Cryptocurrency: Discover the Many Kinds
The advent of cryptocurrency is poised to make huge waves not only in finance but across countless industries and aspects of everyday life. Crypto has spawned a nearly-instant peer-to-peer payment framework that leverages distributed verification and security, so that no central organization (like banks or government) can alter or change the currency fundamentals. The term crypto casts an incredibly wide net, however, and to demystify some of the different types, we’re going to dive into the many types of crypto.
What is Crypto?
All crypto, whether coins or tokens, utilizes something called “blockchain technology”, which utilizes complex cryptography to create or “mint” new solutions to the cryptographic formula. In the case of the flagship crypto bitcoin, for example, each unique solution to this formula creates a set number of new bitcoins which are recorded in the blockchain.
This blockchain is a distributed ledger system that is maintained by everyone participating in the crypto. This means that the blockchain is immutable and unchangeable, which provides the crypto with a record of all transactions that have ever taken place with that particular crypto. This prevents things like fraud, counterfeiting, and double-spending issues that often plague traditional fiat currencies.
Why Are There So Many Different Cryptocurrencies?
The intrinsic nature of blockchain technology means that it is open source and that anyone can duplicate the basic framework required of it, to produce their coin or token to fit their needs or ambitions. This has allowed an incredible ability of new cryptos to proliferate and either gain traction and utility or to become disused and eventually die off in obsolescence. This has led to the creation of thousands of different crypto coins and tokens, with many being worth tiny fractions of just a cent.
The Difference Between Crypto Coins & Tokens
Anyone that has started to research crypto has undoubtedly begun to see terms like “coin” and “token” being used nearly interchangeably, however, they are drastically different in both their operation and utility. These differences are essential points of understanding for anyone hoping to invest in one form of crypto or another.
Coins are created with their own blockchain, so the blockchain of bitcoin, for example, will not have any information regarding any other coins on the blockchain. This principle carries over to all crypto coins and is what gives them their most common uses as both currency or tradable value, as well as a long-term general store of value.
Tokens, on the other hand, can be much more versatile, but they do not have their own blockchain and must be implemented on existing blockchains. Tokens can be used in an incredibly wide range of applications, from tracking software usage, to authenticating digital art, and even representing real-world real estate properties.
Most Popular Types of Crypto
While this list is far from exhaustive, it does represent the most popular different types of crypto. This means that not only will they have the largest market cap, but they will also have some of the greatest trading volumes from day to day.
1. Bitcoin
Bitcoin was created by a programmer with the pseudonym Satoshi Nakamoto in 2009 and remains the most popular crypto for use as currency and as a digital store of wealth. Bitcoin pioneered the concept of decentralized ledger-keeping and remains the yardstick by which other coins are measured.
2. Ethereum
Ether is the primary Crypto NFT artists use and is used on the Ethereum network and blockchain. It is unique in its ability to make smart contracts, which leads to the ability to expand use into the NFT space, where original creators can automatically receive royalties for sales of their assets.
3. Tether
Tether is one of the most popular “stablecoins”, which means its value is pegged to the value of a fiat currency, like USD. It combines the distributed blockchain aspects of crypto while eliminating much of the volatility often associated with the value of crypto, and is hosted on the Ethereum chain.
4. USDC
The US Dollar Coin is another crypto that is tied to the value of the US dollar and is also maintained on the Ethereum chain. Originally created as a completely digital alternative to the dollar, it doesn’t require any central bank accounts or residency requirements.
5. Binance Coin
The Binance Coin is a crypto coin unique to the Binance crypto exchange. It can be used not only as currency and traded for other cryptocurrencies, but it also acts as an intrinsic fee payment method for the exchange itself as well as a token to build apps to operate on the exchange.
The Crypto Iceberg Runs Deep
There have been more than 10,000 different cryptos created since bitcoin pioneered blockchain technology in 2009, and while a significant portion of them have since become defunct, there are still hundreds if not thousands of them still being actively traded to this day. This means that for those looking to invest in crypto of any kind, there is a lot of research to be done before jumping into any one specific crypto, particularly in regards to its utility, backing, and popularity.