What are the Types of Cryptocurrency?
Barely over a decade since Bitcoin came into the scene, there are now over 22,000 cryptocurrencies, with the crypto market cap exceeding a Trillion US dollars. There are different types of cryptocurrencies ranging from stablecoins to meme-coins, utility tokens, etc. Cryptocurrencies may be categorised based on their very nature, their uses, and how they function. So in case you’re wondering what the different types of crypto are, we’ve got you covered. Dive in!
Altcoins
The term “Altcoin” is coined from the combination of the words “alternative” and “coin.” The term refers to all cryptocurrencies asides from Bitcoin (although some people consider altcoins to be all cryptocurrencies asides from Bitcoin and Ethereum). The first set of Altcoins, Namecoin & Litecoin, emerged around 2011 as alternative currencies to Bitcoin. However, it was not until the launch of Ethereum in 2015 that altcoins gained popularity.
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Stablecoins
Cryptocurrencies are generally marked by high volatility. However, stablecoins are crypto assets tailored to hold a certain value by pegging their value to that of another currency, commodity, or financial instrument (e.g., fiat, gold, etc.). Depending on the method used in ensuring its price stability, a stablecoin may be a fiat-backed stablecoin, commodity-backed stablecoin, crypto-backed stablecoin, or algorithmic stablecoin.
READ NOW: All You Need to Know about Stablecoins
Meme Coins
Meme coins are joke-inspired tokens or a silly take on another cryptocurrency. Coins that blow up through social media also get this tag. Essentially, meme coins become popular through memes and social media, often thanks to online hype from prominent influencers or investors attempting to exploit short-term gains. The pioneer meme coin was Dogecoin. Although, Dogecoin began as a joke around the “doge” Shiba Inu dog meme, it transformed into a popular asset, receiving backing from even Elon Musk. Consequently, more than 200 meme coins have been created ever since.
Security Tokens
Security tokens are the digital form of traditional investments like stocks, bonds, or other securitised assets. They are designed to act as securities and are even under the Securities and Exchange Commission (SEC) regulation. Notably, Exodus completed an SEC-qualified Reg A+ token offering, through which $75 million shares of common stock were converted to tokens on the Algorand blockchain in 2021.
Utility Tokens
The purpose of utility tokens is to provide services (e.g., to pay network fees or redeem rewards) within a network. While they can also be bought on exchanges and held, their primary function is to be used in the blockchain network to keep it running.
Governance Tokens
Governance tokens are a form of utility tokens since they are generally native to a private blockchain and used for blockchain purposes. However, what makes them special is that they also allow holders certain rights within a blockchain. These rights include voting for changes to protocols or having a say in the decisions of a decentralised autonomous organization (DAO).
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