Cryptocurrencies have expanded far beyond Bitcoin. The recent upward shift in the market for Bitcoin has led to positive movements for altcoins too. But what are these different types of crypto coins and how can they be used? Below, we give you access to four definitive guides dedicated to different types of crypto coins.
Suitable for beginners and more experienced traders, we take a look at everything from Bitcoin through to the increasingly popular entertainment and media coins.
Table of Contents
How Many Types of Cryptocurrency Are There?
There are many different types of cryptocurrencies but learning about digital assets can be daunting when there are over 17,000 (according to coinmarketcap) of them. Luckily, it can be a bit easier to understand these assets (commonly called cryptocurrencies – though there are various non-currency assets, too) when you separate them into different types of cryptocurrency. We’ve split them up into four categories which are:
– Transactional and Payment Cryptos
– Platform and Infrastructure Cryptos
– Utility or Financial Cryptos
– Entertainment and Media Cryptos
Although these categories are very broad and are in loose terms ‘boxes’ it’s important to note that some cryptos included in these categories can fit into more than one category type.
Before we carry on, this article will be using a lot of crypto terms… Luckily we’ve written a guide for that so have a flick through and familiarize yourself: 28 Crypto Terms to Know Before You Invest in Crypto (2022 List).
Type #1: Transactional or Payment Cryptocurrencies
As the name suggests, these assets are mainly for payments and are hence called Payment Currencies. For example, you could use payment currencies to pay for goods or services, pay your bills, cash out from digital currencies to local fiat currencies like the dollar, etc.
While buying and selling on the cryptocurrency market is becoming increasingly mainstream, the opportunities to spend virtual currencies are somewhat limited in comparison due to its volatility.
There are, however, a growing number of companies across a plethora of industries – from big tech to airlines – who are embracing cryptocurrencies, allowing customers to use them as an official method of payment for their goods and services.
El Salvador made headlines in September 2021 as the first country to accept Bitcoin as its official legal tender. The announcement is a new milestone in the widespread adoption of cryptocurrency.
Interest in emerging payment tools such as cryptocurrencies is rising as businesses and financial institutions (FIs) look for ways to stay competitive. We’ve written about the benefits of cryptocurrencies which you can find here: The 20 Benefits of Cryptocurrency You Need to Know (in 2022).
Below we’ve listed 4 Crypto that are used or intended to be used for transactional and payment.
Created by Satoshi Nakamoto in 2009, Bitcoin is the first cryptocurrency that kick-started crypto to become a trending asset – so much so it’s become the official currency of the country of El Salvador. It is the best known of the more than 17,000 cryptocurrencies in existence today.
It allows anyone with internet access to use Bitcoin without limitation. Transactions are fast, taking no more than ten minutes to reach their destination, even if your recipient is on the other side of the world. This is more efficient than bank transfers, which can take several days, especially if funds are being transferred internationally.
Market Cap: $732,888,067,601
– For our take on Bitcoin, make sure to check out: What Is Bitcoin & How Does It Work? [Beginner’s Guide for 2022].
– Also… We recently wrote about the differences between Bitcoin and Bitcoin Cash. Get to grips with that over here: Bitcoin vs Bitcoin Cash: 5 Differences Investors Should Know.
Litecoin (LTC) is one of the first altcoins to be created. The project was brought to life in October 2011 by Charlie Lee, an ex-developer from Google. Litecoin is similar to Bitcoin in many ways, but a few interesting parameters have been changed. They have allowed Litecoin to find its audience and remain firmly established in the crypto asset landscape.
Litecoin has its own blockchain and sports the slogan “Silver to Bitcoin’s gold”: if Bitcoin is considered digital gold, Litecoin on the other hand tries to fulfil the role of digital silver.
Market Cap: $8,614,847,430
– For our take on Litecoin, make sure to check out: What Is Litecoin (LTC) & How Does It Work? Guide for Beginners.
Dogecoin is a cryptocurrency forked from the Litecoin blockchain. DOGE was created as a satire of cryptocurrency culture in 2013 and takes its name from the Shiba Inu Doge meme.
The project was founded by Billy Markus and Jackson Palmer, based on the idea that a comedic coin would receive more mainstream attention than a serious project like Bitcoin.
Since its creation, a large community of fans including Elon Musk has rallied around and supported the coin. Musk has even gone so far as to make the meme coin a currency that you can use to pay for Tesla merchandise and hints in the future that you may be able to buy a Tesla car with it too.
Dogecoin uses a Proof of Work consensus mechanism that requires dedicated mining equipment to mine new coins. The supply of Dogecoins is unlimited to discourage hoarding, reward miners, and keep transaction fees manageable.
This does, however, mean that the coin is inflationary. Although it started as a joke, Dogecoin has become increasingly popular with investors among other major cryptocurrencies.
Market Cap: $20,198,262,018
Tether (USDT) is a blockchain-based cryptocurrency whose tokens in circulation are backed by an equivalent amount of U.S. dollars, making it a stable coin with a price pegged to USD 1.00. Stablecoins track traditional fiat currencies, like the dollar, the euro, or the Japanese yen, which are held in a designated bank account.
Tether tokens, which were developed by the crypto exchange BitFinex, are the native tokens of the Tether network and trade under the USDT symbol. At the time of writing, USDT is the third-largest cryptocurrency by market capitalization.
Tether belongs to a breed of cryptocurrencies called stable coins which aim to keep cryptocurrency valuations stable, as opposed to the wide swings observed in the prices of other popular cryptocurrencies like Bitcoin and Ethereum.
That would allow it to be used as a medium of exchange and a mode of storage of value, instead of being used as a medium of speculative investments.
Market Cap: $78,302,954,120
Although there are many more transactional cryptos we’d like to include on this list, we’d like to give some honourable mentions to some here: Dash (DASH), Monero (XMR), Stellar (XLM), Zcash (ZEC) and Bitcoin Cash (BCH).
Type #2: Platform or Infrastructure Cryptocurrencies
Infrastructure cryptocurrencies are typically used to pay the computers responsible for running programs on a shared blockchain software network.
For example, the crypto asset that powers Ethereum is called ether, and it may be considered an infrastructure cryptocurrency, as people must purchase it in order to create and use decentralized applications running on the network.
Many blockchain platforms provide different use cases, and each of them requires its own infrastructure for cryptocurrency. Just to name a few examples: Ethereum Classic (ETC), Tron (TRX) and EOSIO (EOS).
Tokens focused on interoperability can also be categorized as infrastructure cryptocurrencies. Their goal is to provide a way to link multiple blockchains together and allow users to transact across these networks.
Below we’ve listed 4 Crypto that are used or intended to be used for platform and infrastructure.
Ethereum was created in 2014 by Vitalik Buterin. It is the second most capitalized cryptocurrency on the market, behind Bitcoin. At first glance, Ethereum’s blockchain works on the same model as Bitcoin’s since it is based on the open-source principle and requires computing power from computers to validate transactions, which is called proof of work. The Ethereum network is also decentralized.
Market Cap: $336,771,688,507
- For our take on Ethereum, make sure to check out: What Is Ethereum & How Does It Work? (& Ethereum 2.0).
- We’ve also compared Bitcoin and Ethereum in: Ethereum vs Bitcoin: 6 Differences Crypto Investors Must Know.
Binance coin (BNB)
BNB is the native token of Binance Smart Chain and Binance Chain. First minted in July 2017 on Ethereum, BNB is a utility token that allows holders to pay discounted fees for trading on Binance’s exchange.
Following the creation of BNB other cryptocurrency exchanges also followed in the same footsteps as Binance, example such as Crypto.com with Crypto.com coin (CRO)
All transactions on Binance Smart Chain and Binance Chain are payable in either BEP-20 or BEP-2 BNB.
The coin has a limited supply of 200 million, and Binance conducts quarterly burns of BNB as a deflationary measure. The burning events will occur until the total supply is reduced to 100 million.
Market Cap: $69,875,555,590
Cardano is a blockchain network with a Proof of Stake consensus mechanism. The project was created in 2015 by Charles Hoskinson, a co-founder of Ethereum.
The Cardano team places a focus on peer-reviewed research and evidence-based methods. The development of Cardano is maintained by the Cardano Foundation based in Zug, Switzerland, with a team of academics and blockchain experts.
The network is a third-generation blockchain that has made technological developments in interoperability and scalability. Cardano allows for the creation of smart contracts and decentralized applications, with transaction fees payable in its native token ADA. ADA is also used as a payment method and investment.
Cardano’s Proof of Stake mechanism, known as Ouroboros, is an environmentally-friendly alternative to Proof of Work that drives the network’s security.
Market Cap: $40,295,597,516
Solana is a Proof of Stake, third-generation blockchain founded in 2017 by Anatoly Yakovenko. The network is attempting to achieve some of the fastest transaction processing times in the industry through its unique Proof of History mechanism.
By combining Proof of History with Proof of Stake, the network claims to process up to 50,000 transactions per second. Solana hashes all transactions in a linear process, making an easily verifiable order to network activity.
This feature removes the need for a timestamp and other validators to confirm that the time of the transactions is legitimate. The network uses its native token SOL for transactions fees and staking.
Solana burns 50% of the SOL in each transaction fee as part of its deflationary model. SOL holders can also become network validators and contribute to the running of the blockchain.
Market Cap: $37,993,692,239
Type #3: Utility or Financial Cryptocurrencies
Utility tokens are digital tokens that are used for a blockchain-based product or service. They run on a blockchain platform, or in other words, are part of a Blockchain Economy.
Most utility tokens are ERC20 tokens that run on the Ethereum blockchain but with the continued release of other blockchain platforms. Other token types like TRC10 and TRC20 tokens have emerged as well. Utility crypto Neo (NEO) employs an algorithm that runs on a proof of stake decentralized Byzantine fault-tolerant (dBFT) consensus mechanism between several centrally approved nodes.
A utility token is a crypto token that serves some use case within a specific ecosystem. These tokens allow users to perform some action on a certain network.
Utility tokens are not mineable cryptocurrencies. They are usually pre-mined, being created all at once and distributed in a manner chosen by the team behind the project. So let’s take a look at our 4 main utility cryptos.
Ripple (XRP) is a blockchain-based digital payment network and protocol co-founded by Chris Larsen and Jed McCaleb in 2012. It offers seamless exchange and remittance of assets via its peer-to-peer decentralized platform, aiming to provide more efficient banking services.
Ripple uses a different consensus mechanism to confirm transactions. It relies on a consensus protocol to validate account balances and transactions on the system and prevent double-spending.
The confirmations are almost instant and only charge a small fee. When users make a transaction on Ripple, the network deducts a small amount of XRP, its native cryptocurrency, as a fee.
XRP is also used as an intermediate of exchange between two assets or networks to facilitate a quick conversion. XRP is also used as a global bridge currency between multiple fiat currencies.
Market Cap: $32,561,152,484
Polkadot is a blockchain network that has created a system of interoperable blockchains. The project was founded by Gavin Wood in 2006, a co-founder and former CTO of the Ethereum network.
Polkadot consists of a main Relay Chain which provides a layer of security and standardization for all of its connected, customizable Parachains.
Each Parachain can modify its Proof of Stake consensus mechanism, run DApps, mint tokens, and create its own network rules. The number of Parachains is limited and distributed via an auction system.
DOT is Polkadot’s native utility and governance token. Holders can vote on prospective project changes and also pay network transaction fees on the Relay Chain and some Parachains.
DOT is an inflationary token with an unlimited supply, and users confirm its transactions with a nominated Proof of Stake system.
Market Cap: $21,889,991,095
Chainlink is a decentralized oracle network founded in June 2017 by the company SmartContract. The project connects smart contracts with external data sources such as APIs and information systems.
Projects that depend on off-chain events or information can easily integrate these triggers and feeds into their on-chain code. Chainlink also offers a suite of other products, such as data reporting, result aggregation, and random variable generators.
LINK is Chainlink’s native ERC-677 token that is used to pay for the network’s oracle service. LINK has a limited one billion supply that was distributed via an ICO.
There is no mining or staking involved in releasing coins, but Chainlink does have a Proof of Stake-based consensus mechanism for choosing who verifies transactions.
Market Cap: $9,009,726,129
The Cosmos network was founded in 2014 by Jae Kwon and Ethan Buchman as a solution for interoperable blockchains.
Different projects and applications all have their own blockchain needs for customizability, but they also benefit from compatibility too.
Each new blockchain in the Cosmos ecosystem is known as a Zone. These connect with Cosmos Hub, a Proof of Stake blockchain that enables the transfer of data and assets between different blockchains.
Cosmos Hub’s native token is ATOM, a utility token with three use cases. Users must pay their transaction fees using Atom, with the fee proportional to the computational power required.
ATOM is also used to take part in Cosmos Hub’s governance and staked behind validators for rewards. The token is inflationary, and new coins are minted based on the amount of ATOM staked at any given time.
Market Cap: $10,787,308,468
Type #4: Entertainment and Media Cryptocurrencies
Cryptocurrencies have the potential to transform several markets within media and entertainment, but particularly those where participants would benefit from the security and transparency that blockchain would offer, such as distribution of payments, funding, monetization and contract enforcement.
Blockchain technology is still in the early stages of development, but given the excitement around the many ways it could be put to use, it’s not too soon for media and entertainment companies to start thinking about the possible implications for their businesses and the industry as a whole.
An entertainment token is unique to its ecosystem. Basic Attention Token (BAT), for example, can only be used to tip content creators through the Brave browser or through other applications that have integrated BAT wallets, like Twitter.
Blockchain has the potential to disrupt the way content is produced, aggregated, distributed and consumed and the possibilities for content creators, brokers and arbiters of intellectual property are too big to ignore.
We’ve listed 4 Crypto that are used or intended to be used for entertainment and media.
Basic Attention Token (BAT)
Basic Attention Token (BAT) is a cryptocurrency intending to create a virtuous cycle around digital advertising that is equitable for creators and consumers.
Running on Ethereum (ETH) and integrated natively on a custom web browser called Brave, BAT can be exchanged between advertisers, publishers and internet users based on their web activity, and is intended to streamline commerce between all three groups.
Users are rewarded with BAT for viewing ad content, publishers can deliver higher-impact ads and advertisers can be assured their messaging is being viewed by a willing audience.
The end result is a new kind of digital advertising platform powered by BAT. Users can either hold the BAT, exchange it for cash or other cryptocurrencies, or pay it to support their favourite content creators.
Market Cap: $1,283,633,521
Theta is a decentralized network specializing in video delivery that uses the Theta Network blockchain. Launched in 2019, Theta provides free, high-bandwidth streaming that also utilizes a viewer’s computing power to share video with other users. This sharing activity gives the primary user token rewards.
HETA is an ERC-20 token that lets holders participate in Theta’s governance protocol. Users can also stake Theta to become a Validator or Guardian node and generate news blocks of transactions on the network.
The total supply of the token is one billion, making it deflationary. Theta Network also has the cryptocurrency TFUEL, which users earn by watching streams and sharing their bandwidth.
TFUEL is used to pay for transactions such as interacting with smart contracts and setting up caching nodes. The token also cannot be withdrawn from the Theta.tv platform.
Market Cap: $3,803,996,075
Chiliz (CHZ) is an ERC-20 token on Ethereum that acts as a digital currency for the Socios.com and Chiliz platforms. Both networks provide fintech solutions in the sports and entertainment worlds and are well known for their Fan Tokens.
Through Socios.com, fans of some of the most popular sports teams in the world can show their support by purchasing crypto Fan Tokens. In Fan Token Offerings, users purchase CHZ to convert into the Fan Tokens they want to collect.
Each Fan Token provides privileges and benefits, including the right to vote on club decisions and the chance to win unique VIP experiences. By staking their Fan Tokens on the Socios Platform, smart contracts determine the outcome of the votes held.
For supporters globally, CHZ acts as the gateway to a new level of fandom for their favourite teams.
Market Cap: $6,719,487,705
Enjin Coin (ENJ)
Enjin is a cryptocurrency launched in 2017 by the company Enjin. Enjin Coin is an ERC-20 compatible token, which means you can send and receive it using an Ethereum wallet. But the technology behind Enjin does more than just handle that single currency.
Enjin is designed to integrate with games—you can use Enjin Coin as a currency and use the Enjin wallet to buy, sell, and trade NFTs. For example, MMORPG players may buy an item in Enjin usable across multiple games and easily tradeable or sellable in an online marketplace.
The company behind Enjin is based in Singapore and works with companies to implement their own solutions on the Enjin platform.
Market Cap: $1,680,720,928
Now Over to You
While Bitcoin launched the crypto craze a little more than a decade ago, today there are thousands of different cryptocurrencies that investors may want to learn about and invest in. But cryptocurrencies aren’t like other real-world, fiat currencies, like the dollar, euro or yen.
Those are tangible currencies, governed by central authorities, and they all operate in the same way as a store of value. Meaning: You can exchange any fiat currency for goods and services.
Cryptocurrencies — which can include different types of coins (e.g. stablecoins, utility coins) and tokens (programmable assets) — serve many purposes.
We hope you enjoyed this edition of the knowledge crunch blog just as much as we enjoy writing them! Stay tuned for more and be sure to check out our other helpful blogs with advice and tips to reach your investment goals with ZuluTrade.
Disclaimer: The views expressed do not constitute investment or any other advice/recommendation/suggestion and are subject to change. Reliance upon information in this material is at the sole discretion of the reader. Opinions expressed in this article do not represent the opinion of ZuluTrade Social Trading Platform and do not constitute an offer or invitation to anyone to invest or trade. Every metric and the statistical number is a result of a past performance which does not constitute a promise or a certainty for a future one.