Cryptocurrency used to be only one, which is Bitcoin that is still the gold standard for cryptocurrencies until today. However, since cryptocurrency is growing very fast, with an annual growth of 31% and is expected to reach $1.8 trillion market cap by 2021, many projects emerged. Today, many kinds of coins on different underlying blockchains are available. Not to mention thousands of tokens that are built based on existing blockchain keep appearing. All of this might make people confused, but no more worries as this article will classify them and make types of cryptocurrencies simpler for you to comprehend.
Types of Cryptocurrencies:
Bitcoin is the first cryptocurrency that allows the decentralized peer-to-peer transaction without any intermediary. It is by far the most successful blockchain project as it has no organization and no leader. Its founder Satoshi Nakamoto is nowhere to be found. It is not a real name and nobody knows who he is, it could be a group of people, it could be a person. Despite the absence of a central governing body, Bitcoin networks keep running with a Proof-of-Work consensus mechanism by decentralized miners who verify the transactions. These miners will contribute the computing power to solve the algorithm, verify the transactions, then and add the next blocks to the blockchain, then they will be rewarded by Bitcoin.
Altcoins are all coins besides Bitcoin. It got this name because these are the alternate version of Bitcoin at the beginning. There are thousands of Altcoins today, and not all are similar to Bitcoin. There are some coins that are designed to be a better version of Bitcoin, whether with faster transaction speed or with larger scalability and lower gas fee, for instance like Bitcoin Cash and LiteCoin. Then there are also coins that are designed to be a blockchain where dApps could be created such as Etherium with its smart contract feature. Coins such as Etherium and NEO has very different purpose compared to Bitcoin as it is not designed to be a digital currency.
3. Stable Coins
Stable coins are coins in which value is pegged to either precious metal, fiat or cryptocurrency with a stable value. Some stable coins are collateralized in order to tackle the volatility issues in the crypto market. The stable coins are a safe haven when the market is bearish but it will also not increase in price that creates profit for its holders. Some examples of stable coins include USDT and Libra, a stable coin issued by Facebook.
Tokens are coins that do not own their own blockchain. They are created on dApps which are built based on an existing blockchain. Many projects use Etherium blockchain to create their token. Token that underlies on Etherium blockchain is usually known as ERC-20 tokens. Another example is token based on Binance Chain (Binance blockchain) which is known as BEP-2 tokens. These tokens can migrate from a blockchain to another. Many projects start with an ERC-20 token and then migrated to their own blockchain when they launch the project mainnet. There are several types of tokens, which differs based on the usage:
- Security Tokens: Security tokens are tokens that represent assets, for instance, the participation of physical underlying, revenue streams or dividend/interest payments. It is similar to owning stocks in a company. This type of token is usually regulated by law.
- Utility Tokens: Utility is usually backed up by a project and is utilized on the project platform to give a certain benefit such as discounted fees for service and voting fees or the grant of special access on the platform. This type of token is the most common token to be bought by crypto holders as an investment.
Have you understood about types of cryptocurrencies now? If you do, care to take a guess of what type of cryptocurrency $HNST is? Yes, $HNST is a utility token based on Binance Chain (BEP-2). It is utilized in the Honest Mining platform for ease process in staking and discounted service fees. You can start staking on altcoins and tokens on the Honest Mining platform easily with minimum investment and earn up to 80% annual yield. Do not forget to use $HNST to get your discount!