, and can be exchanged for goods or services. 

Cryptocurrencies can serve a wide variety of purposes beyond serving as currency. The use of cryptocurrency as “currency” only scratches the surface of blockchain technology. In virtually every sector of our economy, cryptos provide solutions to long-standing problems due to their use of blockchain technology.

Most Popular Cryptocurrencies 

Considering each cryptocurrency has different features depending on what the developer designed it for, there is no “best” cryptocurrency. The following is an overview of some of the most popular digital coins and their uses.

  • Bitcoin 

Blockchain technology facilitates payments and digital transactions with Bitcoin, the first decentralized cryptocurrency. A Bitcoin blockchain acts as a public ledger of all transactions in the history of Bitcoin rather than relying on a central bank or third parties to verify transactions. By using the ledger, a party can prove they own the Bitcoin they are trying to use and prevent fraud. Peer-to-peer money transfers can also be made faster and less expensive with decentralized currencies. 

  • Ethereum 

Ethereum is also a blockchain network. But Ethereum was designed as a programmable blockchain – which means that users can create, publish, monetize, and deploy decentralized applications (dApps) using the network. Ethereum’s native currency, Ether (ETH), was developed as a payment method. ETH can be thought of as a kind of fuel that powers the Ethereum blockchain. Because many ICOs are built on the Ethereum blockchain, Ethereum has helped launch many ICOs. The non-fungible token boom has also been attributed to Ethereum.

  • Tether 

It is a stablecoin, which is a cryptocurrency tied to a fiat currency. It combines the benefits of a crypto currency (such as no need for financial intermediaries) with the stability of a currency issued by a sovereign government (instead of the wild price fluctuations inherent in many crypto currencies). 

There are many types of crypto currencies, so there is no doubt that it is worth taking some time to figure out which is right for you. Learning is a great way to reduce risk and make an informed decision about your money, regardless of whether you’re an experienced crypto investor or just starting out.

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