If you are new to cryptocurrency, you may have only heard about one or two different types. However, there is a vast range of cryptocurrencies available, many of which with different goals and use cases. In this look at the cryptocurrency markets, we'll be breaking down the common types of digital assets, and discussing some of the more well-known cryptocurrencies and where they fit among the varieties available.
What is Cryptocurrency?
Before delving into a little more depth about the different types of cryptocurrencies available, let's look a little at what cryptocurrencies are in the first place. With such regular changes in the crypto space in both the scope and types of projects available, the definition of what exactly a cryptocurrency is can be a broad thing to describe. Conveniently, there are a few things that do help define what cryptocurrencies are though.
- Often used as a medium of exchange
- Intangible by nature
- Leverage some form of blockchain technology
- Can be exchanged using public and private key pairs
- Is generally mined or minted
The first modern type of digital currencies to really take off was bitcoin. After it's inception several years ago now it has remained one of the most well-known and resilient. It is an excellent example of digital currency as well as the first cryptocurrency to catch the attention of the world. The bitcoin network is primarily focused on being decentralized, having an immutable ledger, and being transferable. While projects like Liquid and Lightning have taken things further with side chains and other layer two functionality, at its core bitcoin is a stable, rock-solid way to transfer value between two (or more) parties.
While less dripping with features as some newer projects it still manages to support useful features like multisig transactions to allow bitcoin escrow services and much more. Bitcoin has shown us that reliability and security often stand out when it comes to digital currencies, and it's likely to continue doing just that into the foreseeable future. Some other forms of digital currency include Dash, Litecoin (LTC), Dogecoin (DOGE), and Bitcoin Cash (BCH).
When it comes to tokens, the cryptocurrencies list is a large one. They are also quite varied in their use cases, focus, intent, and other variables that can be factored into the use of a token. A token may be used as a utility token in which you can use it to interact with some form of platform or service. Many tokens begin with an ICO, IEO, or other types of crowd sales. However, this isn't explicitly the case; anyone can launch their own token, whether it is used and adopted is the harder part.
The most popular platform by far for tokens is Ethereum (ETH). When it comes to smart contracts, Ethereum has brought them to the forefront of fintech and made them quite popular inside the space, and to some degree outside of the crypto space as well. Typically a token will leverage the power of a larger blockchain like Ethereum to avoid having to "reinvent the wheel" and deal with maintaining the strength and security of a blockchain, instead allowing developers to focus on developing around the token.
In recent years there has been a substantial increase in the availability and variety of stablecoins on the market. Even stablecoins backed by gold are becoming more prevalent. However, when it comes to stablecoins, the most liquid and commonly used is Tether's USDT. USDT has been launched on several blockchains from Omni (a software layer built on top of bitcoin), Ethereum (ETH), to even Tron (TRX) and has become commonplace to find on centralized exchanges. USDT has amassed a significant market capitalization over the years, and this doesn't seem to be changing. There also seems to be a lot of space available in the cryptocurrency market for more options as USD Coin (USDC), TrueUSD (TUSD), Dai (DAI), Paxos Standard (PAX) and more are all laying their own foundations and absorbing value.
The primary use traders find from having access to stablecoins is protection from the more extreme volatility that can be had in the broader cryptocurrency market. While fiat-backed stablecoins are by their very nature somewhat volatile, they are typically far less so compared to even significant cryptocurrencies like Bitcoin. Many traders use stablecoins to lock in profits from trades, as well as things like staff being paid for crypto jobs, and even remittance, stablecoins have a lot to offer in various situations.
An interesting topic among the types of cryptocurrency is privacy coins. These coins, as you can probably imagine, are intended to increase privacy when using cryptocurrency. Arguably the most well-known and one of the most popular privacy coins today is Monero. Monero is focused on combining privacy, security, with being decentralized to allow for safe and private cryptocurrency transactions. While quite popular Monero isn't the only privacy-focused cryptocurrency available, among the growing list of privacy coins is Zcash (ZEC), Horizen (ZEN), Verge (XVG), and Komodo (KMD.
There is a substantial and ongoing discussion about what is the most private way to use cryptocurrency, which approaches are best, and which coins are the most private. If you are interested in privacy coins, it's quite a deep rabbit hole you can go down if you start digging. However, if you are looking for a way to increase the privacy of your transactions, privacy coins are a great place to look.
What are Altcoins?
A commonly used cryptocurrency term, the word altcoin is one that came about due to the success of Bitcoin. Its casual use this term refers to any cryptocurrency that is not Bitcoin. While some may take offense to this term as implying a project is less than bitcoin, it's often just used as a placeholder for lack of a better word. With such a broad variety in the types of cryptocurrency out there sometimes it can be hard to label them, in which case altcoin is often the term used.
A modern twist on a database, blockchains at a basic level are a chain of pieces of digital information secured and verified using various algorithms and approaches. Blockchain technology has expanded into many fields and has started becoming a viable option to use as an alternative to many traditional solutions for a range of tasks. For everything from cloud hosting to supply chain management cryptocurrencies and blockchains are cropping up all over the world. Where we go in the future is hard to say, but it seems that blockchain technology is here to stay.
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