What are the Different Types of Cryptocurrency
Cryptocurrency is changing the world economy. But why the hell is it so damned confusing? For example, even to answer the question, “What are the different types of cryptocurrency” might not be the answer to your real question. If you’re looking for a list of the “top” cryptocurrencies click here. But first, it’s important to understand what the basic differences between cryptocurrencies are.
There are various cryptocurrencies that exist and are widely in use. There are over a thousand cryptocurrencies out in the world at varying levels of value, efficacy, and staying power. This can all sound needlessly confusing but given a lot of the background development, coding, and economic development this is likely the tip of the iceberg of what goes into cryptocurrencies.
What are the different types of cryptocurrency?
So to start, it might help to use money as an example. There’s a difference between paper money and coins. Similarly, cryptocurrency is roughly broken down into four different types: Bitcoin, Altcoins, tokens, and memecoins. These four give you a rough breakdown to understand the general types of cryptocurrency that exist.
Bitcoin is the OG cryptocurrency. On October 31, 2008, a mysterious character known only as Satoshi Nakamoto released a white paper outlining the use of a new form of currency called Bitcoin. In January 2009, the open-source software was released into the wild. And it was off to the races.
Now, Bitcoin is essentially the starter coin for all of cryptocurrency. Its value has gone from nothing to roughly $40,000 per coin.
Bitcoin is not without problems. The innovation being done to the bitcoin model and blockchain have led to the creation of altcoins. Altcoins are cryptocurrencies that are traded on their own blockchain. They can be similar or completely different from bitcoin.
A helpful way to remember it is if a coin is traded on a blockchain and is not bitcoin it’s an altcoin. There’s been a decent amount of time between the genesis of bitcoin and it going mainstream which has allowed different developers to create new forms of cryptocurrency that might be more efficient, more green, or even centralized.
Tokens and NFTs
Tokens are coins that can be traded on decentralized apps. So rather than being traded on blockchains, these can be traded independently. Rather than relying on the blockchain, these are a different model which allows for more adoption.
Also, NFTs (non-fungible tokens) are a way to use blockchain technology to track ownership of digital assets. This can be anything from a tweet to an entire catalog of art or an album. They’re growing in popularity and are often traded on the Ethereum blockchain. An altcoin is traded on its own blockchain but if an element or piece of crypto is traded on multiple platforms or apps, it’s a token.
Memecoins are essentially the bottom-tier altcoins. There are thousands of cryptocurrencies in circulation and more cropping up as people see a potential for profit.
But, there needs to be some thought to the financial end goal in mind. The value of the coin, the feasibility of it succeeding and a general adoption strategy need to be thought out. The computing and financial dynamics need to be locked down.
When there’s no foreseeable value in a type of crypto, it can be called a memecoin. Some notable memecoins include PutinCoin and WhopperCoin.
It’s one thing to create something to trade on a blockchain. It’s completely different to create a viable currency that not only has outside interest and sustainability but also increases in demand.
One of the most readily familiar memecoins is dogecoin. Dogecoin, while growing in value and adoption, began as a joke. It was created by software engineers Billy Markus and Jackson Palmer as a satirical take on Bitcoin. But its wide popularity on social media like Twitter and Reddit led to its increase in price.
However, the intense volatility of Dogecoin does call into question its meme-ability. After all, if it can be so easily affected by tweets by Elon Musk and sketches on Saturday Night Live, how sustainable can it really be?
Now those cover the types of cryptocurrencies. But there are also different varieties of cryptocurrencies that live on their own blockchains like Ether, Litecoin, or Tether. If you are new to crypto and you’re familiarizing yourself with the terrain, you may want to know the top 7 cryptocurrencies. We’ve got you covered there. For sure, it’s a disruptive and exciting playing field creating amazing opportunities out there for those who learn the dynamics and are brave enough to dive in!
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