Understanding different types of cryptocurrencies

Since the inception of Bitcoin in 2009, the cryptocurrency world has seen immense growth.

Today, thousands of different cryptocurrencies exist, each providing a new function or feature.

We often interchange the term crypto with coins or tokens, although they represent different things.

Coins can include Bitcoin and altcoins, which were first introduced through Litecoin and Namecoin in 2011, but it wasn’t until Ethereum rolled out that altcoins gained traction.

On the other hand, Tokens are programmable assets residing in a specific platform’s blockchain. They are created within the blockchain of an existing coin.

Tokens are usually developed and distributed through an initial coin offering or ICO and are classified into three types.

Value tokens represent digital assets such as art or music in the form of an NFT, while security tokens function like stocks, representing ownership of securities.

Utility tokens have specific uses, giving you the right to perform actions on a blockchain or a decentralized application.

You also have stablecoins in the crypto space, whose values are pegged to the prices of other assets. If it is working properly, the value of a stablecoin pegged to the US dollar should be one dollar.

Meme coins are what provide the crypto world with a sense of humor. These are coins that grew their popularity and influence through, you guessed it, memes and social media.

Give it to Dogecoin for starting it all. What started as a lighthearted joke, the coin inspired by the famed “doge” meme led to the creation of hundreds of meme coins today.

Cryptocurrencies represent a significant innovation in technology and finance, and more of them are being started.

While they rely on the same premise to transfer value between parties, there are differences between them that traders and investors like you need always to remember.