Types of Cryptocurrency

By : Neha Dhyani

Updated : Mar 1, 2022, 8:43

Gone are the days when the share market was the only investment avenue for aggressive investors. Presently, cryptocurrency has emerged as a viable alternative for aggressive investors. The cryptocurrency market in the world began with Bitcoin in 2009. By 2011, the cryptocurrency list started growing, with many competitors launching new cryptocurrencies using the same Blockchain technology used by Bitcoin.

Presently, the cryptocurrency market in the world is brimming with thousands of types of cryptocurrencies with different purposes. While not all are equally successful, they have made the cryptocurrency list richer, and investors have many options. As of September 2021, the total market capitalisation of cryptocurrency in the world is almost US$2 trillion.

What is Cryptocurrency?

Cryptocurrency is a unique investment instrument since it is not governed by any government authority, such as banks or regulators. Cryptocurrency price movements depend on demand, supply, competition, and news, among others.

These currencies are encrypted with a special code known as cryptography. Cryptocurrencies are generally stored in unique digital wallets called Blockchain wallets. Investors buy and sell cryptocurrency through these Blockchain wallets.

What are the Types of Cryptocurrency?

You can classify cryptocurrency into two broad categories - coins and tokens. While coins are of two types, Bitcoin and altcoins, tokens are programmable assets thriving within a platform’s Blockchain. Although crypto, tokens, and coins are often used interchangeably, it is prudent to know the differences to invest sensibly.

Coins Vs. Tokens in the Crypto Market

In essence, coins and tokens are types of cryptocurrency. But, their functions are different. Coins, such as Ether, Bitcoin, Tether, Binance Coin, Cardano, etc., are cryptocurrencies in their own right. Each crypto is built on its trademark Blockchain. For instance, Ether is built on the Ethereum Blockchain. Crypto coins are either Bitcoin or Altcoins.

Tokens also exist within a Blockchain. But, they are not currency. Tokens are programmable assets that facilitate smart contract creation and execution. Tokens give the owner the right to trade them outside the Blockchain network. They usually represent some units of value, such as electricity, points, money, etc., and you can freely trade (send and receive) them. For instance, the Basic Attention Token (BAT) is generally used in digital advertising and is based on the Ethereum platform.

The 3 Most Popular Cryptocurrencies in the World

  • Bitcoin

Bitcoin is the first cryptocurrency in the world. It has a capped limit of 21 million, of which nearly 18.8 million tokens are currently in circulation. Bitcoin was the pioneer in designing the primary system of cryptography and peer-to-peer (consensus) verification. Bitcoin miners (traders) use high-end computers to verify transactions and generate bitcoins.

  • Ethereum

Ethereum is similar to Bitcoin, except it is a programmable Blockchain. The primary purpose of the creation of Ethereum was not to support some currency but to allow Ethereum users to design, launch, monetise, and use apps. Ethereum only accepts payments through its native currency, Ether. Ethereum is the second most valuable virtual currency.

  • Cardano

Cardano is a third-generation Blockchain platform. Since it uses the Proof-of-Stake (PoS) framework and not the Proof-of-Work (PoW) framework used by Bitcoin and Ethereum, it is considered more environmentally sustainable and efficient. The name of Cardano’s cryptocurrency is ADA.

Cryptocurrency has passed through various stages of growth and degrowth. But, its popularity has never subsided. Proper knowledge and skills can help you ace the cryptocurrency market like a pro.

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FAQs on Types of Cryptocurrency

Q.1 What is Cryptocurrency?

Cryptocurrencies are encrypted with a special code known as cryptography. They are generally stored in special digital wallets called Blockchain wallets. Investors buy and sell cryptocurrency in the world through these Blockchain wallets.

Q.2 What are the Types of Cryptocurrency?

You can classify all the cryptocurrencies in the world into two broad categories - coins and tokens. While coins are of two types, Bitcoin and altcoins, tokens are programmable assets thriving within a platform’s Blockchain.

Q.3 Which are the three most popular Cryptocurrencies in the world?

According to market capitalisation, Bitcoin, Ethereum, and Cardano figure at the top of the cryptocurrency list.