Manifold Types of Cryptocurrencies: All You Need to Know

Virtual megacosm is teeming with a myriad of coins and tokens ranging from behemoths like Bitcoin and ETH to NFT drawings. In this material, we will sink into a reverie of what types of cryptocurrency are there and how to navigate your investment ship through such diversity. 

What Are Cryptocurrencies?

Cryptocurrencies are virtual assets whose functioning is ensured by a network of decentralized computer nodes. Most of them are based on blockchain, i.e. a database of operations in a chain of linked blocks.

Cryptocurrencies are mainly used for settlements between network customers, payment of transfer fees, and store holding of capital. However, they can have a lot of peculiarities and restrictions. In some blockchains, an unlimited plurality of cryptocurrencies can be emitted.

Blockchain empowers direct and unrestricted interaction with cryptocurrencies. Decentralization and lack of control by any country or corporate organization eliminate the possibility of blockchain funds and other risks. What are the different types of cryptocurrency? Let`s move on.

Types of Cryptocurrency

Moving on to different types of cryptocurrency, it is important to note that Bitcoin remains apart from each category because it is the first coin, which does not fall under the existing gradations. The spectrum of the most distinctive types of cryptocurrencies is as follows:

• cons;
• tokens;
• altcoins;
• stablecoins;
• DeFi;
• NFT.

Crypto Coins

Digital coins are cryptocurrencies that run on their native blockchains. Most often, they are used as a means of exchange or purchase with further savings. Developers can issue cryptocurrencies on top of their native coin blockchain, but these new cryptocurrencies will be called “tokens”, which we will discuss below.

Bitcoin is a prime example of a crypto coin, but many others such as Litecoin, Dogecoin, and Ethereum also fit this definition. Bitcoin is the first and most widely used cryptocurrency in the world. Many believe that Bitcoin is the digital analog of fiat currencies and gold. 

Tokens

Tokens show a wider range than coins. There are two main types of tokens: security tokens and utility tokens. The first ones are digital analogs of securities that certify the ownership of an asset (a share in a company, real estate, precious metals, etc.). The second ones are analogous to certificates, confirming the holder’s right to a service, product, discount, or other privilege, the ability to participate in voting in a decentralized autonomous organization or pay for transactions within the network, etc. Often issued in smart contract blockchains such as Ethereum, service tokens serve a certain function in their respective Web3 ecosystems. Typically, dApp developers launch service tokens to increase participation in their projects, such as DeFi (decentralized finance). Many games that require earning money, such as Axie Infinity (AXS), also have in-game coins that can unlock special in-game features.

Tokens cannot operate autonomously as Bitcoin and altcoins do, thus, they are placed on top of an established cryptocurrency network and controlled through smart contracts.

Altcoins

Among the types of cryptocurrency coins with their native blockchains, it is customary to single out Bitcoin as a separate category (some even recognize its special status as an asset outside the categories). 

All other coins are collectively called altcoins, as each of them appeared as an alternative to the first cryptocurrency. They gained a market share of about 60% in 2023. Some of the altcoins repeat Bitcoin in their structure (like Litecoin), while others are focused on creating new tools and opportunities (Ethereum is the most striking example with its smart contracts and support for decentralized applications). It is not uncommon for altcoin developers to take the open-source code of the Bitcoin blockchain as a basis and refine it in order to increase the speed of transactions, optimize the process of creating new blocks, and make it possible to place smart contracts, various applications, and services on the blockchain. 

Stablecoins

It is vital to realize that this crypto is directly related to something tangible, such as

• gold;
• U.S. dollar;
• oil. 

If some types of cryptocurrencies and their rate for today can change dynamically during the day, week, and month, all these fluctuations are reflected on the graph by a broken line, then stablecoins will have pronounced stability. Of course, fluctuations will be present. After all, the rate of, for instance, any fiat currency, is movable. But such fluctuations will not be extremely significant, because crypto is supported by specific material resources. 

In 2023, Tether and Binance USD were confessed as the most popular stablecoins.

Some stablecoins are not backed by anything like Carbon and Havven. The rate of these cryptocurrencies is regulated thanks to the issuance or burning of assets.

DeFi

With the development of crypto markets, there was a whole surge against the background of the transition of finance into the virtual sphere. Thus, these events were followed by new solutions, i.e. the emergence of NFT and DeFi. 

DeFi is not directly related to one of the crypto options, however, it still plays not the last role in the world of online finance. These are, in fact, complex platforms that deal with the organization of several types of virtual assets and their functionality. According to most experts, this is the direction that will contribute to the “new breath” of the crypto market. Thanks to DeFi, users will be able to directly conduct all procedures related to the provision and delivery of services. Any intermediaries in these chains are completely excluded. Any calculations are carried out on a decentralized platform, which will highlight their reliability.

NFT

These tokens have been developed for the specific purpose of confirming ownership of a resource. Ownership rights can be sold and moved around within the blockchain in all sorts of ways. What NFT assets can be

• antiques and high-value items;
• works of art – paintings, musical works;
• video content;
• various 3D models;
• items of the gamer industry that perform any functions or are relics in the gaming world. 

It is crucial to note that each of these tokens has unique properties and the appearance of a replacement for them is simply excluded. At the moment, NFT is more spread in the community of gamers and collectors. However, this direction has very ambitious prospects.

Difference Between Crypto Coins and Tokens

What are the types of cryptocurrency? With all the spectrum of cryptocurrencies, they can be divided into two main types – coins and tokens. The fundamental discrepancy between them is the presence of their blockchain. Coins are created as part of a unique blockchain and can function independently of the outside world within their blockchain network. Their issuance occurs by generating and adding new blocks to the distributed ledger (mining or minting) and in most cases is a decentralized process.

Tokens, on the other hand, are created based on an existing blockchain, in which information about them is recorded, and cannot (unlike coins) exist independently. Special software is often used to access them, and they are managed using smart contracts. Token issuance is carried out by issuing a certain number of tokens by a team of developers of a given crypto project and therefore is centralized. Unlike coins, which are issued gradually, the emission of tokens can be carried out in one step and completely.

Tokens are designed to perform certain functions and, depending on this, are divided into different types. They are often issued to raise funds for the development of a project or to ensure its operability. Many generally consider tokens not a cryptocurrency, but a digital analog of securities, acting as a certificate that confirms the holder’s rights to certain property objects.

Main and Largest Cryptocurrencies

Among the 20,000 virtual coins, we especially want to highlight a few of the most mainstream, which we have divided into 3 categories.

Cryptocurrencies with the frontmost market capitalization

Bitcoin (BTC)

The most popular cryptocurrency of all time was created in late 2008 and early 2009. Currently, the BTC capitalization has exceeded $1.077 trillion, which exceeds many times the number of other types of virtual money. Naturally, Bitcoin is the main object of interest for potential investors and the subject of trading on various cryptocurrency exchanges.

Ethereum (ETH)

Ethereum is the second best-selling and capitalized cryptocurrency in the world. Despite its relatively small age, the trading volume of Ethereum has now reached $351.7 billion, far surpassing all other cryptocurrencies except Bitcoin. The Ethereum payment system was launched in mid-2015. In a little over two years, the asset has managed to confidently move into second place, in some segments competing with Bitcoin, which seemed unattainable until recently.

XRP (XRP)

Ripple is a cryptocurrency that was released in 2012 and has gained popularity over the years. What sets it apart from other virtual money is that it is a payment protocol designed to facilitate global money transfers. XRP topped the top altcoins by volume in 2023. It is a native token of the Ripple network, which is the platform of the distributed ledger technology (DLT) used by financial institutions around the world.

Tron (TRX)

TRX is a native cryptocurrency of the TRON blockchain platform, which is the basis for decentralized applications. TRX is among the top 10 crypto assets by market capitalization. TRON appeared in 2017 in China and was positioned as “Ethereum`s killer”. The project claims to simplify the development of decentralized applications and support for smart contracts of other blockchains.

Stablecoins

Stablecoins, often referred to as non-Bitcoin cryptocurrencies, are cryptocurrencies that maintain a 1:1 ratio with another asset, mainly the U.S. dollar. Because stablecoins are supposed to be non-volatile digital assets, they have gained a large share of the cryptocurrency market. Here are the two dominant U.S. dollar stablecoins:

Tether (USDT)

Tether is currently the most sought-after stablecoin in the world. It is anchored to the U.S. dollar and has a large customer base. USDT is the oldest stablecoin issued by the Bitfinex cryptocurrency exchange and launched in 2014. While USDT is now available on dozens of blockchains, it is most prominent in the Ethereum ecosystem.

DAI (DAI)

Launched in 2017, DAI is the largest decentralized stablecoin pegged to the U.S. dollar. DAI is managed and backed by the MakerDAO Foundation and issued via a smart contract platform. The DeFi MakerDAO project emits DAI stablecoins to users who contribute cryptocurrency collateral to the project’s Ethereum-based protocol.

Ethereum’s competitors

Despite Ethereum’s upgrade to the PoS in 2022, dozens of competing projects claim they have already surpassed Ethereum 2.0. Here are some of the top “Ethereum killers” that often make headlines in today’s crypto industry:

Binance Coin (BNB)

Binance Coin was originally used as an incentive token for users of the Binance CEX. However, since the company released its smart contract-based BNB blockchain, BNB has become more useful for native dApp applications such as PancakeSwap. One of the most significant benefits of Binance Coin is that traders use it to get discounts on Binance commissions. BNB transactions are instantaneous (up to 1.4 million transactions per second), far outperforming Bitcoin and Ethereum.

Dogecoin (DOGE)

The virtual coin was first introduced to the financial market in December 2013. Its key feature is a fairly fast mining process, which leads to a constant increase in the number of issued monetary units. Currently, their amount has exceeded 143 billion with a capitalization value of $11 billion. The basis of the Dogecoin virtual platform is Litecoin, which, in turn, is a BTC fork.

Cardano (ADA)

Led by former Ethereum developer Charles Hoskinson, Cardano is a PoS network created in 2017. Although Cardano’s blockchain is still in development, its native cryptocurrency ADA is often ranked among the top ten cryptocurrencies by market capitalization.

Cardano, a research blockchain project, aims to provide a sustainable and scalable alternative to ETH. It has therefore been dubbed the “Ethereum killer”. Despite criticism for slow progress, the Cardano’s PoS consensus mechanism has kindled significant interest.

Solana (SOL)

The Solana blockchain, launched in 2020, is one of the newest smart contract platforms. It is also one of the fastest one with a maximal confirmation rate of 65,000 transactions per second (TPS). In a relatively short time, Solana has become one of the top 5 cryptocurrencies with many active DeFi and NFT applications.

FAQ

Why are There So Many Types of Cryptocurrency?

The spectrum of cryptocurrencies existing on the financial market today is extremely large ranging from basic-fundamental ones with a cool idea that can change millions of lives on our planet to outright scam (fraud), solely to make a lot of money. As the capitalization and popularity of any particular project grows, its coin becomes a cryptocurrency and can be widely used outside the specific product. If a project develops successfully, its creators can become very rich people. Virtual money is now appearing every day and this process will continue for a long time, at least until certain qualitative changes occur in the entire market.

Why Is Bitcoin Still the Most Important Cryptocurrency?

Since its launch in 2008, Bitcoin has remained the flagship cryptocurrency, outpacing altcoins in terms of value and capitalization.

At the beginning of its journey, BTC was simply a realization of blockchain technology and was of interest to a narrow group of individuals. Today, it has become an investment and savings tool not only for private investors but also for large companies. The transformation of the main digital coin can make it one of the world’s reserve currencies.

Where to Buy Cryptocurrency

You can purchase, store, and trade cryptocurrencies on large centralized exchanges with an impeccable reputation like Binance, WhiteBIT, Kuna, etc., or on various crypto exchange services. The Godex conversion facility is characterized by the simplest possible interface, where you only need to select a currency and enter the required amount for conversion. Godex does not store your money, thus, you do not have to worry about your funds disappearing. Unlike cryptocurrency exchanges, Godex does not require any registration or disclosure of personal data, therefore, the anonymity of your transactions is in safe hands. Our exchange center provides access to more than 300 assets.

Disclaimer: Please keep in mind that the content of this article is not financial or investing advice. The information provided is the author’s opinion only and should not be considered as direct recommendations for trading or investment. Any article reader or website visitor should consider multiple viewpoints and become familiar with all local regulations before cryptocurrency investment. We do not make any warranties about reliability and accuracy of this information.