7 Types of Cryptocurrencies Explained

1. Store Of Value

  • Store a value cryptocurrency are designed to hold or even increase their purchasing power over time
  • Bitcoin is the most popular cryptocurrency that falls into the store of value and is also referred to as “digital gold”
  • Bitcoin has a maximum supply of just 21 million BTC. This 21 million BTC is created gradually over time by miners, who solve complex equations to process transactions on the Bitcoin blockchain and earned BTC as a reward
  • While Bitcoin was originally designed to be digital cash, its economics combined with relatively slow transaction speed has made it more like digital gold than digital cash
  • Bitcoin Paradox: People buy cryptocoins, but they don’t use them because they want their value to grow. However, unless crypto is used to serve its purpose as a means of exchange, its value will eventually fall, and investors will offload it

2. Smart Contract

  • Smart contracts are basically programs that do something automatically when a certain set of conditions is met
  • Smart contracts can be used to create different types of cryptocurrency tokens that are fungible (indistinguishable from each other)like a regular currency or non-fungible like a rare baseball card
  • When you combine multiple smart contracts together, you get a decentralized application or dApp
  • dApps are decentralized so there’s no middle man taking a cut or stealing your data.
  • Infinite amount of use cases but the most notable ones: government voting system, storing health records of patients, supply chain invoices and contracts, processing loans and mortgage agreements
  • Ethereum is the most notable cryptocurrency

3. Oracle Cryptocurrencies

  • Bring real-world data to smart contract cryptocurrency blockchains.
  • Most of the applications you use every day required some sort of real-world data be it date and time, weather, or the price of something you’re buying or selling
  • This normally works is that dozens of individuals or institutions will tell an article crypto what the price of something is, and the oracle will use the average of their answers.
  • In an example of weather, the crypto links to multiple providers of weather and averages the results
  • Chainlink is the most notable cryptocurrency

4. Payment Cryptocurrencies

  • Payment cryptos aim to replace the current payment systems we use today and sometimes use smart contract technology to do this.
  • In the traditional system, credit card companies like Visa and Mastercard as well as banks takes days to settle and charges a significant processing fee
  • Payment cryptocurrencies make it possible to finalize transactions within seconds at a fraction of the cost.
  • Any payments can also be stored in a decentralized network without worry that the bank have access to your funds
  • Bitcoin Cash [https://bitcoincash.org/] is a popular payment crypto today

5. Privacy Cryptocurrencies

  • Privacy cryptos are designed to preserve your privacy when making transactions or you using dApps
  • Privacy coins are a class of cryptocurrencies that power private and anonymous blockchain transactions by obscuring their origin and destination
  • One of the advantages of the blockchain is that it’s completely transparent; this means that anyone can see any transactions processed to what wallet address
  • While your identity is not connected to your cryptocurrency wallet address by default it’s not that hard to figure out which cryptocurrency wallet addresses you own
  • Privacy crypto like Tornado Cash (TOR) make it possible to privatize your public transactions on Ethereum by mixing up your funds and sending them to a new wallet address with no transaction history
  • Monero is a popular privacy coin today

6. Exchange Tokens

  • Exchange tokens are owned and operated by the cryptocurrency exchanges they belong to
  • You can think of exchange tokens as being a combination of a membership subscription and company stock
  • Exchange tokens are like a membership subscription because they can give you a whole bunch of perks such as trading fee discounts, and VIP access to early coin and token sales
  • Exchange tokens are like company stock because the performance of an exchanged token depends on the popularity of the exchange platform
  • Binance Coin is the most notable exchange token

7. Meme Coins

  • Meme coins have no specific use case and exist for no other reason besides hype and a false promise of profit
  • Most meme coins exist for one purpose and that is to enrich their creators, you can try your luck riding that wave but the risk is not worth the reward in my personal opinion
  • Shiba Inu Coin is notable today, but this will most definitely continue to change overtime

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Hi! I'm

Ricky Young

My belief is that financial freedom cannot be obtained by just a 9-to-5, but a combination of smart investing and passive income. This is my journey to achieve financial freedom.

Disclaimer: The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. To learn more, read our Terms of Use.