Cryptocurrency is digital internet money that provides an economic incentive model for validating transactions on a blockchain.
Cryptocurrencies can broadly be categorized into two types:
- Crypto Coins (such as Bitcoin, Ethereum, Litecoin,...,etc)
- Crypto Tokens (such as security tokens, utility tokens, stablecoins,...,etc.)
Crypto Coins
Crypto Coins are native digital currencies that operate independently of a central bank, serving as a decentralized medium of exchange for transactions. The Coins in this group are built on their own blockchain and considered to be native currency. One point to remember is that each blockchain has only one cryptocurrency.
Crypto Coin Examples: Bitcoin (BTC), Ethereum(ETH), Litecoin (LTC), Cardano (ADA) and Solana(SOL) are some examples.
Types of Crypto Coins
Bitcoins:
Bitcoin (BTC) is the first cryptocurrency created on the Bitcoin’s Blockchain network.
Altcoins:
Altcoins (shorthand for alternative to Bitcoin) are also known as Non-Bitcoin Cryptocurrencies. Altcoins are built on the Bitcoin’s Blockchain framework. Some of the popular altcoins are Ethereum, Litecoin, USD Coin,...,etc.
Crypto Tokens
Crypto Tokens are programmable assets that live within any Blockchain platform. These are built on the existing blockchain and are not considered currency but programmable assets for unique contracts.
Crypto Tokens are built using some rules known as tokenization standards. These tokenization standards help crypto tokens to be stored, used, and exchanged on a blockchain.
Some of the popular types of tokenization standards are ERC-20 tokens on the Ethereum blockchain and BEP-20 on Binance Smart Chain.These tokens make it easy to integrate with Ethereum wallets and can be used across DApps.
Contracts can establish ownership of these assets outside the Blockchain. These Tokens represent units of value for money, points, coins, digital assets etc. Which can be sent and received. Example: Basic Attention Token (BAT) built on the Ethereum Platform used for digital advertising. Tokens are usually created and issued through an Initial Coin Offering (ICO) like stocks.
Types of Crypto Tokens
The following are the different types of crypto tokens available in the Market today.
Stablecoins:
Stablecoins are a type of cryptocurrency that is pegged to a stable asset, such as a fiat currency or a commodity, in order to minimize price volatility. It is often used as a means of payment or a store of value.
Utility Tokens:
Tokens that provide access to some kind of service are known as utility tokens. It’s similar to a stock certificate, except instead of representing ownership in a company, it represents ownership in something else. Examples include Binance Coin (BNB) and Basic Attention Token (BAT).
Security Tokens:
Security tokens are a different kind of asset. Cryptocurrencies represent ownership in physical assets, such as a company or business, and are subject to securities regulations instead of providing access to a service. This means that investors can sell shares of a company without taking any control over how the company operates. Security tokens can represent anything from company shares to real estate.
Cryptocurrency FAQs:
How many cryptocurrencies are there?
A. It is important to know how many Cryptocurrencies there are. There is no exact answer to this! As new coins and technologies are constantly developed. However as of February 2023, there are more than 24 thousand plus types of cryptocurrencies.
How are cryptocurrencies stored?
A. Cryptocurrencies are stored in digital wallets, which allow users to manage and trade their coins on the blockchain network.
How many types of cryptocurrency are there?
A. Generally speaking, there are two types of cryptocurrency: Crypto Coins and Crypto Tokens. Crypto Coins are digital currencies that operate independently, while Crypto Tokens are programmable assets for unique contracts.
What are Central Bank Digital Currencies (CBDC)?
A. CBDCs are cryptocurrencies designed to function as central bank currencies. They are often referred to as “digital fiat currencies” because they are issued by a government agency and are considered legal tender.
The first CBDC was launched in January 2019 by the People's Bank of China. In addition to being used as a currency, CBDCs can also be used to pay taxes, make purchases online, and send payments overseas.