Today, there are over 100 million global cryptocurrency users. Because it's gained so much traction in recent years, you've probably heard of cryptos such as Bitcoin and Ethereum.
But the world of cryptocurrency goes so much further than that. For example, did you know there are different types of cryptocurrency?
By knowing what's available out there, you'll be able to make future purchases easier and wiser! Even if you don't end up buying crypto, at least you'll have some valuable knowledge.
So what are the different types of cryptocurrency? Read on for a complete guide!
What Is Cryptocurrency?
Before we can tackle what the different types of cryptocurrency are, let's first go over what cryptocurrency even is (besides a digital form of currency).
Most cryptocurrencies are decentralized networks, which means there's not a single entity that controls transactions (unlike with a bank). This is possible through blockchain, which are networks that allow peer-to-peer transactions that are secure and direct (no intermediaries are needed).
This means that crypto transactions can be anonymous!
What Are the Different Types of Cryptocurrency?
When it comes to cryptos, there are actually 2 different types: coins and tokens. Believe it or not, they're different things.
Coins are created in their own blockchains and you can use them like fiat currency. You'd use it to complete transactions between 2 parties, so they're valid with any merchants that accept them. You can even use them at crypto ATMs to buy gold (more about that here)!
Tokens are similar, but are more than just currency. Not only are they created on top of existing blockchain, but they can be used in software applications. They're even used as digital art!
Tokens are only valid with one merchant though. However, they're easy to create, unlike coins, which are labor-intensive to mine.
Now that you know the difference between coins and tokens, here are the different cryptocurrency types you should consider.
This is perhaps the biggest type of crypto out there, so it's only fitting that we start off the list with Bitcoin.
Bitcoin was first created in 2009 by "Satoshi Nakamoto". It's not clear if Nakamoto is one person or a group of people.
In any case, when Bitcoin was created, there was a capped limit of 21 million coins. As of September 2021, there's almost 19 million bitcoin in circulation, so the supply's quickly dwindling!
As we've mentioned earlier, crypto's mined. This is done through powerful computers and miners who verify the blocks of transactions in a proof-of-work system. What this does is validate and secure bitcoin.
Ethereum is actually the name of the network; Ether is the token. It was first created in 2015.
Like with Bitcoin, Ether uses blockchain technology to be decentralized. However, it was also designed to be a programmable blockchain, which means Ethereum is so much more than just a currency.
Instead, users can create and use applications (dApps) on Ethereum. Ether was created as a way to provide and accept payments on the platform.
Today, it's the second most popular cryptocurrency after Bitcoin. There are also miners who uncover Ether through a proof-of-work system, but what's great about Ether is there's no cap. This means Ether can be continuously generated.
Binance Coin (BNB)
Similar to Ethereum/Ether, Binance is a cryptocurrency exchange and its actual currency is Binance Coin. In fact, this network was first built on Ethereum blockchain, but since then, it's moved to its own blockchain.
Also, Binance Coin was originally started in 2017 for users on Binance to get discounted trading fees. But since then, it's grown for usage across several purposes, such as for online services, travel, and of course, payments.
BNB does have a cap, but it's a lot more generous than with Bitcoin. There are 200 million Binance Coin and 100 million are distributed to investors during the company's initial coin offering (ICO).
What's interesting to note is that Binance will buy some of its Binance Coin back every quarter and destroys them permanently. This allows them to keep demand for the crypto up.
Litecoin was first launched in 2011. It's often lauded as the "better" version of Bitcoin, as it's a fork of BTC, meaning it borrows from the blockchain code but improves upon it.
What does this mean? While it's still a peer-to-peer crypto, it has many improvements compared to Bitcoin.
For one, it produces 4 times as many blocks as Bitcoin does in the same time period. This also means LTC has 4 times as many coins as BTC does, with a cap of 84 million coins.
Dogecoin was created as a joke coin (the first one ever, in fact!), as it's based around the Doge meme. It was meant to poke fun at how seriously everyone took Bitcoin.
However, today, it's more of a serious cryptocurrency, especially after Elon Musk tweeted about it positively in 2019.
There's no coin generation cap on Dogecoin and transactions are quicker and easier on this platform as well, which definitely makes it more appealing than Bitcoin.
Get in on the Crypto Action
Now you know the answer to the question, "what are the different types of cryptocurrency?" While there's the big dog Bitcoin, there are plenty of others you should consider if you're interested in buying crypto. After all, you shouldn't put all your eggs in one basket!
So take a look around and see hat cryptocurrencies interest you. Do a little research to see how they're trending and don't go all-in at first. By testing the waters first, you'll be able to see how well a crypto does, without losing a huge amount of money should things go wrong.
Want some cryptocurrency tips? Then make sure you read the rest of our blog page!