Types Of Cryptocurrencies Explained

Last updated Apr 25, 2024 | 03:40 PM UTC

Understanding popular types of cryptocurrencies and their distinctions is crucial for anyone looking to support crypto. Notably, the three main different types of cryptocurrency include:

  • Payment cryptocurrencies
  • Tokens
  • Stablecoins 

Payment cryptocurrencies, such as Litecoin (LTC) and Bitcoin (BTC), act as exchange mediums and facilitate transactions seamlessly. 

Tokens – like Ethereum's ERC-20 tokens – represent assets or utilities and allow utilizing decentralized apps (dApps) and smart contracts

Stablecoins – like Tether (USDT) and USD Coin (USD) – aim to offer stability against the volatility of the cryptocurrency market. They are often pegged to fiat currencies or commodities.

With thousands of different coins in existence, along with countless new offerings with varying potential emerging every day, the world of crypto has evolved, providing a number of Bitcoin alternatives.

Exploring different cryptocurrency examples within each category can help you understand and navigate this space effectively.

Payment cryptocurrencies

Digital currencies created especially to make payments and transactions easier are known as payment cryptocurrencies. They provide safe, decentralized platforms for peer-to-peer transactions without the need for middlemen like banks, thanks to their use of blockchain technology. These are a few well-known payment cryptocurrencies, including:

  • Bitcoin (BTC): First decentralized cryptocurrency, uses proof-of-work (PoW) consensus.
  • Bitcoin Cash (BCH): Fork of Bitcoin, larger blocks for faster transactions.
  • Litecoin (LTC): Silver to Bitcoin's gold, faster and cheaper transactions.
  • Dash (DASH): Emphasizes fast and private transactions.
  • Monero (XMR): Focuses on privacy and fungibility.
  • Zcash (ZEC): Offers privacy through zero-knowledge proofs.
  • Ripple (XRP): Facilitates cross-border payments for institutions.
  • Stellar (XLM): Simplifies asset transfers and cross-border transactions.
  • Nano (XNO): Fee-less and instant transactions, ideal for small-scale exchanges.
  • Bitcoin SV (BSV): Aims for scalability and adherence to Bitcoin's original vision.
  • Dogecoin (DOGE): Originally playful, used for tipping and donations.
  • Bitcoin Gold (BTG): Democratizes mining with ASIC-resistant algorithm.
  • Qtum (QTUM): Combines Bitcoin security with Ethereum smart contracts.

Bitcoin (BTC)

The world’s first cryptocurrency, known as Bitcoin, was unveiled in 2009 by Satoshi Nakamoto, an unidentified individual or group. It uses a proof-of-work consensus technique to secure and confirm transactions on its blockchain and runs on a decentralized network of nodes dispersed globally.

Bitcoin Cash (BCH)

A hard fork of Bitcoin led to the creation of Bitcoin Cash in 2017. It attempts to solve the scalability problems with Bitcoin by expanding the block size, enabling more rapid and affordable transactions. The usage of Bitcoin Cash as digital currency for regular transactions is supported by its supporters.

Litecoin (LTC)

In 2011, Charlie Lee, a former Google programmer, founded Litecoin, which is sometimes referred to as the silver to Bitcoin's gold. Similar to Bitcoin, but with a different mining algorithm and a shorter block generation period, it promises faster transaction times and lower costs.

Dash (DASH)

Dash, which stands for 'digital cash', is renowned for emphasizing instantaneous transactions and secrecy. It makes use of a special masternode network to provide functions like InstantSend, which enables very instantaneous transactions, and PrivateSend, which anonymizes transactions.

Monero (XMR)

Monero is a cryptocurrency that emphasizes anonymity and fungibility with a privacy-focused approach. It obscures transaction details using sophisticated cryptographic techniques, such as stealth addresses and ring signatures, making it nearly hard to track the sender, receiver, and transaction amounts.

Zcash (ZEC)

Zcash is another cryptocurrency that prioritizes privacy and gives users the ability to encrypt their transactions using zero-knowledge proofs. With the help of this technology, users can selectively provide transaction details to certain parties while keeping others confidential.

Ripple (XRP)

The goal of Ripple is to make cross-border payments and remittances for banks and financial organizations quick and affordable. Because of its network, RippleNet, which facilitates real-time currency conversion and settlement, it is a desirable option for international money transfers.

Stellar (XLM)

Stellar is a decentralized payment network developed to make asset transfers and cross-border transactions easier. Through the provision of inexpensive remittance services and the ability to tokenize a variety of assets, including commodities and fiat currencies, it focuses on financial inclusion.

Nano (XNO)

Nano stands out for its fee-free and instantaneous transactions, which are made possible by its special block-lattice architecture. It seeks to be an environmentally sustainable and scalable payment solution that is perfect for small-scale transactions, peer-to-peer exchanges, and regular purchases.

Bitcoin SV (BSV)

In 2018, a hard fork of Bitcoin Cash produced the cryptocurrency known as Bitcoin SV (Satoshi Vision). With an emphasis on scalability, stability, and widespread adoption, it seeks to reinstate the original Bitcoin protocol as described by Satoshi Nakamoto.

Dogecoin (DOGE)

Once a playful cryptocurrency centred around memes, Dogecoin has grown in popularity as a social media tipping system and a method of making charity donations. Despite its humble beginnings, Dogecoin has gained a lot of traction and is still utilized for a variety of online transactions.

Bitcoin Gold (BTG)

Another Bitcoin split, known as Bitcoin Gold, surfaced in 2017 with the goal of democratizing mining through the use of an alternative, ASIC-resistant proof-of-work algorithm called Equihash. By enabling users to mine using consumer-grade technology, it aims to increase mining accessibility for a larger audience.

Qtum (QTUM)

Qtum is a platform for dApps and smart contracts that combines the secure blockchain technology of Bitcoin with the smart contract capabilities of Ethereum. With its adaptable and scalable platform, it seeks to close the gap between blockchain technology and practical business applications.

Tokens

Tokens are digital assets that stand in for ownership or access privileges on a blockchain platform. They can be used for a number of things, including enabling transactions or providing access to particular goods or services inside a decentralized ecosystem. In this article, we'll explore the three primary types of tokens: utility, security, and exchange tokens, along with some noteworthy examples of each type.

Utility tokens

Tokens known as 'utility tokens' give users access to particular goods or services within a blockchain network. They are frequently utilized to lower platform fees or offer incentives for participation. Some examples of cryptocurrency tokens falling in this category include:

  • Ethereum (ETH): When engaging with smart contracts and dApps, Ether is used to cover transaction fees and computational services. It is the native money of the Ethereum platform.
  • Chainlink (LINK): Chainlink makes it possible for smart contracts running on different blockchain platforms to safely communicate with external APIs and real-world data by facilitating decentralized oracle services.
  • BNB Coin (BNB): The native cryptocurrency of the Binance exchange, BNB Coin, is used to cover transaction fees, trading fees, and other platform costs.
  • Filecoin (FIL): Users can rent out their unused storage space on the decentralized Filecoin network and receive Filecoin tokens in exchange.
  • Uniswap (UNI): The Uniswap decentralized exchange's governance token, UNI, enables holders to take part in protocol governance and profit from trade fees by supplying liquidity.
  • Basic Attention Token (BAT): The Brave browser ecosystem uses Basic Attention Token to pay content providers for their efforts and to reward users for viewing advertisements.

Security tokens

Security tokens are a popular cryptocurrency tokens governed by regulations and symbolize ownership in real-world assets like stocks, debt, or commodities. They grant investors the right to profit-sharing, dividends, and other financial advantages.

  • tZERO (TZROP): Tokenized versions of conventional assets including stocks, bonds, and real estate are available for trading on the tZERO platform for digital securities.
  • SPiCE VC (SPICE): A security token called SPiCE VC is used to indicate ownership in a venture capital fund that invests in blockchain and cryptocurrency start-ups.
  • Harbor Real Estate Investment Trust (HBR): Investors can get more exposed to property ownership and rental revenue by purchasing tokenized real estate assets through Harbor Real Estate Investment Trust.
  • Blockchain Capital (BCAP): Blockchain Capital is a venture capital fund that provides investors with fractional ownership and liquidity in the blockchain firms in its portfolio by tokenizing its ownership shares.
  • Augmate (MATE): A security token called Augmate denotes ownership in a business that offers enterprise augmented reality (AR) and Internet of Things (IoT) solutions.
  • SPiCE VC (SPICE): The security token known as SPiCE VC (SPICE) denotes ownership in a venture capital fund that is devoted to blockchain and cryptocurrency companies.

Exchange tokens

Exchange tokens are the native tokens of cryptocurrency exchanges and are used to engage in token sales on the platform, pay transaction fees, and access premium features.

  • BNB Coin (BNB): The native cryptocurrency of the Binance exchange, Binance Coin, is used to cover transaction fees, trading fees, and other platform costs.
  • Bitfinex LEO Token (LEO): On the Bitfinex exchange, Bitfinex LEO Token users can take advantage of faster withdrawal times, lower trading costs, and other advantages.
  • KuCoin Shares (KCS): On the KuCoin exchange, holders of KuCoin Shares receive revenue sharing, reductions on trading fees, and other advantages.
  • OKB (OKB): The native utility token of the OKEx exchange, OKB, entitles holders to preferential access to new features, reduced trading fees, and token sales participation.
  • Huobi Token (HT): On the Huobi exchange, Huobi Token is used to cover transaction costs, take part in token sales, and have access to premium features.

Stablecoins

Stablecoins are digital currencies that are linked to a stable asset, such as gold or fiat currencies like the US dollar, to reduce market volatility. They reduce the risk of price swings that are frequently connected to other cryptocurrencies and offer a dependable way of transferring wealth within the bitcoin ecosystem.

  • Tether (USDT): One of the most popular stablecoins that is based on the US dollar is Tether; it is frequently used for trading and value transfers on cryptocurrency exchanges and is kept stable by a reserve of fiat money.
  • USD Coin (USDC): Stablecoin USD Coin is backed 1:1 by US dollars that are kept in reserve and is distributed by regulated financial institutions. Within the cryptocurrency world, it is regarded as a reliable stablecoin due to its transparency and adherence to legal requirements.
  • TrueUSD (TUSD): To maintain stability and transparency, TrueUSD is a stablecoin that is entirely backed by US dollars kept in escrow accounts and subject to routine audits by third-party firms. Within the Bitcoin ecosystem, it offers customers a dependable and transparent means of transacting with US dollars.
  • Dai (DAI): A system of collateralized debt positions (CDPs) stabilizes Dai, a decentralized stablecoin built on the Ethereum network. It is controlled by MakerDAO, a decentralized autonomous organization (DAO), and sustains its value through overcollateralization with other cryptocurrencies, such Ether (ETH).
  • Paxos Standard (PAX): The FDIC-insured banks hold US dollars, which serve as the 1:1 backing for Paxos Standard, a regulated stablecoin produced by Paxos Trust Company. Users can be assured of its reliability and liquidity since it provides instantaneous transactions that are fully redeemable for US dollars.
  • Gemini Dollar (GUSD): The New York State Department of Financial Services (NYDFS) oversees the Gemini Trust Company-issued stablecoin known as Gemini Dollar. Users can benefit from transparency and regulatory compliance as it is backed 1:1 by US dollars kept at State Street Bank and Trust Company.
  • Binance USD (BUSD): Binance USD is a stablecoin that is backed 1:1 by the US dollar and is released in collaboration with Paxos. On the Binance exchange, it provides quick and inexpensive transactions, supported by fully audited and controlled reserves.
  • HUSD (HUSD): Stable Universal Limited is the issuer of the stablecoin HUSD, which is fixed 1:1 to the US dollar. It provides customers with a dependable and transparent method of transacting in USD within the cryptocurrency ecosystem and is supported by a number of cryptocurrency exchanges.
  • TerraUSD (UST): Based on the Terra blockchain, TerraUSD is a stablecoin that is correlated with the US dollar. It provides stability and liquidity with quick and inexpensive transactions, supported by a basket of government bonds and fiat currencies.
  • sUSD (sUSD): Backed by a variety of digital assets and stablecoins, sUSD is a synthetic stablecoin that was released on the Synthetix platform. In addition to permitting decentralized trading and liquidity provision within the Synthetix ecosystem, it exposes users to the value of the US dollar.

What’s the next Bitcoin? Top five BTC alternatives

Now that we’ve identified all the types of crypto, what is the most likely to be the next Bitcoin? Let’s see.

Ethereum (ETH)

As a result of its adaptability and strong infrastructure, Ethereum is frequently hailed as the next big thing after Bitcoin. In contrast to Bitcoin, which functions mainly as a store of wealth or digital gold, Ethereum is a decentralized platform that supports dApps and smart contracts. 

Beyond basic transactions, a plethora of use cases are made possible by its blockchain's capacity to run programmable code, such as decentralized finance (DeFi), non-fungible tokens (NFTs), and DAOs

Ethereum has the potential to be a top cryptocurrency due to its significant developer community, vibrant ecosystem, and continuous improvements like the switch to proof-of-stake consensus, danksharding, proto-danksharding and various other planned upgrades for the upcoming years.

Pros Cons
Versatile platform for smart contracts and dApps Scalability challenges with high gas fees and network congestion
Large developer community Potential security vulnerabilities in smart contracts
Active ecosystem of NFT marketplaces and DeFi projects Ethical concerns surrounding centralization due to PoS
Ongoing upgrades and improvements like proto-danksharding Competition from other smart contract platforms

As one of the most promising cryptocurrencies, Ethereum must contend with rivalry from nascent smart contract platforms as well as scaling concerns. On the other hand, its robust network effects and ongoing development make it a good candidate to become the next Bitcoin.

Cardano (ADA)

Cardano is a blockchain organization that is frequently regarded as a strong candidate to replace Bitcoin because of its creative use of technology and dedication to sustainability, scalability, and interoperability. 

Cardano sets itself apart by its scientific development methodology, which is informed by strong academic standards and peer-reviewed research. Its multi-layered architecture seeks to improve sustainability, scalability, and security while easing blockchain interoperability. 

Cardano's emphasis on decentralized governance and consensus techniques like Ouroboros also helps to cement its standing as one of the top cryptocurrency platforms.

Pros Cons
A scientifically backed approach to development Development progress may be slower due to the rigorous research process
Multi-layered architecture for scalability and security Limited adoption and use cases compared to more established cryptocurrencies
Commitment to interoperability with other blockchains Competition from other smart contract platforms
Emphasis on decentralized governance and consensus Potential regulatory challenges as the platform matures

Solana (SOL)

Solana has a high-performance blockchain that is built for speed and scalability, making it a strong contender to replace Bitcoin. A proof-of-history consensus mechanism and a high-performance, low-latency network are only two of the unique technologies that Solana's creative architecture makes use of to enable quick transaction speeds and cheap fees even during times of significant network activity. 

dApps, DeFi, and other use cases needing high throughput and low latency are well supported by Solana because of its concentration on scalability and throughput.

Pros  Cons
High-performance blockchain with fast transaction speeds Relatively new and less established compared to other cryptocurrencies
Scalability and throughput for dApps and DeFi Potential security vulnerabilities as the platform scales
Low transaction fees even during peak network activity Limited ecosystem and adoption compared to more established platforms
Innovative consensus mechanism and network architecture Competition from other high-performance blockchain platforms

Although Solana has remarkable transaction speeds and scalability, it has drawbacks such as security flaws and competition from other blockchain systems. But its cutting-edge technology and emphasis on scalability make it a competitive player in the crypto market.

Ripple (XRP)

Since its goal is to transform international payments and remittances, Ripple (XRP) is a strong candidate to become the next Bitcoin. Ripple provides a decentralized network called RippleNet that acts as a bridge currency for its native digital asset, XRP, to facilitate quick and inexpensive international money transfers. 

In contrast to Bitcoin, which functions mainly as a store of value, Ripple seeks to upend the established financial system by offering effective and affordable cross-border transaction alternatives. Its regulatory compliance initiatives and collaborations with financial institutions strengthen its standing in the crypto market.

Moreover, Ripple’s expansion to the stablecoin market with the plans to launch a stablecoin make it a sound candidate to compete with Bitcoin and other stablecoins.

Pros Cons
Focus on revolutionizing cross-border payments Centralization concerns due to Ripple's control over XRP
Fast and low-cost international money transfers Legal and regulatory uncertainties surrounding XRP's classification
Partnerships with financial institutions Potential competition from other cryptocurrencies and fintech companies
Regulatory compliance efforts Criticism for its pre-mined supply and distribution of XRP

Although Ripple provides cutting-edge solutions for international payments, it has to contend with issues including regulatory uncertainty and centralization worries. However, it is positioned as a major player in the fintech and cryptocurrency industries thanks to its alliances, attempts to comply with regulations, and emphasis on real-world use cases.

Polygon (MATIC)

As a result of its emphasis on enhancing the usability and scalability of the Ethereum blockchain, Polygon (MATIC) is gaining traction as a possible contender to replace Bitcoin. Previously called Matic Network, Polygon provides a framework for creating and tying together Ethereum-compatible blockchain networks in an effort to alleviate Ethereum's scaling issues. 

It is compatible with Ethereum's ecosystem and allows for faster and less expensive transactions with solutions like Polygon SDK and Polygon PoS Chain. It is a desirable platform for dApps, DeFi, and NFTs because of its compatibility and scalability solutions.

Pros Cons
Improves the scalability and usability of Ethereum Relatively new and less established compared to other layer-2 solutions
Offers solutions for faster and cheaper transactions Potential competition from other layer-2 solutions
Interoperability with Ethereum's ecosystem Security concerns as the platform scales
Provides infrastructure for dApps, DeFi, and NFTs Adoption challenges due to network effects of Ethereum

If Polygon solves Ethereum's scalability problems, it still has to contend with obstacles like adoption and competition from other layer-2 alternatives. Nonetheless, its emphasis on usability, scalability, and interoperability makes it a viable platform for expansion and uptake in the cryptocurrency ecosystem in the future.

How many cryptocurrencies are there?

As new cryptocurrency types are developed and current ones become dormant or are removed from exchange lists, the total number of cryptocurrencies is continually fluctuating. There are reportedly more than 13,000 cryptocurrencies in existence as of April 2024.

It's crucial to remember that not all of these cryptocurrencies are useful or have much value, though. After taking into account inactive or deceased coins, there are around 9,537 active cryptocurrencies.

The rising usage of cryptocurrencies, which is thought to be used by more than 300 million people worldwide, is a sign of their rising popularity. Additionally, about 18,000 companies have accepted cryptocurrencies as a form of payment, demonstrating the rising use of digital currencies across a range of industries. It's important to keep in mind that these numbers could alter as the crypto ecosystem develops.

For the most up-to-date information on the quantity of cryptocurrencies in circulation, it is always important to consult current sources, given how dynamic and vulnerable to rapid change the cryptocurrency market is.

Advantages of cryptocurrency

Cryptocurrency has gained massive attention among investors. The main reason is the advantages it brings to people and communities. Here are most important perks of cryptocurrencies below:

  • Speed of transactions: Transferring your funds is possible within minutes. This is an efficient way of handling transactions and is appealing to potential users. It is also incomparable to traditional bank transfers that could take five or more days.
  • Low costs: Using crypto generates lower costs than you expect. Many times you won't have costs, or they will be minimal. The elimination of costs is thanks to the absence of third parties who would need to confirm and process transactions. 
  • Safety: Cryptocurrency security is the backbone of digital assets. No one will have access to your funds unless they have your private key. Security is also achieved with a network of computers that approve all the transactions on the blockchain. 
  • Decentralization: Cryptocurrencies are free from central control. This means that prices depend on demand and supply, and banks don't influence them. 
  • Accessibility: You can easily open a crypto wallet and make transactions with your funds. The only requirement is to have a stable internet connection, computer, or smartphone. 
  • Transparency: You can check the status of transactions by visiting blockchain explorer. The system is transparent and free from any fraud.
  • Privacy: Blockchain transactions are private and pseudonymous. No one can connect your identity with transfers, which keeps security on a higher level. 

 Crypto Pros & Cons

Drawbacks of cryptocurrency

With so many types of cryptocurrencies, you should also be aware of associated risks. 

While researching a suitable type of cryptocurrency and what are major cryptos, here are the key risks to watch out:

  • Volatility: The high price volatility of cryptocurrencies is well known. In a short amount of time, the value of cryptocurrencies can change rapidly, which might result in big gains or losses for investors. Numerous factors, including market mood, governmental changes, technical breakthroughs, and macroeconomic situations, all have an impact on this volatility. The volatility of cryptocurrency pricing puts traders and investors at risk.
  • Security risks: Security is a top priority in the cryptosphere. Cryptographic principles are used by cryptocurrencies to maintain the security of transactions on decentralized networks. But there are security threats including hacking, phishing, and flaws in crypto exchanges and wallets. Individuals risk losing their money or being the victims of theft or fraud if security measures are not adequately implemented.
  • Regulatory and legal risks: The regulatory environment for cryptocurrencies is still developing. Governments and regulatory organizations are working to create frameworks to address issues with investment security, money laundering, consumer protection, and tax compliance. Regulation alterations or new legal requirements may have an impact on how cryptocurrencies are used, traded, and accepted, creating hazards to people and businesses engaged in the cryptocurrency industry.
  • Lack of adoption and liquidity: Even though crypto currency types are becoming more popular, mainstream adoption remains challenging. Cryptocurrencies' widespread usage is hampered by the limited merchant and business adoption of them as a form of payment. Furthermore, some cryptocurrencies can have poor liquidity, making it difficult to buy or sell large amounts without significantly altering the market price. It may be difficult to sell investments or convert cryptocurrencies into conventional fiat currency in illiquid markets.

The future of cryptocurrency

As technology develops and becomes more widely accepted, cryptocurrencies have a bright future. As more people begin to support cryptocurrencies, they are anticipated to have a bigger impact on our financial systems as more organizations and institutions come to understand the advantages of blockchain technology and decentralized finance. We may look forward to improvements in scalability, privacy, and interoperability that will solve present constraints and broaden use cases.
 

Frequently Asked Questions

What is cryptocurrency?

Cryptocurrency is a digital form of currency that utilizes cryptographic technology to secure financial transactions, control the creation of new units, and verify the transfer of assets. It operates independently of any central authority or government, making it decentralized and resistant to censorship. 

How many types of cryptocurrencies are there?

There are currently over 13,000 types of cryptocurrencies in existence. Some popular examples include Bitcoin, Ethereum, Ripple, and Litecoin. With continuous growth, new types of cryptocurrencies are constantly being introduced, ensuring a diverse range of options for users to choose from.

Who created Bitcoin?

Bitcoin was created by an anonymous individual or group using the pseudonym Satoshi Nakamoto. While the true identity of Satoshi remains a mystery, it is widely believed that they were a highly skilled programmer and cryptography expert. 

What are the most popular types of cryptocurrencies?

The most popular types of cryptocurrencies in 2024 are Bitcoin (BTC), Ethereum (ETH), and Ripple (XRP). Bitcoin, being the first and most well-known cryptocurrency, continues to dominate the market with its decentralized nature and widespread adoption.

What are the advantages of investing in altcoins?

Altcoins, or alternative cryptocurrencies, offer several advantages for investors. Firstly, altcoins often have lower entry barriers compared to well-established cryptocurrencies like Bitcoin or Ethereum, allowing investors with limited capital to participate in the market. Additionally, altcoins have the potential for higher returns as they are still in their early stages of development and can experience rapid growth.