What are the main types of cryptocurrencies?
There are over 22,000 cryptocurrecies, and just like stock markets have assets of different categories, crypto also does. In this module, we'll present you to a wider variety of cryptocurrencies and their classifications.
Introduction
There are over 22,000 cryptocurrecies, and just like stock markets have assets of different categories, crypto also does. In this module, we’ll present you to a wider variety of cryptocurrencies and their classifications.
Bitcoin
Bitcoin is the first cryptocurrency created and does not have a physical coin or banknote. It is entirely digital, formed from a unique code. Bitcoin is a limited currency. Unlike the dollar and euro, currencies that can be issued by countries, bitcoin was coded so that only 21 million coins could be issued. Since it is the main cryptocurrency and the most knownglobally, all the other coins are referred to as “altcoins”.
Altcoins
In the world of cryptocurrencies, “altcoin” means “alternative currency”. In short, it is a term used to define any cryptocurrency other than Bitcoin. So that makes Ethereum, the cryptocurrency with the second highest market capitalization, an altcoin, just like the other 6,000+ cryptocurrencies already ranked.
Each altcoin will have its predetermined consensus mechanisms such as proof of stake (PoS) or proof of work (PoW). Bitcoin is the most popular cryptocurrency and uses the original proof-of-work validator method, which is also used by many altcoins.
Altcoins try to differentiate themselves from Bitcoin through new technologies such as smart contracts, PoS, or different tokenomics. Some aspects between altcoins and bitcoins will always remain the same, like peer-to-peer systems, for example. There are different groups of altcoins, and the main ones are described below.
Native Tokens
A Layer 1 is a foundation network, like Bitcoin, Ethereum, and Litecoin. A Layer 1 Blockchain is the core network of an ecosystem, capable of validating and finalizing transactions without the need for another network. Most layer-1 blockchains have their underlying tokens to sustain network security and functioning, called native tokens. The main examples are:
Bitcoin (BTC)
Ethereum (ETH)
Litecoin (LTC)
Stablecoins
Stablecoins are cryptocurrencies considered stable because their price does not depend so much on supply and demand, but is fixed to that of some other asset. The most popular stablecoins are those pegged to the dollar: coins like USD Tether (USDT), USD Coin (USDC) or DAI cost 1 USD. Stablecoins are important for today’s cryptocurrency market, as they allow you to protect value in bear markets, and they also have a lot of use in DeFi. Additionally, in countries with strong currency restrictions, stablecoins allow you to save dollars with no purchase or usage limits.
Memecoins
Memecoins are tokens that are inspired by some internet community or even directly by jokes that circulate in them, and although they don’t seem to have a very clear use, they tend to attract cryptocurrency enthusiasts. The most distinctive case is Dogecoin, the currency that has the Asian Shiba Inu dog as its mascot. Dogecoin emerged as an adaptation of the Litecoin code, with the proposal of being a useful currency to transfer little value in a short time and with low commissions. After the popularization of Dogecoin from the buzz generated by entertainment and technology personalities, a flood of “Dogekillers” or tokens came to dethrone it from that place of privilege, seeking to be the new reigning memecoin. In that sense, Shiba Inu was closest to the mark, but there are many others. The most famous examples of memecoins are:
Dogecoin: this coin was named “Doge” after a popular meme of a Japanese Shiba Inu dog that broke the internet during 2013.
Shiba Inu: Shiba Inu is a memecoin built on the Ethereum blockchain that features the Japanese hound dog Shiba Inu as its main character.
Types of Tokens
Utility tokens
The Utility token is offered by companies or projects that want to raise a certain amount of money by offering their unique products and services through the purchase of an initial coin offering (also referred to as initial token offering or ICO). Investors who purchase this token offer will be able to enjoy numerous benefits offered by the brand or company. Some examples are:
Chillz (CHZ)
Basic Attention Token (BAT)
Smooth Love Potion (SLP)
Security tokens
In Security Tokens, the investor has the opportunity to acquire a percentage of a tradable asset. In this sense, this asset can be a car, painting, action or even real estate.
Governance Tokens
The governance token is a token where its “owner/buyer” can contribute directly to the organization that issued the token. These contributions occur through voting. These tokens are related to the innovative form of organizational governance. With the governance token, it is possible to create a community, and this community can be reliable, solid, collaborative, decentralized and with common interests. Some examples are:
CRV - ( I thought we wrote about Curve before )
AAVE - What Is Aave? All You Need to Know About AAVE
COMP - ( I thought we may have $COMP .. )
Conclusion
Cryptocurrencies are much more than just Bitcoin. Throughout the years, the technology evolved and different types of tokens surged, each one with their main objectives. At the same time, different categories of tokens surged and new subsectors were created. We’ll dig into more details about the several existing crypto categories in future courses.
Highlights
Bitcoin is the main cryptocurrency, while other are referred to as altcoins. Altcoins can be divided into several categories, including stablecoins, memecoins and layer-1 tokens.
Utility tokens help provide a service and give users the right to perform actions on a blockchain network or an application.
Security tokens represent the ownership of an asset, and might be used by companies to raise capital by selling equity tokens.
Governance tokens given, among other objectives, voting rights and decision-making power, allowing the creation of a community that can be organized, collaborative and decentralized.
Related Articles
What are the main types of cryptocurrencies?
There are over 22,000 cryptocurrecies, and just like stock markets have assets of different categories, crypto also does. In this module, we'll present you to a wider variety of cryptocurrencies and their classifications.
Introduction
There are over 22,000 cryptocurrecies, and just like stock markets have assets of different categories, crypto also does. In this module, we’ll present you to a wider variety of cryptocurrencies and their classifications.
Bitcoin
Bitcoin is the first cryptocurrency created and does not have a physical coin or banknote. It is entirely digital, formed from a unique code. Bitcoin is a limited currency. Unlike the dollar and euro, currencies that can be issued by countries, bitcoin was coded so that only 21 million coins could be issued. Since it is the main cryptocurrency and the most knownglobally, all the other coins are referred to as “altcoins”.
Altcoins
In the world of cryptocurrencies, “altcoin” means “alternative currency”. In short, it is a term used to define any cryptocurrency other than Bitcoin. So that makes Ethereum, the cryptocurrency with the second highest market capitalization, an altcoin, just like the other 6,000+ cryptocurrencies already ranked.
Each altcoin will have its predetermined consensus mechanisms such as proof of stake (PoS) or proof of work (PoW). Bitcoin is the most popular cryptocurrency and uses the original proof-of-work validator method, which is also used by many altcoins.
Altcoins try to differentiate themselves from Bitcoin through new technologies such as smart contracts, PoS, or different tokenomics. Some aspects between altcoins and bitcoins will always remain the same, like peer-to-peer systems, for example. There are different groups of altcoins, and the main ones are described below.
Native Tokens
A Layer 1 is a foundation network, like Bitcoin, Ethereum, and Litecoin. A Layer 1 Blockchain is the core network of an ecosystem, capable of validating and finalizing transactions without the need for another network. Most layer-1 blockchains have their underlying tokens to sustain network security and functioning, called native tokens. The main examples are:
Bitcoin (BTC)
Ethereum (ETH)
Litecoin (LTC)
Stablecoins
Stablecoins are cryptocurrencies considered stable because their price does not depend so much on supply and demand, but is fixed to that of some other asset. The most popular stablecoins are those pegged to the dollar: coins like USD Tether (USDT), USD Coin (USDC) or DAI cost 1 USD. Stablecoins are important for today’s cryptocurrency market, as they allow you to protect value in bear markets, and they also have a lot of use in DeFi. Additionally, in countries with strong currency restrictions, stablecoins allow you to save dollars with no purchase or usage limits.
Memecoins
Memecoins are tokens that are inspired by some internet community or even directly by jokes that circulate in them, and although they don’t seem to have a very clear use, they tend to attract cryptocurrency enthusiasts. The most distinctive case is Dogecoin, the currency that has the Asian Shiba Inu dog as its mascot. Dogecoin emerged as an adaptation of the Litecoin code, with the proposal of being a useful currency to transfer little value in a short time and with low commissions. After the popularization of Dogecoin from the buzz generated by entertainment and technology personalities, a flood of “Dogekillers” or tokens came to dethrone it from that place of privilege, seeking to be the new reigning memecoin. In that sense, Shiba Inu was closest to the mark, but there are many others. The most famous examples of memecoins are:
Dogecoin: this coin was named “Doge” after a popular meme of a Japanese Shiba Inu dog that broke the internet during 2013.
Shiba Inu: Shiba Inu is a memecoin built on the Ethereum blockchain that features the Japanese hound dog Shiba Inu as its main character.
Types of Tokens
Utility tokens
The Utility token is offered by companies or projects that want to raise a certain amount of money by offering their unique products and services through the purchase of an initial coin offering (also referred to as initial token offering or ICO). Investors who purchase this token offer will be able to enjoy numerous benefits offered by the brand or company. Some examples are:
Chillz (CHZ)
Basic Attention Token (BAT)
Smooth Love Potion (SLP)
Security tokens
In Security Tokens, the investor has the opportunity to acquire a percentage of a tradable asset. In this sense, this asset can be a car, painting, action or even real estate.
Governance Tokens
The governance token is a token where its “owner/buyer” can contribute directly to the organization that issued the token. These contributions occur through voting. These tokens are related to the innovative form of organizational governance. With the governance token, it is possible to create a community, and this community can be reliable, solid, collaborative, decentralized and with common interests. Some examples are:
CRV - ( I thought we wrote about Curve before )
AAVE - What Is Aave? All You Need to Know About AAVE
COMP - ( I thought we may have $COMP .. )
Conclusion
Cryptocurrencies are much more than just Bitcoin. Throughout the years, the technology evolved and different types of tokens surged, each one with their main objectives. At the same time, different categories of tokens surged and new subsectors were created. We’ll dig into more details about the several existing crypto categories in future courses.
Highlights
Bitcoin is the main cryptocurrency, while other are referred to as altcoins. Altcoins can be divided into several categories, including stablecoins, memecoins and layer-1 tokens.
Utility tokens help provide a service and give users the right to perform actions on a blockchain network or an application.
Security tokens represent the ownership of an asset, and might be used by companies to raise capital by selling equity tokens.
Governance tokens given, among other objectives, voting rights and decision-making power, allowing the creation of a community that can be organized, collaborative and decentralized.
Related Articles