Cryptocurrencies by Type: A Comprehensive Guide

Cryptocurrencies can be broadly categorized into several types, each with its own unique characteristics and uses.

Altcoins, such as Bitcoin Cash and Litecoin, were created as alternatives to Bitcoin.

The most well-known type of cryptocurrency is Bitcoin, which was the first decentralized digital currency.

Bitcoin's decentralized nature allows for peer-to-peer transactions without the need for intermediaries.

Cryptocurrencies can also be classified as tokens, which are used to represent a specific asset or utility.

Tokens can be issued on various blockchain platforms, including Ethereum and Binance Smart Chain.

Cryptocurrencies can be broadly categorized into several types, each with its own unique purpose and function. Utility tokens, such as XRP and ETH, serve specific functions on their respective blockchains. They are designed to facilitate work done on the blockchain, like Ethereum's ether, which is used for validating transactions and opening blocks.

Payment cryptocurrencies, like Bitcoin, are designed to be used as a medium of exchange and a purely peer-to-peer electronic cash to facilitate transactions. They have a limited number of digital coins that can ever be created, making them naturally deflationary.

Here are the main types of cryptocurrencies:

There are several types of cryptocurrencies, each with its own purpose and function. Utility tokens, like XRP and ETH, serve specific functions on their respective blockchains.

A payment cryptocurrency, such as Bitcoin, is designed to be used as a medium of exchange and a purely peer-to-peer electronic cash to facilitate transactions. These cryptocurrencies have a dedicated blockchain that only supports that purpose and tend to have a limited number of digital coins that can ever be created.

Some cryptocurrencies, like Ethereum, are designed to be used as a platform for decentralized applications (DApps) and smart contracts. These tokens are not capped and are, therefore, inflationary, meaning that the value of this digital asset should be expected to fall over time.

Tokens can also be used for governance purposes, giving holders a right to vote on certain things within a cryptocurrency network. Governance tokens, like MKR, are used to make decisions for decentralized autonomous organizations (DAOs).

Smart Contract Platform tokens, also known as infrastructure tokens, are used to pay the costs of using a network. These tokens are required for users to interact with a blockchain for any type of transaction.

Here are some common types of cryptocurrencies:

Stablecoins are designed to provide a store of value, maintaining their value because they can be exchanged for one or more fiat currencies, most commonly the U.S. dollar or the Euro.

The highest profile stablecoin is Tether's USDT, which is pegged to the US dollar and achieves stability by backing every USDT with one US dollar worth of reserve assets in cash or cash equivalents.

Holders can deposit their fiat currency for USDT or redeem their USDT directly with Tether Limited at the redemption price of $1, less fees that Tether charges. Tether also lends out cash to companies to make money.

Stablecoins are not subject to any government regulation or oversight, which can be a concern for investors. In May 2022, another high-profile stablecoin, TerraUSD, and its sibling coin, Luna, collapsed.

TerraUSD went from $1 to just 11 cents, and the problem was that it was backed by its own currency, Luna, which lost its value during the crash. As holders of TerraUSD clamored to redeem their stablecoins, TerraUSD lost its peg to the dollar.

Stablecoin projects claim to be backed by a reserve asset, such as the US Dollar, which is the case for Tether (USDT) and USDC. Other stablecoins might be backed by crypto reserves, or in some cases nothing at all, which applies to algorithmic backed stablecoins.

The larger stablecoins are traded at high volumes, similar to cash in a traditional market, as investors use them as vehicles to take profit or wait-out the market for the next opportunity.

Ethereum is a decentralized software platform that enables smart contracts and dApps to be built and run without downtime or interference from a third party. It uses ether, its platform-specific token, which is used for various purposes including payment for validators and as an investment.

Ethereum's transition to proof-of-stake (PoS) validation method in 2022 made the blockchain more efficient and allowed it to scale better. This change was less energy-intensive compared to the previous method.

Dogecoin's market capitalization was $16.46 billion as of October 6, 2022, and one DOGE was valued at around $0.11. It's the eighth-largest cryptocurrency and is accepted as a form of payment by some major companies.

TRON's native token, TRX, is used for on-chain transactions and as a payment method on exchanges. Anyone holding TRX can apply to become a Super Representative, someone with the authority to validate transactions and create new blocks for the blockchain.

Media and Entertainment Cryptocurrencies are used for various purposes, including content, games, and online gambling.

Basic Attention Token (BAT) is an example of a Media and Entertainment Cryptocurrency that rewards users with tokens for opting-in to view advertisements.

These tokens can then be used to support content creators, giving users a say in what content they see and how they interact with it.

The BAT token is a prime example of how Media and Entertainment Cryptocurrencies can benefit both users and content creators.

Bitcoin is a peer-to-peer decentralized digital currency, the first of its kind, that allows users to transact with one another without an intermediary or third party.

It uses revolutionary blockchain technology to facilitate these transactions, making it censorship-resistant, permissionless, and highly impervious to seizure.

Anyone with an internet connection can send and receive Bitcoin, and no central controlling party can stop you using the network.

Bitcoin can be used as a medium of exchange to buy anything from clothes to cars, as long as the vendor accepts it as payment.

It's also the preferred method of sending remittances in many unbanked countries, often being the cheapest and easiest option.

Bitcoin has a limited supply of only 21 million, making it a store of value, with many referring to it as "digital gold".

Solana (SOL) is a blockchain platform designed to support decentralized applications (dApps). It was founded in 2017 and is often referred to as an 'Ethereum killer'.

Solana performs many more transactions per second than Ethereum, making it a more efficient option. This is due to its unique hybrid consensus model of Proof of Stake (PoS) and Proof of History (PoH) mechanisms.

The PoH model records a digital timestamp of all incoming transactions, effectively speeding up the PoS confirmation process. This hybrid consensus mechanism also uses significantly less computational power compared to Proof of Work (PoW).

Solana has a native cryptocurrency called Solana (SOL), which is used for making or sending transactions, interacting with smart contracts, or for staking. Since its inception, its price has risen tremendously.

As of Oct. 6, 2024, Solana had a market capitalization of $68.4 billion and was valued at around $145.95. This makes it the fifth-largest cryptocurrency by market cap.

Solana has faced issues with multiple outages, network restarts, and other issues that have raised questions about its stability. However, it remains a heavyweight asset with almost 3,000 developers continuing to progress the network.

Solana and Ethereum can utilize smart contracts, which are essential for running cutting-edge applications, including decentralized finance (DeFi) and non-fungible tokens (NFTs).

Tether (USDT) is a stablecoin that aims to peg its market value to the U.S. dollar, reducing volatility. Launched in 2014, it was one of the first stablecoins.

Tether’s price is tied directly to the U.S. dollar because the developers claim to hold one U.S. dollar (or an equivalent) for every circulating USDT. This system allows users to more easily make transfers from other cryptocurrencies back to U.S. dollars in a more timely manner than actually converting to standard currency.

Tether was the third-largest cryptocurrency by market capitalization on Oct. 6, 2024, with a market cap of $119.70 billion and a per-token value of $0.999. Its developers claim to hold a variety of reserve assets equivalent to (or possibly greater than) its total supply.

Tether has been used by nationals in economically volatile countries to shield them from rampant inflation. By backing the coin with reserve assets, Tether has been able to avoid the price volatility that often plagues other cryptocurrencies.

Tether is a blockchain-based digital money that can be used to make everyday transactions within the crypto ecosystem, or beyond it. It has been used to make cashless everyday transactions and as a store of value due to its relative stability.

Binance Coin (BNB) is a utility cryptocurrency created by Binance, a crypto exchange that launched in 2017. It has some elements of currency and utility crypto types.

BNB can be used to pay for goods and services within and outside of the network. It's also used to pay network gas fees on Binance's smart contract blockchain, BNB Chain.

Outside of this, BNB has a range of useful functions on the BNB Chain, including trading fee discounts when you pay in BNB on Binance's exchange, access to exclusive token sales, and access to the BNB Chain ecosystem of DeFi gaming, DApps, and more.

BNB is also the fourth-largest cryptocurrency by market capitalization, with a market capitalization of $82.70 billion on Oct. 6, 2024, and a value of around $567.00 per BNB.

Here are some of the key benefits of using BNB:

Shib is a memecoin inspired by a meme, specifically the Shiba Inu breed of dog. It rose to prominence in the fall of 2021, briefly surpassing Dogecoin's market capitalization.

Shib's market performance is closely tied to the whims of cryptocurrency enthusiasts and internet trends. Anyone with the right technical knowledge and an internet connection can create and distribute a memecoin like Shib.

Shib is often compared to Dogecoin due to its similar origins as a meme-inspired cryptocurrency. Dogecoin, in turn, was created as a joke by two software engineers, Billy Markus and Jackson Palmer, in 2013.

Shib's market capitalization and value can fluctuate wildly, with one SHIB token valued at around $0.11 as of October 6, 2022.

Tron (TRX) has its roots in 2017 as the TRON Foundation, aiming to give digital content makers full ownership rights through tokenization and decentralized applications (dApps).

The TRON Foundation launched TRX, its native token, to pay for on-chain transactions and as a payment method on exchanges.

In 2018, TRON made a significant move by purchasing BitTorrent, a popular file-sharing program, and integrating it into the TRON blockchain.

Anyone holding TRX can apply to become a Super Representative, someone with the authority and obligation to validate transactions and create new blocks for the blockchain.

TRON's consensus mechanism is a tweaked version of Ethereum's proof-of-stake called designated proof-of-stake (DPoS), where the network votes in the super reps.

As of October 6, 2024, TRX had a value of $0.15 and a market cap of $13.38 billion.

Polkadot is a multichain protocol that allows multiple chains to transfer data and tokens. It's worth noting that this feature is unique to Polkadot and sets it apart from other cryptocurrencies.

Polkadot's ticker is DOT, and as of October 2024, its market capitalization is approximately $6.29 billion.

Shiba Inu is a memecoin with a very low price of $0.000018. This is significantly lower than the prices of some of the other cryptocurrencies mentioned in this article.

Avalanche is the fastest smart contracts platform as measured by time-to-finality. It also has the most validators securing its activity of any proof-of-stake protocol.

Chainlink is a blockchain layer that allows universal smart contracts.

Bitcoin's popularity has led to a multitude of alternative coins, known as altcoins. These altcoins have a wide range of purposes, from being a joke to facilitating transactions on a global virtual machine.

The introduction of Bitcoin in 2009 sparked a wave of innovation, resulting in the creation of new technologies based on its blockchain and underlying theories.