Types of cryptocurrencies: what types of cryptocoins exist, difference, advantages and disadvantages

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Cryptocurrency is associated primarily with Bitcoin, and the most interesting thing about this is that its creator (Satoshi Nakamoto) was not going to create a currency at all – rather, he was interested in creating a kind of “peer-to-peer electronic monetary system”. But it was this decision that became the missing piece for the formation of digital money, which has been brewing for a long time.

What is cryptocurrency

If we remove the heap of noisy conjectures around cryptocurrencies, then there remains a dry definition: these are simply records in the database that cannot be changed without meeting certain conditions.

Imagine money in your bank account – it can be defined exactly the same. Moreover, this applies even to physical money. In a broad sense, any money is a verified and confirmed entry in a certain base related to balance and transactions, and only the one who owns it can change the state of this money.

In the case of cryptocurrencies, there is a special database management mechanism. The network of the same Bitcoin consists of a large number of nodes of the same rank. Each node keeps a complete history of all transactions and, as a result, the state of all balances. A transaction is a file that says “X gives N bitcoins to Y”, and this file is signed with a private key X – ordinary cryptography. Once signed, the transaction appears on the network and propagates to all its nodes.

These are the basic concepts of P2P technology.

Cryptocurrency rate from the top 10

Information about the value of coins, capitalization, trading volume from the top ten of the rating. We recommend watching the course of all cryptocurrencies.

The main types of cryptocurrencies

At least 3,000 cryptocurrencies have already been created in the world, and their classification was formed by itself, allowing you to understand this diversity. The vast majority of coins are based on Bitcoin or Ethereum (a phenomenon called a “fork”). The fork takes the base code of the cryptocurrency and updates it, adding features that the network participants deem necessary.

One of the most popular classifications offers the following types of cryptocurrencies:

Currencies Coin

The largest share of all cryptocurrencies falls on this type – monetary systems that allow you to exchange amounts of money. They are most often called “coins”. They can be used to buy goods and services like regular money, but there is decentralization, anonymity and ease of use.

Two examples of extremely popular blockchain coins:

Bitcoin:

✅  the very first and most popular cryptocurrency;

✅  can be used to buy anything in the virtual space;

✅  uses immutable blockchain technology to prevent double spending and fraudulent transactions;

✅  limited emission effectively prevents inflation.

Litecoin:

✅  appeared as the first fork of Bitcoin;

✅  allows for fast transactions with low fees;

✅  uses the Scrypt mining algorithm, which is more ASIC resistant;

✅  is considered one of the most convenient options on the market.

Platforms Coins

Quote from one blockchain investor: “During the gold rush, shovel makers earned the most.”

The idea is that perhaps the best strategy is to invest in tools that cryptocurrency users cannot do without. In this case, “shovel manufacturers” are cryptocurrency exchanges, exchangers and developer platforms. Let’s dwell on the latter for now.

During the market crisis, we sadly look at the wreckage of the crumbling ships, but against their background it is the platforms that look the most reliable and confident. A crypto platform is a blockchain-based network that allows software developers to write smart contracts. Smart contracts are programs that automatically control the transfer of funds between two or more parties based on specified conditions.

Platforms are closest to this type of system. The most famous platform coin is Ethereum. In 2017, the rates of many such currencies skyrocketed. Why do people like to invest in them so much?

The main answer is versatility, multi-purpose focus. People can build various services and applications based on these platforms, thereby achieving an almost unlimited number of use cases. By investing in infrastructure, a person is confident that he is investing not in a marketing trap, but in real innovation.

Cryptocurrency Exchanges

Recently, a large number of cryptocurrency exchanges have been issuing their own coins to increase the liquidity of the rest of the coins within the platform and to help less demanded coins trade better. After all, if it is impossible to sell some coin for any other, but investors are not inclined to take risks by purchasing it. But if the exchange guarantees that you can always sell this coin for an exchange token, then the risk is significantly reduced.

Although the main purpose of the emergence of such tokens is to facilitate trading on the exchange (including saving on commissions), over time, and this is not surprising, the coins have become independent objects of investment. The fact is that they have guaranteed liquidity and support from large and reliable organizations – exchanges.

Such coins also have a drawback: their value is unlikely to ever rise significantly. It is doubtful that you will see them as a popular means of payment in any stores. In addition, being bound to a specific site means a close dependence on the position of that site. Exchange crashed under hacker attack? At the same moment, her tokens will collapse.

In general, exchange token rates are likely to correspond to the general direction of the market. There are quite a few people entering the cryptocurrency world, which means that more and more people use exchanges, getting the opportunity to use tokens in the process of flipping funds from one coin to another.

Today, the tokens of the KuCoin, Binance, Huobi exchanges are especially famous.

Utility Tokens

In another way, such tokens are called App Coins, because they are closely related to the usefulness of a particular decentralized application for which the team opens ICO. Almost all such “useful” tokens have a limited emission, and after the ICO, the team is trying to further promote it as an investment option, since the token rate will, of course, increase if the application becomes popular.

But this tactic is now under the watchful eye of the US Securities and Exchange Commission, so you need to have a good understanding of the economy to work with it.

Security Tokens

Security Tokens are issued to investors during the ICO. On their basis, dividends are paid, profit is divided; they can also be invested in other assets. In a number of countries (for example, the USA) such currencies are prohibited.

However, not everyone knew about this – some companies, in the wake of euphoria from blockchain startups, issued such tokens, as a result of which they were punished by the US SEC.

In order not to get into the same situation, developers should remember about the so-called Howie test, developed in the first half of the last century. So, a token is considered a security if it means:

  • investment of money
  • … to a common enterprise
  • … with the expectation of profit
  • … involving the efforts of outsiders.

All four conditions must be met simultaneously. The SEC is generally not opposed to ICOs, but this commission is closely monitoring their regulation.

Crypto Commodities

Crypto Commodities is a generic term used to describe a tradable or fungible asset that can represent a commodity, function, or contract in the real or virtual world using special coins.

For example, an application developer can use tokens to pay for hosting, or a user can watch online content on a blockchain platform for a fee. A trader can use them to make deals, and tokens can also be used to support virtual contracts.

One recent and very popular application for such crypto commodities was the CryptoKitties game on the Ethereum network, which allowed people to use Ethereum to trade and breed virtual cats using smart contracts. The more unique a cat was born, the more its value was.

Basically, any platform that offers a tradable or fungible asset that gives access to values, services or functions on the blockchain network through the use of unique tokens is a crypto-commodity ecosystem. The mechanism of self-regulation and fair transactions in Crypto Commodities is provided by linking the rules for the valuation of tokens and the operation of contracts through programmable code in the form of smart contracts of decentralized applications.

Stable Coins

“Stable coins” are cryptocurrencies whose volatility is minimized by being tied to a stable asset, such as the dollar or gold. The most famous cryptocurrency of this kind is Tether, although more and more of them appear over time.

Top cryptocurrencies with description

Coins that are confidently in the top by market capitalization (28/03/2019):

  1. Bitcoin (BTC). The first fully decentralized open source peer-to-peer payment system. The exchange rate for today is $ 4009, and in December 2017 it rose to $ 20,000. The disadvantages include the low, in comparison with new analogues, the speed of transactions.
Bitcoin
  1. Ethereum (ETH). The invention of a native of Russia Vitalik Buterin. The main innovation that the world saw with Ethereum is full-fledged smart contracts, and not their stripped-down version, as in Bitcoin. Course – $ 137.
  1. Ripple (XRP). It is positioned primarily as an effective mechanism for fast and cheap transactions; in this capacity, banks and large corporations are interested in the coin. Course – $ 0.3.
  1. EOS. It is based on Ethereum and also acts as a platform for application development. The main goal of the developers is the safety of operations, believing that other systems have problems with this issue. Course – $ 4.2.
  1. Litecoin (LTC). The first “alternative” to Bitcoin. Powered by the Scrypt algorithm, it has a higher transaction speed and higher throughput compared to its progenitor. Course – $ 60.
  1. Bitcoin Cash (BCH). Another Bitcoin fork, differing primarily in the block size. Thus, it was possible to increase the speed of transactions, while not increasing the commission. Not so long ago, Bitcoin Cash also split into two branches. The price of the main coin is $ 167.
  1. Binance Coin (BNB). Variant of exchange tokens, which were detailed above. For today, the Binance coin rate is $ 16.6.
  1. Stellar (XLM). The site is focused on direct transactions between companies and individuals. Operating costs have been significantly reduced. Course – $ 0.1.
  1. Cardano (ADA). An application development platform, most notable for the fact that it uses the Ouroboros algorithm during mining instead of the usual Proof-of-Work. It uses less electricity. Cardano’s rate for today is $ 0.06.
  1. Tron (TRX). A platform focused exclusively on entertainment content – downloading, distributing, promoting and monetizing it. The company recently integrated with the BitTorrent platform – the result was the emergence of a token of the same name. Tron price – $ 0.02.
  1. Tether (USDT). The price of this coin is always $ 1, since it belongs to the stablecoins described above. The USDT token is positioned as a “digitized” version of the US dollar. This makes it much easier for users to convert and use.

With all the advantages and disadvantages of cryptocurrencies, it is clear that they have come to stay. And change the world. This is already happening. All over the world, people buy Bitcoin to protect themselves from the devaluation of their national currency. Banks and the government understand the danger to themselves, so they are trying to stop the process, but it is already impossible to do this – only to postpone it.

You can save your money from depreciation using the Matbi wallet exchanger. Here you can quickly and profitably buy bitcoin and store it in your wallet in Matbi. Then wait for the growth of the bitcoin rate and exchange the cryptocurrency back for rubles, having received a profit.

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