Not so long ago, when people said «cryptocurrency» they meant only Bitcoin. That was because there was only one major crypto, and other altcoins didn’t exist or were so new and niche that no one considered them. As years went by, the crypto market gained many new vibrant shades and categories of cryptocurrencies. Today, every crypto exchange or DeFi service has its token, and all blockchains have one or more cryptocurrencies to host.
To stay informed and well-oriented in such diversity, read what types of cryptocurrencies there are. Most of them are available on KvaPay.
Major Types of Cryptocurrencies
The first division that comes to mind would be Bitcoin and Altcoins. However, there are more kinds of tokens than that. We decided to list the following types of crypto:
- Bitcoin
- Altcoins
- Stablecoins
- Meme coins
- Utility tokens
Bitcoin
Bitcoin (BTC) is a pioneer cryptocurrency introduced in 2009. The pseudonymous creator of Bitcoin, Satoshi Nakamoto, created this project as the first purely digital payment system. Bitcoin features a peer-to-peer mechanism of work, supported by miners who gain compensation for their work paid in newly issued Bitcoins. BTC is often referred to as digital gold because there is a limited amount of it. One day, supposedly in the year 2140, all 21 million bitcoins will be mined, hence it is similar to gold in its scarcity.
Altcoins
Altcoin stands for «alternative coin» and traditionally means all cryptocurrencies other than Bitcoin. Because this definition is so broad, we included only those currencies not related to other categories.
Ether (ETH)
A crypto native to the Ethereum blockchain launched by Vitalik Buterin in 2015. This crypto and the underlying blockchain are special because they first introduced the concept of smart contracts. The Ethereum Virtual Machine (EVM) gives ground for decentralized applications, decentralized finance, and many more innovative projects.
More on this topic: What Is Decentralized Finance?
Litecoin (LTC)
Litecoin is one of the first altcoins on the market. It was created in 2011 by Charlie Lee as Bitcoin’s fork, copying many characteristics of BTC, particularly its scarcity. Litecoin features a different hashing algorithm called Scrypt. It improves transaction speed and makes LTC more suitable for day-to-day transactions.
Ripple (XRP)
Ripple focuses mainly on quick and low-cost international payments. It was founded in 2012 by Chris Larsen and Jed McCaleb as Ripple payment protocol and the digital currency XRP. Ripple uses a different from traditional mining consensus algorithm, making transactions quicker and more energy-efficient. Ripple has agreements with many financial institutions to transfer money internationally.
Cardano (ADA)
Cardano was founded by Charles Hoskinson, a co-founder of Ethereum. Cardano is a blockchain platform that features scalability, sustainability, and interoperability. The so-called two-layer architecture separates the settlement layer (where the transactions are processed) from the computation layer (the smart contract side). It improves the security and efficiency of the platform.
Polkadot (DOT)
Polkadot was created by yet another co-founder of Ethereum Gavin Wood. It is designed to enable cross-integration of different blockchains. It features a multi-chain framework that allows transfers of any data or assets across blockchains. Such interoperability allows blockchains to cooperate and share information. Three distinct functions are served by Polkadot's native DOT token: bonding tokens to link parachains, enabling network governance, and staking for operations and security.
Stablecoins
Stablecoins are a category of cryptocurrencies that address the issue of crypto volatility. This is achieved by algorithmically pegging a token’s value to a fiat currency or a commodity like gold. The pegging mechanisms drastically reduce fluctuations and help users with everyday transactions and savings.
Stablecoins connect traditional finance with decentralized, fixing some flaws of the latter. Stable tokens used now are considered DeFi services since they provide people with a stable and reliable medium of exchange not prone to volatility.
Tether (USDT)
It is the most widely used and the first created stablecoin pegged to the US dollar at a 1:1 ratio. The peg is achieved by backing every Tether to a dollar’s worth of assets held in reserve. Tether is commonly accepted as a stable store of value and a reliable non-volatile crypto.
USD Coin (USDC)
USD Coin is another USD-pegged stablecoin launched by Coinbase. It is fully backed by fiat reserves kept in official financial institutions. USDC is also used for many purposes, being integrated into many DeFi services.
Meme Coins
Meme coins are a special category of cryptocurrencies driven by speculation and social media hype, mainly on Twitter. While they lack any particular utility or use case, some managed to gain significant popularity and value because of support from influencers and their community.
Dogecoin (DOGE)
Created in 2013 as a joke based on the popular «Doge» meme, the crypto quickly acquired a strong fan base. It has been used for charity causes and tipping content creators online. Its low transaction fees also made it popular for microtransactions. The popularity of this meme coin saw some dramatic increases thanks to Elon Musk’s endorsements on Twitter.
Shiba Inu (SHIB)
Shiba Inu was launched in 2020 inspired by Dogecoin. It also has the Shiba Inu breed dog as its mascot. SHIB has a community of dedicated fans and a decentralized exchange ShibaSwap. SHIB has attracted many investors and encountered significant volatility, earning its place on the crypto market for good.
Utility Tokens
Unlike other cryptocurrencies, utility tokens primarily serve a function within a specific blockchain or decentralized service and have little to no use cases outside of that. However, they still have their price and can be used to pay transaction fees on exchanges or other service tasks.
Binance Coin (BNB)
The native token of the Binance exchange. Initially launched as an ERC-20 token on the Ethereum blockchain, then migrated to Binance’s proprietary blockchain Binance Chain. BNB is primarily used to pay trading fees on the exchange.
Chainlink (LINK)
Chainlink is a decentralized network that connects blockchain to real-world data, APIs, and payment systems. LINK tokens are used as payment for services within the ecosystem, such as data needed to execute smart contracts.
With all that being said, it is apparent that the world of cryptocurrency is unbelievably vast and diverse. Bitcoin, altcoins, stablecoins, meme coins, and utility tokens make a competitive market where everyone can find a needed crypto. Bitcoin remains the most popular cryptocurrency, growing further and confirming its name as digital gold, and altcoins like Ether and Polkadot are flowing through the veins of their blockchains. To take advantage of these cryptocurrencies and exchange them with comfort, sign up on KvaPay and read more of our articles.
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