In the nascent field of digital currency, Bitcoin had little to no competition when it first debuted in 2009. By 2011, however, new cryptocurrency categories started to appear as rival platforms, and currencies launched their products using the blockchain technology that bitcoin was based on. The rush to produce more cryptocurrency suddenly began. As per an analysis by Morningstar, the value of the cryptocurrency market soared about $2.6 trillion in 2021. As of 2022, the market capitalisation is about $2.1 trillion.
Over 20,000 different types of currencies hold the market values currently. However, these fall into a few categories of utility-based cryptocurrencies.
What are the types of crypto?
Different varieties of cryptocurrency often fall into either of these two groups:
1. Coins, such as Bitcoin and alternative cryptocurrencies (non-Bitcoin cryptocurrencies).
2. Tokens are programmable digital assets stored on a platform’s blockchain.
Difference between tokens and coins
Although they are both regarded as categories of cryptocurrencies, coins and tokens serve different purposes. Coins are designed to function as a currency and constructed on their blockchain. For instance, the cryptocurrency built on the Ethereum blockchain is called Ether (ETH).
Although based on an existing blockchain network, tokens are programmable assets that enable the development and execution of separate smart contracts rather than being viewed as cash. These agreements can define who owns property outside the blockchain network. These can also represent value units, including tangible things like money, electricity, points, coins, and more. They can also be given and received.
Utility-based categories of cryptocurrencies
Based on utility, different categories of cryptocurrency are as follows.
The first cryptocurrency ever created, bitcoin, was designed for this purpose. The goal was to speed up and reduce the cost of cross-border financial transactions. It has been a valuable store of value throughout time. As per data from coinmarketcap.com, the value of one bitcoin has increased from around $1 in 2009 to $48,000 today.
Since the value of stable coins depends on the worth of an external asset, they can be classified as assets. For instance, the US dollar is the source of value for USDT. The price of gold correlates with gold GLC. Previously, investors could exchange any cryptocurrency they had opted to sell for another cryptocurrency (it may or may not be preferred) or fiat money. They can now choose to stay in the cryptocurrency ecosystem by swapping their holdings for a more secure cryptocurrency. At the same time, they decide on the upcoming more advantageous option due to the accessibility of stable coins.
Many buyers believe that this is where cryptocurrencies will go in the future. It first evolved to fund unique initiatives intended to address global issues. For instance, Siacoin (SIA) seeks to address the issue of high-cost cloud storage. Decentraland, an Ethereum-based platform where users may purchase virtual land (based on NFT) using its currency, is one instance (MANA).
4. Meme coins
These were made solely for amusement; they had no objectives or purposes, yet they are today worth millions. Dogelon Mars (ELON), for instance, was invented as a joke. It is intended to make “InterPlanetary Money Transactions” easier when it becomes feasible. Shiba Inu and Dogecoin began as meme currencies, but they now compete in the cryptocurrency market. Nevertheless, it is among the top crypto categories you need to know.
No matter what category it is, investors should always use caution when dealing with cryptocurrencies. Small smarts are always the best, as the thumb rule says.