Now, the question you are asking is, how many cryptocurrency types are there?
We currently have thousands of cryptocurrencies, while the new ones are rolling out daily.
By now, you’ve probably heard that cryptocurrencies are digital currencies secured by cryptography.
Apart from the renowned cryptocurrencies that many people know about, such as Bitcoin (BTC) and Ethereum (ETH),
numerous other crypto projects serve various purposes.
I will dwell more on the types of cryptocurrencies, their prices, and other related facts about cryptocurrency types.
Read Also our related post about cryptocurrency Here.
Without wasting time, let’s get started.
How many cryptocurrency types are there
There are approximately 22,932 cryptocurrencies listed on CoinMarketCap, with a total market capitalization of over $1.1 trillion or even more than that.
When you consider that Bitcoin launched only in 2009, that’s quite impressive.
Alternatives to the original crypto, later known as altcoins, didn’t emerge until 2011.
Like Litecoin (LTC) and Namecoin (NMC). The popularity of altcoins began after Ethereum (ETH) launched.
Cryptocurrencies, like Bitcoin, are used as investment vehicles. Many buyers regard them as a store of value.
There are others that are more transactional, like ETH. The more transactional blockchains allow developers to build a lot of tools, services, and communities.
What are the 4 types of cryptocurrency?
There’s also a distinction between coins and tokens. A coin is a cryptocurrency such as Bitcoin or Ethereum that runs on their own blockchain.
Usually, when people think of cryptocurrency, they think of coins like Bitcoin.
Basically, a token is a digital asset stored in a blockchain database. These coins are created on existing blockchains and represent an asset or provide access to a specific application or service for the holder.
A token represents an asset or utility digitally – for example, a lot of other tokens run on the Ethereum network.
Here, I will list the four most popular types of cryptocurrencies below.
- Altcoins
- Stablecoins
- Meme Coins
- Utility tokens.
Altcoins (ALT)
Altcoin definitions have evolved since the early days of cryptocurrency, when only a few crypto assets were available. Back then, any other cryptocurrency apart from Bitcoin was considered an altcoin.
Nowadays, cryptocurrencies have gone far beyond being a medium of exchange, with a wide range of coins and tokens with good use cases.
In many cases, these cryptos are not necessarily competitors of Bitcoin.
Today’s leading altcoin is Ethereum, which has a market cap of $150 billion, while Bitcoin has $325 billion.
Altcoins that are also notable include Solana (SOL) and Cardano (ADA). SOL and ADA should be considered as the most popular competitors to Ethereum.
Apart from serving as a digital currency, altcoins can also serve other purposes. The purpose of Bitcoin is to be a currency that is decentralized,
Ethereum is a blockchain computing network that facilitates ” The development of smart contracts as well as decentralized applications.”
The stablecoin
Stablecoins are cryptocurrencies whose value is tied to the price of another asset. It is expected that a stablecoin pegged to the U.S. dollar will always be valued at $1 if everything is working correctly.
One of the stablecoin types is the one in which a financial institution provides collateral backing for each unit of the stablecoin.
It uses derivative strategies to maintain the value of the underlying government currency for crypto assets.
The collateralized stablecoin.
Collateralized stablecoins maintain a pool of collateral to support the coin’s value.
Each time a token is sold, an equal amount of collateral is deducted from the coin’s reserves.
Tether (USDT), as a crypto that is pegged to the U.S. dollar, is probably the most recognizable stablecoin, although people question the reliability of its reserves.
Algorithmic stablecoins
These stablecoins use algorithms to control their supply and thus maintain their price peg.
A good example is TerraUSD (UST), which was initially pegged at $1 by creating and destroying a sister coin called Luna.
Every time TerraUSD was bought or sold, Luna, its sister token, was created or destroyed.
After a panic caused people to cash in their TerraUSD in a mass exodus, the strategy stopped working.
Along with Luna, TerraUSD depegged from $1 and slid to near zero. TerraUSD’s defense is that Tether dropped from $1 per coin to $0.94 due to the same panic.
The meme coins
A meme coin is a comedian in the crypto world. These meme coins gain more popularity and traction through social media.
Similarly, the term is also used jokingly to refer to coins that explode on social media.
The original meme coin that started is Dogecoin (DOGE), branded around the “doge” Shiba Inu dog meme.
Despite its humorous nature, the asset has become a verifiable cult asset as users flock to it. This led to the emergence of more meme coins.
Since Dogecoin was launched, more than 200 meme coins have been created. Even though memes are fun to conceptualize, meme coins can also fall just as fast as they rise.
As of today, DOGE is only worth a tenth of its all-time high back in 2021. Nevertheless, this is an essential lesson for all cryptocurrency investors to keep in mind.
3 types of cryptocurrency
So here I will list out the top three types of cryptocurrencies. Though I mentioned some of these types of cryptocurrency at the beginning of this post, the difference here is that I have added one new kind of cryptocurrency, the (NFT).
- Altcoins
- Stablecoins
- Meme Coins
- Non-Fungible Tokens (NFTs)
all types of cryptocurrency
In this section, I will answer this question directly by listing all the types of cryptocurrency assets and how they work according to how they were developed to function in their blockchain ecosystem.
Proof of Work (PoW)
Decentralization was a crucial part of the original vision for cryptocurrencies. To accomplish that,
there needed to be a way to confirm transactions without the involvement of financial institutions. The first solution to this challenge was called proof of work.
Cryptocurrencies use proof of work (PoW) to add new blocks of transactions to their blockchain.
In this case, the work involves generating a hash (a long string of characters) matching the target hash for the current block.
When a crypto miner does this, he or she wins the right to add this block to the blockchain and receive rewards.
During the very first days of cryptocurrency, proof of work served as the consensus mechanism, which was used by Bitcoin (BTC 4.56%).
It’s well-known for its security, inefficiency, and heavy environmental impact.
Proof of Stake (PoS)
Cryptocurrencies and blockchain technologies are based on decentralization. A blockchain has no central gatekeeper to manage data and transactions.
To validate and also add new blocks to the chain, the network relies on a large number of participants.
As a consensus mechanism, proof of stake determines which of the participants will be assigned to handle this kind of lucrative task—lucrative because the chosen ones are rewarded with new crypto for validating the new data, and they have not cheated the system.
“Blockchain participants achieve consensus by verifying a transaction is legitimate and adding it to the blockchain,” says Marius Smith, head of business development at Finoa.
By using proof of stake, participants known as “validators” lock up a specific amount of cryptocurrency, or crypto tokens, in a smart contract as their stake.
As a result, they can validate new transactions and earn a reward. But if they improperly validate fraudulent or harmful data, they may lose some or all of their stake as a penalty.
The most significant cryptocurrencies using proof of stake are Solana, Terra, and Cardano.
After Bitcoin, Ethereum ranks second in market capitalization and is currently transitioning from a proof-of-work to a proof-of-stake system.
Tokens
It can be confusing for people new to crypto to understand what a token is. This is because there are roughly three overlapping meanings to the word.
In a technical sense, a token is an asset that represents ownership or value in a decentralized system.
In this sense, it’s no different from “cryptocurrency,” “digital asset,” or “cryptoasset.”
A token can mean any crypto assets other than Bitcoin and, to a lesser extent, Ethereum.
This has a similar meaning to “altcoin” (alternative coin).
Within the crypto industry, a token is generally referred to as a non-native blockchain token.
As an example, the Ethereum blockchain native token is ETH. Any other crypto assets that exist on the Ethereum blockchain are tokens.
Utility tokens
At their core, utility tokens are digital tokens created on a blockchain and meant to be used for a specific purpose within a network or platform.
Unlike security tokens, which represent an investment and are subject to strict regulatory scrutiny,
utility tokens are designed to provide it users with the access to a product or service.
Utility tokens are commonly issued during Initial Coin Offerings (ICOs) or Initial Dex Offerings (IDOs).
Holders of utility tokens are entitled to certain privileges, such as discounted fees or access to specific services.
It is also possible for utility token holders to vote on the improvement proposals of an upcoming decentralized application (dApp).
Among utility tokens, the ERC-20 token standard developed on the Ethereum network is the most widely used.
Non-Fungible Tokens (NFTs)
In technology, non-fungible tokens (NFTs) are assets that have been tokenized via a blockchain. In order to distinguish them from other tokens, they are assigned unique identification codes and metadata.
An NFT can be traded for money, cryptocurrencies, or other NFTs-it all depends on their market value and owners’ expectations.
An image of a banana could be converted into a token using a crypto exchange.
There might be people who pay millions of dollars for the NFT, and there might also be people who consider it worthless.
A cryptocurrency is a token as well; however, the critical difference between them is that two cryptocurrencies from the identical blockchain are interchangeable—they are fungible.
Two NFTs from the identical blockchain can look similar but are not interchangeable.
Conclusion
Congratulations on making it to the end of this article! You should be able to understand and recognize the different types of cryptocurrencies that exist in the crypto space.
The investment in crypto-assets is risky, despite the fact that they represent a significant technological, economic, financial, and computer science innovation.
Remember that most of the cryptocurrencies out there are very volatile and can lead to profit or loss, but in the case of the stablecoins,
it is rare for the value of your money to decrease whenever you store your coins in the stablecoin.
Only invest capital that you know you can lose, and only invest with regulated companies with U.S. domiciles.
Read also our related article about cryptocurrency wallet types.