5 Types of Cryptocurrency

How many types of cryptocurrency are there? Despite over 20,000 cryptocurrencies available on the market, not everyone understands what they are all about and how to find reliable ones. But before we can discuss the types of coins in cryptocurrency, 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 a special record system called blockchain. The main idea behind this technology is that the data is stored by all the system’s participants in a peer-to-peer network, which theoretically removes the need for any centralized oversight.

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 than just digital money.

Now, let’s find out more about the most famous cryptocurrencies, their features, and what advantages they have to offer.

Bitcoin (BTC)

• Current market cap — $1.20 trillion;
• Launch year — 2009.

Even those who never wondered how many types of cryptocurrency are out there have at least heard about this one. 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 blockchain for transactions.

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

Ethereum (ETH)

• Current market cap — $317.07 billion;
• Launch year — 2015.

Once again, even if you’re not familiar with ​​types of crypto, Ethereum is probably another one you’ve 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 a 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 — $116.96 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 the project is that its coins can be conveniently used as a medium for converting your money into 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 — $79.13 billion
• Launch year — 2017

BNB stands for Binance Coins and is a cryptocurrency used to make trading-associated payments on the Binance Exchange. In terms of market capitalization, BNB is one of the top digital currencies out there. In addition to Binance trading, this cryptocurrency offers several other 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 — $31.98 billion
• Launch year — 2012

Currently sold under the name of XRP, this cryptocurrency appeared in 2012 as Ripple and was first created by a web developer, Ryan Fugger. The distinguishing feature of XRP is that it can be used to make various offline payments. 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 financial company.

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

Other Types of Cryptocurrency

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

Solana

Solana has a market cap of $67.12 billion and was introduced in March 2020. While it is a relatively new cryptocurrency, it already gained some popularity for its excellent transaction speed. It can also be used in 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 $34.52 billion and was launched in 2018. The benefits of USD Coin are that it’s backed by reserve assets and has low 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. Different types of cryptocurrency have widely different benefits to offer, and it’s likely 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 stable and centralized but aren’t suitable for investment purposes. To make the right decision, you must decide what features are non-negotiable for you and whether you need your cryptocurrency to be decentralized.