What types of cryptocurrencies are there?
Cryptocurrencies are a modern digital type of cryptographic assets that exist solely as digital records in the blockchain, where specific transactions are specified. Cryptocurrencies have a certain classification. Conventionally, they can be divided into main types of cryptocurrencies: bitcoin, altcoins, stable coins and tokens. Each type of cryptocurrency has its own characteristics and characteristics. Therefore, today we will define the cryptocurrencies types. Cryptocurrency: how many kinds?
Bitcoin is used as a means of payment, and is recognized by participants in the cryptocurrency market. Today, Bitcoin can buy many goods and services: from a cup of coffee to luxury real estate and a sports car.
Bitcoin is convenient for payments and obtaining information about market participants. For example, it allows you to quickly send assets from one country to another without delays and inconvenience from banks and commissions.
Altcoins are all cryptocurrencies, except bitcoin. The essence of altcoins is to become an “alternative” to bitcoin. The most famous altcoin is Ethereum (ETH). It ranks second in the world by market capitalization. This type of cryptocurrency was developed by a Canadian programmer of Russian origin, Vitalik Buterin.
He was one of the first to see the limitless potential of the blockchain and developed the ERC-20 platform. Cryptocurrency can be described as a platform for the functioning of many altcoins and tokens.
This is a type of altcoin. The name speaks for itself. Stablecoins are cryptocurrencies that are tied to existing assets: national currency, bonds, precious metals, and even real estate. These cryptocurrencies are fully correlated with the rate of assets tied to them.
The main stablecoin by capitalization is Tether (USDT). This is the equivalent of the US dollar. It ranks third in the cryptocurrency market in terms of trading volume.
At the heart of the differences between conventional cryptocurrencies and stablecoins is the way they are priced. Stablecoins are suitable for investors and traders with a conservative or moderate earning strategy. It is possible to form a share of the portfolio from stablecoins, forming a reliable “safe haven”.
A token is a kind of crypto asset. Tokens, as a rule, do not have their own blockchain and are created on the basis of the existing infrastructure of some kind of cryptocurrency.
Tokens do not play the role of means of payment in the broad sense, like the dollar or Bitcoin, but solve local applied problems. You can draw an analogy with a token for slot machines – the token has value, it can be given as a gift or sold to a friend, and it looks like a coin, but its use is very limited.
Tokens can be used as points in a loyalty program or serve as a means of exchange for goods or services of the startup that issued the token. A token can be the equivalent of shares in a startup or company that is already on the market.
This article presented the classification of cryptocurrencies. It is worth noting that each coin has its own advantages. For example, bitcoin is known and convenient to everyone, Monero guarantees complete anonymity, Ripple is very convenient for banks for mutual settlements (although it had problems with the regulator). In addition, cryptocurrencies types allow users to form a diverse portfolio and increase the return on investment.