What Are the Different Types of Cryptocurrency?

Cryptocurrency. This term arose relatively recently but is already firmly entrenched in our speech. Almost everyone has heard about cryptocurrency or «crypto», and more and more people are earning real money on it. Let's briefly outline what cryptocurrencies are.

Cryptocurrency is based on blockchain technology and cryptography. Information about each bitcoin transaction is securely encrypted and stored in blocks. All blocks are interconnected in a chain and decentralized. The advantage of cryptocurrencies is that it is not controlled by any central authority, such as a national bank. Each bitcoin transaction is verified at a critical node by a miner. Thanks to encryption, a crypto wallet is very difficult to hack. To the benefits, it is also worth adding a considerable growth potential.

The main disadvantage of cryptocurrency is instability (although this problem is partially solved by stablecoins, which we will discuss below). Within one day, the value of crypto can fluctuate by several thousand US dollars. In addition, cryptocurrency has existed since 2009 and is constantly evolving. Therefore, so far, there are no general international rules that would regulate it. In early 2022, the Securities and Exchange Commission began discussing such regulation, but it has not yet been completed.

Data security, user anonymity, and the absence of a single supervisory authority —  are why users worldwide choose cryptocurrency for exchange operations. The number and variety of digital money increase daily: from the first Bitcoin in 2009 to 12,000 to 18,000 (according to CoinMarketCap and CoinGecko exchanges) in 2022. 

Now let's talk about a slightly more complex topic — the types of cryptocurrency. This article discusses the top 20 crypto types and the different types of cryptocurrencies. 

‍

Types of cryptocurrency: common features

Cryptocurrency is the trending digital currency nowadays. Many people do not know what cryptocurrency is. The cryptocurrency was designed for cashless purchases. If goods and services can be paid for by card, why not develop a common digital currency worldwide? 

Bitcoin has had tremendous momentum this past year, surging from $2 to 900 dollars in just a few months. But what exactly is cryptocurrency? In its most basic sense, it's a peer-to-peer (p2p) type of digital currency that allows instant transactions, preventing fraud and cutting out the middleman like banks. Blockchain is the technology behind this new form of payment, which brings us to the various forms of cryptocurrency available today.

Today, there are more than 20,000 different types of cryptocurrency created in the world, but not all of them are used as regular currency. More often, types of cryptos are developed for specific functions. However, they are united by common principles: 

1. Decentralization. Cryptocurrency is not issued by the state and is not regulated by financial institutions. 

2. Cryptography. This unique encrypted code is used to encode data of all types of crypto.

3. Blockchain. Cryptocurrency is created using a distributable blockchain registry and peer-to-peer (P2P) verification.

4. Cryptocurrency assets are stored in a crypto wallet, such as CPAY. All transactions for buying and selling crypto assets take place on a smartphone. The user manages his expenses and income.

Then what are the different types of cryptocurrency?

‍

What are the different types of cryptocurrency?

All types of cryptocurrencies that have appeared since bitcoin are called alternative coins. For example, the first altcoins were Namecoin and Litecoin in 2011. The main idea of the developers was to increase the speed of Bitcoin transactions. 

Ethereum has become a crypto platform thanks to the introduction of smart contracts. Ripple became a centralized system, gaining even stronger independence from Bitcoin. Some types of crypto focus users' attention on increased security, such as Dash.

When discussing different types of cryptocurrency, you may be familiar with the concepts of coins and tokens. So what's the difference?

Bitcoin is the most well-known and largest cryptocurrency in the world. It is counted in coins. The Bitcoin project was created on the blockchain, so bitcoin is also a global payment system. Transactions via blockchain occur without intermediaries. 

All examples of cryptocurrencies that were created after bitcoin are called altcoins.  Altcoins can also be payment systems. 

A token is a type of digital currency and a digital token that guarantees ownership — for example, an object of art, real estate, or securities. Tokens cannot work independently, so they are on the cryptocurrency network. 

Tokens can be divided into: 

• Capital tokens — securities (shares) of a company;
• Service tokens — used by online platforms and can represent points, game currency, and reputation;
• Asset-backed tokens — a kind of commitment to services or goods.

‍

‍

A simple example to make sense of it: Ethereum is a coin because it runs on the Ethereum blockchain, and Uniswap is a token that runs on Ethereum.

‍

Why are there so many cryptocurrencies?

Blockchain technology is open source. This means that any developer can use it and create new crypto types by adding new features to it. This evolution continues until today. 

Some types of cryptocurrencies are used as an asset for investment and savings. They can be bought, sold, or exchanged on cryptocurrency exchanges.

The goals of crypto platforms are different. Blockchain offers solutions to problems in many areas: finance, agriculture, cybersecurity, fine art, insurance, gambling, health care, law, medicine, real estate, and delivery.

The «Fear of missing out» factor also encourages developers and entrepreneurs to invest in creating new types of crypto. The popularity of cryptocurrencies is because entrepreneurs and developers want to get rich through crypto assets. 

‍

Payment currencies: almost like real money

Let's start with the simplest — with the payment crypto. This type is called so because it is intended for payments. Suppose you can pay for goods or services with a cryptocurrency and withdraw the crypto into a fiat currency (for example, dollar, euro, yuan). In that case, you have typical payment crypto. Cryptocurrency is not money in its usual form. Yes, the concept implies a digital asset or a means of exchange. 

Among all categories of cryptocurrencies, payment ones are the most common and well-known. This includes, foremost, Bitcoin — the first crypto in the world. Other popular types often come up are Ethereum, Litecoin, Dogecoin (it's funny that this crypto initially started as a joke), and others. But even after more than ten years, different types of cryptocurrency are prohibited or restricted in many countries. Some tech companies accept cryptocurrency payments for their services, Microsoft and Shopify among them. Bitcoins can be used to pay for luxury goods. For example, on the Bitdials marketplace, you can buy expensive Rolex, and Patek Philippe watches with cryptocurrency. Lamborghini was the first company to accept cryptocurrency as payment. Now you can also buy a Tesla for bitcoins. In 2021, AXA, a Swiss insurance company, began accepting payments for insurance plans in bitcoin.

So, for now, you can't pay for a cup of coffee with any type of cryptocurrency. But you can have a cryptocurrency wallet or cryptocurrency payment gateway, you can buy different types of cryptocurrency, keep track of the rate, sell them at an excellent value, and you can accumulate or exchange them for real money.

‍

‍

If we talk about the payment crypto, the answer to the question «how many kinds of cryptocurrencies are there?» will constantly change. This is due to the emergence of new and new platforms on which fresh and new payment cryptocurrencies are built. What is a blockchain platform? Now we will talk about it.

‍

Blockchain economy: technology that is changing the banking system

Why do people worldwide want to be part of the cryptocurrency universe? Why indeed? The answer is, in short: blockchain economics.

Blockchain and cryptocurrency are often identified. But they are different. Blockchain is the basis on which cryptocurrency works. In the most general sense, blockchain is a system for capturing information. It differs from a conventional database in the way information is stored, namely the inability to change, hack or cheat the system in the blockchain. The cryptocurrency Bitcoin was the first product to use blockchain technology. The concept of blockchain is already changing the established banking system. Blockchain guarantees equality between all users through features such as peer-to-peer and self-governance. P2P transactions happen on a blockchain without intermediaries. The cost of each transaction is much lower. In addition, the consensus algorithms used to verify the accuracy of the distributed ledger make the system less vulnerable to fraudsters and cybercriminals.

The blockchain economy or platform is more global and complex than payment crypto. With the help of platforms, it is already possible to pay for goods and services and create your own tokens. This opens up a wide range of possibilities for you. Roughly speaking, when using such categories of cryptocurrencies as the blockchain economy, you get at your disposal not the material values ​​themselves but the machine for their creation.

The most famous type of digital currency of this kind is Ethereum. It is a programmable blockchain that is now second in popularity after Bitcoin. It was with Ethereum that the popularity of non-fungible tokens or NFTs began. Cardano and Solana are other popular types of cryptocurrency that are also blockchain economies.

‍

Utility tokens & smart contracts

Blockchain economies produce utility tokens. Using tokens, you can create unique smart contracts, for example, to purchase goods and services. A widespread use case for a token is to pay for the rental of computing power to perform resource-intensive tasks. Not all tokens are created as investment instruments. Service tokens are intended for access to the relevant platform and the products and services provided by that platform. For example, the tokens of the decentralized Uber can give the right to a ride. ARK tokens, however, offer the right to vote for protocol direction via delegated share proof (DPoS). This is the difference between utility and investment tokens, which you earn income by owning.

A popular utility token is the Basic Attention Token, built on the Ethereum blockchain platform. An essential feature of utility tokens is the maintenance of smart contracts. Whatever blockchain these tokens run on, they must support smart contracts. For this reason, the Ethereum network, which distributes intelligent contract technology, is a frequent choice of project developers. 

Here it is worth making a slight digression and explaining the difference between tokens and coins since these two concepts are often confused.

Crypto coins are essentially a form of currency. Coins are created on their blockchain and used as a means of payment for digital payments. Tokens are built on an existing blockchain and can be used to pay for real things like electricity.

‍

Privacy coins — security guarantor

If you choose the type that will be the most confidential of the entire cryptocurrency types list, then your choice is privacy coins. Privacy coins are types of crypto that provide strong user privacy protection and guarantee their data security. Cryptography the wallet balance and user address to maintain anonymity and privacy. However, Privacy coins do not guarantee complete privacy, and you should always investigate local laws when using these assets.

This type got its name because only the sender and the recipient know the number of transactions of such crypto. Also, only its owner knows the balance of the wallet. This is a fundamental difference between privacy coins and various cryptocurrencies like Bitcoin, where the balance of the wallet address is known to everyone.

Privacy coins use three cryptographic methods:

Hidden addresses: each new transaction generates a unique address. It is a means of protecting the confidentiality of the recipient. 

Zk-SNARKs: this non-interactive knowledge argument with zero disclosure is proof of the validity of a transaction without details (sender, recipient, amount). 

Ring signatures: the tool does not allow you to see your signature using your private key, so the signature is not associated with your address. 

There are many privacy coins; the most famous are ZCash, and PIVX.

‍

Stablecoins: the way to stability

The stablecoin completes our list of various cryptocurrencies. It is straightforward to understand what it is if you know that the name consists of two words — «stability» and «coin». Stablecoins are types of cryptocurrencies with a fixed or stable exchange rate. They are convenient for trading, capital accumulation, and investment portfolio protection from volatility and generally are a universal unit of account.

‍

‍

While the value of other types of cryptocurrencies can fluctuate greatly, stablecoins strive for stability. This does not mean that this digital currency always has the same price, but fluctuations tend to be minimal. Various methods are used to maintain this stability.

The purpose of the existence of a stablecoin is to simplify and reduce the cost of transactions. It is also a great solution to prevent financial losses. For example, you are a trader and see that your assets are losing value. Then you sell the support for a stablecoin and get a crypt with an almost fixed value.

Stablecoins are convenient for storing capital or using it as currency for exchange. Unlike fiat currencies, coins are faster and easier to transfer between user accounts. Stablecoins can be called a universal currency because they are always equal to the dollar's exchange rate. In addition, stablecoins protect against the volatility of the cryptocurrency portfolio and are actively used in DeFi applications.

An excellent example of a stablecoin is USD Coin, built on the Ethereum blockchain platform. The value of this digital coin is pegged to the US dollar at a ratio of 1:1.

By the way, you can quickly receive different cryptocurrencies from your clients with our CPAY service. Also, CPAY allows you to monitor exchange rates in real time and provides the statistics for each cryptocurrency.

‍

The 20 largest cryptocurrencies by market volume

So, when you already know the types of cryptocurrencies, let's look at the 20 most relevant and famous cryptocurrencies. 

‍

1. Bitcoin (BTC) — industry pioneer

Bitcoin (BTC) is the world's first example of a cryptocurrency. Bitcoin can be earned in many ways: mining it, buying it on the open market, wagered, and — in rare cases — obtained through promotions, bonuses, and various games.

At the end of June 2022, one bitcoin is worth about $20,000. 

Such value of the cryptocurrency is due to its limited number — no more than 21 million. And most of the bitcoins have already been generated, and about 30%  of the coins are irreversibly lost.

‍

2. Ethereum (ETH) — almost cash

Ethereum is a form of type of digital currency that is mainly used on the Ethereum platform. ETH is similar to regular money that you transfer into an account. True, one ETH is now worth more than $2,000.

Ethereum is developed in the Solidity programming language and uses smart contracts. Unlike the bitcoin blockchain in the Ethereum network, smart contracts can be executed multiple times. Thanks to this program, a connection between all cryptocurrency owners is established.

‍

3. Tether (USDT) — stability guarantor

Tether (USDT) is a cryptocurrency type like a Stablecoin. That is, it is backed by fiat money and differs from the same Bitcoin in its stability. The lack of volatility is not the only plus of USDT. 

Tether allows users to be anonymous and not have to worry about leaking personal data. USDT has established itself as a reliable cryptocurrency that is accepted on many exchanges around the world. It can be successfully converted to any local currency at a favorable exchange rate. Tether is insured against risks by Tether Limited's assets.

‍

4. USD Coin (USDC) — the rate will always be equal to the dollar

USD Coin (USDC) is a type of crypto, like Stablecoin. Each USDC coin is backed by one dollar or asset with an equivalent fair value, held in accounts with financial institutions regulated by U.S. authorities. You can always exchange 1 USD Coin for 1 USD to make its value more stable. 

USD Coin is an Ethereum token so that you can store these cryptocurrency types in an Ethereum-compatible wallet, such as CPAY Wallet.

‍

5. Binance Coin (BNB) — instant transaction

Binance Coin (BNB) is a crypto type that supports the Binance Chain ecosystem. BNB is one of the most popular utility tokens in the world. Not only can you trade BNB like any other cryptocurrency, but you can also use BNB for the broadest array of extra benefits. 

Every three months, Binance uses 20% of its total profits to redeem and “burn" — the final elimination of a certain quantity of BNB. This is a deflationary procedure that increases the value of the cryptocurrency over time.

‍

6. XRP (XRP) — The best option for banking and financial services

Ripple is the name of a company and a cryptocurrency remittance network, while XRP is full-fledged crypto designed to work on this network and is consistently one of the top five cryptocurrencies by capitalization. But for many people unfamiliar with the intricacies of financial systems and transactions, Ripple and XRP are synonymous, and when they come across either word, they think of cryptocurrency first.

First, its difference from other types of digital currencies is that it was created to serve financial transactions and therefore targets the banking and financial services market. For example, the Ripple protocol is used by such global financial giants as UniCredit, UBS, and Santander. The idea is that Ripple is a trusted agent between the two parties to a transaction because the network can quickly confirm that the exchange went correctly. Ripple can facilitate exchanges for various fiat (government) currencies, cryptocurrencies such as bitcoins, and even commodities such as gold.

‍

7. Binance USD (BUSD) — approved by the New York State Office of Financial Services

BUSD is a cryptocurrency type of Stablecoin approved by the New York State Financial Services Authority (NYDFS) and released in conjunction with Paxos.

As a stablecoin, BUSD is supposed to maintain a stable market value. It allows investors and traders to store assets on the blockchain without the threat of volatility and without having to withdraw them from the crypto space.

‍

8. Cardano (ADA) — third-generation blockchain

Cardano (ADA) is a so-called third-generation blockchain. It can be used to create decentralized apps (DAAPs), just like Ethereum. However, this blockchain compares to other similar platforms in many ways. The critical difference is Cardano's particular strategy — the cryptocurrency and blockchain use top scientific research and expert evaluations for development.

‍

9. Solana (SOL) — a mechanism for adding timestamps to blocks

Solana (SOL) is a type of cryptos created on a new blockchain. The blockchain has timestamps thanks to the unique Proof of History (PoH) consensus mechanism. These timestamps determine when a transaction or event occurred. 

Blockchain SOL can conduct up to 710,000 operations per second (for example, VISA conducts only 65,000 transactions per second). At the same time, the fees in the network are minimal, and the cryptocurrency is fully decentralized.

‍

10. Dogecoin (DOGE) — joke currency

Jackson Palmer decided to play a joke on newly minted crypto investors and created his type of cryptocurrency called Dogecoin. Palmer wanted to show everyone around him that investing vast amounts of money in this unstable direction is absurd. 

However, as it turned out, over time, the joke ceased to be such, and the capitalization of the «meme» began to grow to hundreds of millions of dollars.

‍

11. Polkadot (DOT) — multi-platform

Foremost, Polkadot is not a type of cryptocurrency but a multiplatform designed to unite all currently existing blockchains into a single global ecosystem. Polkadot's mission is to create an entirely new Web3 network based on dinner blockchains, where information exchange will be completely decentralized.

‍

12. Dai (DAI) — It's like getting money from the bank

Dai is a decentralized Stablecoin. It is an ERC20 token that is pegged to the US dollar. Each Dai is worth $1 and will always be worth that much, no matter how long it exists. There is no centralized authority for it, like Tether, to maintain value, and there is no traditional bank to back each Dai with a real U.S. dollar. There is nothing to shut down, and no centralized system can be trusted. Dai runs on the Ethereum blockchain using smart contracts.

‍

13. Shiba Inu (SHIB) — Dogecoin killers

The types of crypto Shiba Inu (SHIB) appeared in August 2020. An anonymous person created it under the pseudonym Ryoshi. The coin positions itself as a «Dogecoin killer», and its logo is a Shiba Inu dog, precisely represented on DOGE coins.

Shiba Inu is an ERC-20 token that runs on the Ethereum blockchain because it has already «proven itself» and helped many create successful crypto projects. Still, analysts agree that Shiba Inu is unsustainable, just like other meme coins or stocks like DOGE or GameStop. «The hype around meme coins like SHIB is a social phenomenon, not a financial one», — argues Ben Caselin, head of research and strategy at cryptocurrency exchange AAX.

‍

14. TRON (TRX) — one of the fastest growing cryptocurrencies

TRON is a blockchain platform that aims to exchange free, decentralized user-generated content. It was created in 2017, and its native cryptocurrency, Tronix (TRX), was the 20th largest cryptocurrency by market capitalization in 2021.

Tron intelligent contracts are compatible with Ethereum. However, the processing speed in this blockchain is higher than in Ethereum. 

‍

15. Avalanche (AVAX) — Can process 6,500 transactions per second

Avalanche, or AVAX, is the native token used to make all transactions on the platform.

The first private sale of AVAX tokens took place in May 2020, when nearly 25 million coins were sold to investors at $0.50 for a total of $12 million. 

You can get AVAX by buying altcoin on exchanges or receiving it as a reward for keeping the blockchain running.

‍

16. UNUS SED LEO (LEO) — Privacy and Utility tokens

LEO is both a service and investment type of digital currency. In other words, the coin also acts as a bond that iFinex has issued. 

It is designed to empower the Bitfinex community and provide utility to those seeking to maximize the performance and capabilities of the Bitfinex trading platform.

‍

17. Wrapped Bitcoin (WBTC) — Bitcoin on Ethereum

Wrapped Bitcoin (WBTC) is an Ethereum token representing bitcoin (BTC) in the Ethereum blockchain. This ERC-20 standard token is designed to track the value of bitcoin. WBTC was created to enable bitcoin holders to work with decentralized finance (DeFi) applications, which are popular on the Ethereum blockchain. It tracks the maintenance of a 1:1 ratio between issued WBTC tokens and bitcoins held in depositories. Through a WBTC partner, one bitcoin can be exchanged for 1 Wrapped Bitcoin and vice versa. BTCs supported by WBTC is verified using a «proof of reserve» system. 

‍

18. Polygon (MATIC) — one of the most promising and fastest-growing coins of 2021

The Polygon platform has its service cryptocurrency, MATIC.

Polygon (MATIC) is a type of cryptocurrency that operates based on the Proof of Stake (PoS) method. This means that coin holders receive income calculated based on their numbers. You can't mine MATIC because everyone who stores tokens in their wallets must participate in the process of confirming transactions on the network.

‍

19. Litecoin (LTC) — bitcoin of all altcoins

Types of crypto Litecoin were created to solve several bitcoin problems. In particular, to reduce the time it takes to verify a new block in its blockchain and maintain storage reliability. This is an advantage of the Litecoin payment system, which was aimed at attracting stores. 

Nevertheless, interest from stores in Litecoin and cryptocurrency, in general, has not increased, which has led to its change and the introduction of new features. For example, Lightning Network and Segregated Witness are also updates implemented by bitcoin.

‍

20. Uniswap (UNI) — Uniswap network token

Initially, Uniswap is a decentralized exchange based on a distributed ledger, which provides cryptocurrency exchange operations without intermediaries. Here you can buy, sell or exchange any token of the ERC-20 standard, i.e., issued on the Ethereum blockchain. 

The UNI token is the site's coin and brings income to its owners (the token's value is about $35). Holders of these tokens determine the mechanism of coin distribution among community members and developers. UNI also provides an opportunity to manage the development of the service by voting for specific changes within the platform.

Now you know the types of cryptocurrencies, what are the different cryptocurrencies, how to use them, and the names of the 20 largest cryptocurrencies by market volume. All that's left is to register your first crypto wallet. 

Summing up, we can once again say that the answer to the question «how many cryptocurrencies are there?». Is constantly changing. The same goes for crypto types. It is possible that over time, new types will appear, and some existing ones will go into oblivion. In any case, we hope that this text has helped you understand the modern kinds of cryptocurrencies. And we will continue to post materials on this topic on the CPAY.com blog.