Types of Cryptocurrencies – Explained!

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    There are so many different types of cryptocurrencies that blossomed from Satoshi Nakamoto’s Mysterious creation. Bitcoin is no longer the only player on the market; thousands of cryptocurrencies are continuously joining the market. This article will focus on the different types of cryptocurrencies and get a better understanding of the crypto marvel.

    The difference between cryptocurrency and a virtual currency

    A virtual currency works as a digital-analog of all fiat currency (EUR, USD, or RUB) and has the same value. One can buy it for the same total of real money, converted into another currency, and used for purchasing goods and services online. The organizing of The turnover of virtual currencies takes place with the assistance of online platforms such as Webmoney, PayPal, Skrill, QIWI, and others.

    Whereas,

    The history of cryptocurrency began with Bitcoin when its technology-enabled peer-to-peer money transfers without trusting any third party. Bitcoin is an open-source initiative; this means that any person can develop it. That is exactly what people did and created alternative cryptocurrencies; altcoins.

    The three basic types of cryptocurrencies

    Traditional cryptocurrencies such as Bitcoin serve only as a unit of exchange. Just like common fiat currencies, they have an intrinsic value accredited to people using it; its price may rise or drop.

    Utility cryptocurrencies

    These work to build an infrastructure on the top of it. A good example is; Ethereum, it allows developers to produce ‘Smart Contracts’, ( the code which can execute coin transactions with no middlemen or third-party organizations. Moreover, Smart contracts can motivate decentralized applications and be useful in literally anywhere communication with no trust is required. Another related cryptocurrency is Filecoin; this coin serves to generate a decentralized data storage system.

    Tokens (app or platform cryptocurrencies).

    These types of cryptocurrencies are cryptocurrency equivalents of a platform or application that produced on top of a utility cryptocurrency such as Ethereum. The use of tokens is usually in the frames of a particular infrastructure for purchases or even getting some sort of rewards. For example, Shivom is a decentralized genome information storage platform built on top of Ethereum; it permits users to share their genetic data with researchers as well as medical organizations for a reward in return. Yumerium is an Ethereum-based online gambling platform which incentivizes users with the exclusive YUM token for testing and reviewing games.

    Popular crypto coins and their differentiation

    types of cryptocurrenciesIf you think that all cryptocurrencies are the same, think again. As a matter of fact, NEO and Ethereum are completely different. Rather than serving as a digital currency, Ethereum allows for building platforms as well as applications on the blockchain. Let’s take a look at the most influential types of cryptocurrencies;

    Bitcoin

    As the first cryptocurrency ever; Bitcoin occupies 40% of the market, and most people believe that it will remain at number one. Modern stores accept Bitcoin as a form of payment, and it is the easiest coin to be turned into physical cash. The limit of bitcoin is just 21 million; 17 of them have already been mined, and four are left. That will only raise its price! Regardless of its popularity, Bitcoin is not perfect; the scalability of its transactions is limited to 3.5-7 transactions every second. Therefore, the issuing of alternative coins took place to alter the core protocol as well as improve this value.

    Litecoin

    The creators of litecoin addressed the problem and created a cryptocurrency with a verification period of two and a half minutes (as opposed to ten minutes with BTC); and total coin supply of 84 mln. Hence, that reduces the mining competition rate and lowers transaction fees. Also, litecoin does not only boost the P2P transfers speed by four times; but also uses a memory-intensive proof-of-work system, that makes it more available.

    Ethereum

    Of all the types of cryptocurrencies, Ethereum is the second most popular cryptocurrency following Bitcoin. It allows the generation of smart contracts; the portions of code that written on the blockchain and are almost impossible to change. Nevertheless, transactions are anonymous, quick and verified by the network. The main benefit of Ethereum is its versatility; it can go into the foundation of any project in need of coding, security, and decentralization.

    Ripple

    This type of cryptocurrency is one that allows money transfer between countries. How it works I; users convert their currency into Ripple, and the transaction occurs on the blockchain, and then the receiver will convert Ripple back to the currency he requires. Ripple does not need mining; this is because the fixed coin supply is sufficient for existing time-locked contracts.

    Monero

    This is one of the Top 10 currencies. From the launching of the coin in 2014 it has rapidly gained authority amid cryptography amateurs. The development of the cryptocurrency is driven by the community of cryptography and its donations. Today it is celebrated for the supposed technology of ‘ring signatures’ which allows for ultimate privacy. Moreover, one can replace Monero currency for any other unit.

    Final thoughts

    After going through this article, you should; now be a little more familiar with the types of cryptocurrencies that exist and the popular cryptos aswell. You know more of their difference and understand what they are all about.

    You are now in a much better position to begin doing more research and developing an opinion of your own.

    Good luck!