Types of Cryptocurrencies

Are you curious about the cryptocurrency market? Do you want to learn more, but you’re not sure you’ll understand the different types?

The world’s cryptocurrency market is now worth more than 3 trillion dollars. Understanding this growing market can help you see how it might affect us in the future.

The cryptocurrency market is becoming more complex, and not every crypto asset is the same. Here’s a guide to the many types of cryptocurrencies that exist today.

Cryptocurrency Categories

There are thousands of different types of cryptocurrencies available. Each one provides a specific feature or function in the crypto space.

The cryptocurrency market has two main categories available today: coins (including Bitcoin and Altcoins) and tokens.

There is no single best cryptocurrency. The best one for you depends on how you want to use the coin. Understanding the different categories can provide you with a better grasp of the market.

Coins vs. Altcoins

Coins are digital money created on their own blockchain using blockchain technology. The first digital coin was Bitcoin. The term Altcoin originally came from ‘alternative coin,’ or a coin that was an alternative to Bitcoin.

The first altcoin was Etherium (ETH). Litecoin (LTC) is another example.

Coins require a lot of resources to create. Their distribution occurs through a process called mining. They are like a currency in the crypto space, meaning they are one way to store value. You can buy items from merchants that recognize the currency.

You can trade or exchange them on cryptocurrency exchanges. Many large companies and countries around the world recognize crypto coins.

Understanding Tokens

Programmers create tokens on a blockchain network, but they are not digital money like coins. They are valuable assets you can trade or exchange.

Tokens are easier to create than coins. Their distribution occurs through an initial coin offering. Using the word coin confuses the two terms in this situation.

The three main types of tokens are value, utility, and security tokens. Each type is valid with one merchant and has a different aim. They have more uses than a coin, which simply stores value.

A value token is a store of value within a specific area of the crypto space. A security token has an underlying value. Security tokens represent a digital contract that gives ownership of a tangible asset like a car or a stock.

A utility token is part of a software application used to track products, record ownership, or allow access. Tokens can establish ownership of assets outside of the blockchain. They allow for the creation of smart contracts.

An example of a popular token is Chainlink (LINK).

Chainlink allows smart contracts on the Ethereum network to securely connect to sources outside of the network. These connections can include data sources and payment systems. You can buy Chainlink here.

Know the Types Of Cryptocurrencies

Now that you have some knowledge about the types of cryptocurrencies in the market today, it will be easier to figure out a new coin or token when you come across one.

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