5 Types of Cryptocurrency

A lot of people wonder — how many different cryptocurrencies are there? Despite over 20,000 cryptocurrencies available on the market, not everyone understands what they are all about and what the reliable options are. But before we can discuss types of cryptocurrencies, it is important to have a basic idea of the concept. 

Cryptocurrency broadly refers to digital or virtual money that is created as coins or tokens. The most well-known cryptocurrencies, Bitcoin and Ether, are usually referred to as coins and run on their blockchains, which ensures the security and transparency of all transactions. 

At the same time, tokens are digital assets that are kept on the blockchain database. They are created on the already-existing blockchains and represent a specific asset. Tokens also have more uses compared to digital money. 

Now, as we've dealt with the basics, let's find out more about the most famous cryptocurrencies, their features, and what advantages they offer.

Bitcoin (BTC) 

• Current market cap — $731 billion
• Launch year – 2009

Bitcoin was first introduced to the public in 2009, and there is unproven information that it was created by a person named Satoshi Nakamoto. Bitcoin is considered the first decentralized cryptocurrency that relies on the use of blockchain for transactions. 

Thanks to being a decentralized currency, Bitcoin allows users to send quick peer-to-peer payments and do this less expensively than by using traditional bank transfer. The advantages of Bitcoin include its transparency, user anonymity, liquidity, and accessibility. The disadvantages are its fairly limited uses and high volatility. 

Ethereum (ETH) 

• Current market cap — $241 billion
• Launch year – 2015

Even if you aren’t familiar with ​​types of crypto, Ethereum is probably another one (besides Bitcoin) that you have heard about. The actual coins are referred to as “ether” and can be used for numerous purposes. Just like Bitcoin, Ethereum uses blockchain technology, utilizing it as both cryptocurrency platform and a development sandbox. 

The advantages of Ethereum include a high level of customization, a growing ecosystem, excellent user support, transparency, and decentralization. At the same time, this cryptocurrency is associated with development and scalability issues, specifically when the number of transactions and users in the network increases. 

Tether (USDT) 

• Current market cap — $89 billion
• Launch year — 2014

Founded by Reeve Collins, Craig Sellars, and Brock Pierce, Tether falls into a different category of examples of cryptocurrency. It is often referred to as “stablecoin” because this currency is backed by a specific asset — the US dollar. At the moment, the price of one Tether coin is 1$. The selling feature of this cryptocurrency is that it can be conveniently used as a medium for switching to a different cryptocurrency. 

The advantage of Tether is its high level of stability and the absence of financial intermediaries. Tether also offers more liquidity compared to other digital assets and provides growing investment opportunities. The disadvantages are the lack of transparency, regulatory scrutiny, and the risk of de-pegging. 

Binance Coins (BNB)

• Current market cap — $35 billion
• Launch year — 2017

BNB stands for Binance Coins and is a cryptocurrency used to make trading-associated payments on the Binance Exchange. In the terms of market capitalization, BNB is one of the top digital currencies out there. In addition to Binance trading, this cryptocurrency offers several uses, such as investment, paying for entertainment, credit card payments, booking travel, and more.  

The advantages of BNB include low trading fees, faster transaction speeds compared to its competitors, and a wide range of potential uses. The disadvantage is that this cryptocurrency is centralized and faces regulatory challenges. 

Ripple (XRP)

• Current market cap — $33 billion
• Launch year — 2012

Currently known under the name of XRP, this cryptocurrency appeared in 2012 as Ripple and was first created by a web developer, Ryan Fugger. With XRP, you can make payments in various offline situations. It is actively used for facilitating global transactions and boasts partnerships with numerous banks. XRP goes beyond what we consider a cryptocurrency, as it is a full-on company. 

The advantages in this case include low fees and fast transaction speed. For many users, the main advantage of XRP is how highly centralized it is, which means that it goes against the basic concept of cryptocurrency. Because of this, the currency's highly controlled environment can also be its significant drawback.

Other Types of Cryptocurrency 

In addition to the previously discussed digital currency options, there are also a few worth mentioning:

Solana

Solana has a market cap of $24 billion and was introduced in March 2020. While it is a new cryptocurrency, its most outstanding feature is excellent transaction speed. Also, it can be used on the NFT market, just like Ethereum. The drawbacks of Solana include high inflation rates and some stability issues. 

USD Coin

Similar to the previously mentioned Tether, the USD Coin belongs to the stablecoin category. It has a market cap of $24 billion and was launched in 2018. The benefits of USD Coin are the fact that it’s backed by reserve assets and has low price volatility. At the same time, this currency is uniquely vulnerable to dollar price inflation. 

Final Thought

If you are interested in buying cryptocurrency, it is important to consider all the  advantages and disadvantages of each option. Cryptocurrencies have a significant influence on our world, and it’s obvious that new alternatives will continue to appear.

Some variants, such as types of Bitcoin, are decentralized and offer a high level of transparency. Along with high market caps, these cryptocurrencies are highly attractive yet fairly volatile. Other cryptocurrencies, such as XRP, are more centralized and thus not suitable for some investment purposes. It is crucial to decide what features are non-negotiable for you and whether you need your cryptocurrency to be decentralized so you can make the right decision. 

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