Understanding the Types of Cryptocurrencies
Cryptocurrencies are digital currencies managed using blockchain technology. Blockchain technology can be summarized as a decentralized, distributed ledger that records transactions using mathematical codes and algorithms. It is decentralized because there’s no central authority regulating it. Because of its distributed ledger system, anyone can view transactions carried out but can’t edit them because they are permanent.
With the high adoption rate of Cryptocurrency globally, digital currency has slowly begun to gain acceptance in global markets as an alternate mode of payment to fiat currency. It is, however, important to understand the difference between coins and tokens and to understand, also, the different types of cryptocurrencies we have.
Difference Between a Coin And a Token
Contrary to what most people think, not all cryptocurrencies with a coin suffixed attached to their name are coins.
A coin is a digital currency existing on its own blockchain with its own protocol, and they are purely used as a source of payment. A good example is Bitcoin. A token, on the other hand, is a digital asset issued on a particular project.
Unlike coins, tokens don’t exist on their blockchain, and they are built on already existing blockchains like the Ethereum blockchain or Algorand blockchain. A good example of a token is HaggleX.
Types Of Cryptocurrencies
Now that we’ve understood the difference between coins and tokens let’s examine the different types of cryptocurrency that we have. What other way to start than with the KING!!!
BITCOIN: I dare say that one in every twenty persons you meet around the globe has heard about Bitcoin! If they haven’t, send them to this post ASAP! Lol!
Bitcoin is the first-ever digital currency to be created. It has its own unique blockchain, which makes it a coin. It is transparent and has seen an increase over time. Currently valued at $48000 (at the time of writing) from an initial trading price of around $0.0008 to $0.08 in July 2010 and with a market dominance of 40.93%, Bitcoin is ranked as the number one cryptocurrency in the world.
Google Trends shows that Bitcoin searches were at an All-Time High(ATH) in May 2021. Bitcoin also received an average of 4,700,000 crypto-related searches a month this year. This shows that more people are finding out about bitcoin, and that’s great. But here’s something more promising: Altcoins!
ALTCOINS: According to Quora, Altcoins are cryptocurrencies other than Bitcoin. They are similar to Bitcoin because they can perform some functions that Bitcoin can, but they have unique differences. Examples of Altcoins are HaggleX, Ethereum, Ripple, etc.
Altcoin works similarly to Bitcoin. Its transactions are permanently recorded on the blockchain. Most altcoins are trying to address any perceived Bitcoin flaws by developing competitive advantages in newer versions. They were created to Improve Bitcoin, which earns them the name “Alternative BitCoin.”
Although people think that Ethereum was the first Altcoin because Vitalik Buterin was naming it “Better/Improved Bitcoin,” in actual sense, the first altcoin that was introduced to the market of cryptocurrency is Namecoin. It was created in April 2011, right after the creation of bitcoin.
With over 10,000 altcoins existing, smaller subcategories where altcoins can be classed based on similar use cases have been developed. They are:
Stablecoins: To solve the issues of volatility underlying different cryptocurrencies, stablecoins were created. Stablecoins are altcoins pegged to a fiat currency (USD, EUR, GBP, etc.). Price fluctuations for a stable coin do not exceed a narrow range.
Popular stable coins available today are Tether’s USDT, Circle’s USDC, Binance’s BUSD, and Ethereum’s DAI. Every blockchain has stablecoins that can be used on it, and it is your responsibility to find out which one can be operated on the blockchain you use.
Privacy Coins: With open-source blockchains, public addresses and transactions can be viewed by anyone, which makes it relatively simple to track users’ transactions.
Privacy coins, on the other hand, allow users to carry out private transactions on the blockchain by obscuring the origin and destination of the transaction. Privacy coins offer users anonymity and untraceability. Anonymity hides the identity behind a transaction, while untraceability makes it virtually impossible for third parties to follow the trail of transactions using services such as blockchain analysis. Popular examples include Monero and Dash.
Governance Tokens: Governance tokens are cryptocurrencies that represent voting power on a blockchain project. With governance tokens, developers create an avenue for users to help shape the future of a protocol.
Users can influence decisions concerning the project, such as proposing or deciding on new feature proposals, voting on the development of the project, and even changing the governance system itself. They are usually used in decentralized finance protocols. A common example is Maker (MKR).
Utility Tokens: Utility tokens are used to provide services within a particular network. They are generally platform-specific and are used to pay network fees or claim rewards, or unlock access to services like a subscription. HaggleX falls under this category. Another example is the Revuto token.
Security Token: Security tokens are digital, liquid contracts for assets that already have value. In simple form, they derive their value from external, tradable assets like stocks or real estate.
If you buy a tokenized version of stock, you will acquire the same rights as when you buy stock via a traditional stockbroker — profit share and voting rights. The only difference is that a token comes in digital form. Unlike utility tokens, security tokens are designed to be investments.
Because of their regulatory nature, issues of security tokens are referred to as STOs (Security Token Offerings) rather than ICOs (Initial Coin Offerings). A good example is Infiniti $INX tokens.
It’s important to understand the differences between currencies when choosing the one to invest in. Also, learn to use the right platforms to store your crypto assets. One notable platform is the HaggleX app. One charm of the HaggleX app is that you can qualify to win $100 in the ongoing HaggleX save-to-win promo.