Are you looking to invest in cryptocurrency?
More and more people are trying to get into cryptocurrency. But not everyone who invests has a proper understanding of it, leading to losses. Did you know that the market sector of crypto also grew by a staggering 187.5% in the last year?
If you want to put some of your money in cryptocurrency, you have several options to choose from. Learning what type of crypto is right for you is a great way to grow your investment. Read on and learn the main types of cryptocurrency available today.
How Many Types of Cryptocurrencies Are In The Market?
Think of each cryptocurrency as money from different countries. Each kind has a different value, but cryptocurrency is digital and more secure.
Cryptocurrency gets used as a virtual or digital currency. This currency has secure cryptography algorithms, which makes them hard to counterfeit. Its defining use is that they are for people who don’t want to follow centralized banking or authority.
Cryptocurrency is secure as it protects your privacy more than traditional money. So many kinds of cryptocurrency are available as it is a free market, with anyone able to launch their own. Cryptocurrency is a decentralized exchange meaning the trade occurs only between the traders.
Over 18,000 types of cryptocurrency were available as of March 2022. This increased the market capitalization of cryptocurrency to over $2 trillion. Despite the fluctuating crypto market, crypto is here to stay.
Cryptocurrencies remain a vital digital asset to store and hold money. Some use cryptocurrency as investments and exchange crypto-like stocks. Its advantages include the faster transfer of money and a decentralized system.
Why Are There So Many Types of Cryptocurrency?
The high number of types of cryptocurrency in the market today is because it’s free to build. Many developers can use blockchain technology to create their own unique crypto. Some types of crypto get used as investments, while some get used for crypto exchange to buy or sell.
Many cryptocurrency platforms have other purposes besides exchanging value. Some get used as solutions to problems in several sectors of our economy. With the rising trend of people getting into crypto, more and more people are developing their own currency.
What Are the Types of Crypto Investments?
Some people interchange the use of coins, crypto, and even tokens. Even if this is common, these terms do not have the same meaning and differ from one another. To understand how to invest, you must know what types to invest in.
All types of cryptocurrencies are under two categories which are coins and tokens. Coins include Bitcoin and Altcoins (which are other cryptocurrencies besides Bitcoin). Tokens are types of assets within the blockchain that you can program.
Although still under coins, Altcoins also refer to coins other than Bitcoin. These include coins you can mine, utility and security tokens, stablecoins, etc.
Crypto coins represent concepts, projects, and even assets using strings of computer code. These coins were first made to function as a counterpart of money and work as a currency. Cryptocurrencies have different usage compared to fiat money which includes euros and dollars.
Crypto coins and cryptocurrency are often interchangeable terms. Both are intangible and make use of the capabilities of the blockchain. Since they use blockchain technology, they often offer solutions to its problems.
Cryptocurrencies such as crypto coins rely on strict encryption algorithms. These coins can be used in transactions such as exchanging goods for crypto or vice versa. Crypto coins each have a different value and can be later used to hold or exchange that value.
Bitcoin is a token that has a market cap of $410 billion, making it the number one crypto. Bitcoin is also known as the very first launch of cryptocurrency. The main design of Bitcoin made it the first independent currency, free of any bank or government.
This aimed to make it free of any central bank or government control. Bitcoin was since used to hold more secure and even anonymous transactions online. This made it attractive to people who want to avoid paying taxes on top of their transactions.
Instead of banks or governments, it uses a blockchain that’s decentralized. With this, Bitcoin made the system that all the other cryptography use. Bitcoin created the peer-to-peer verification system that forms most crypto on the market.
Its peer-to-peer system helps it become open, resistant to censorship, and allows sharing. Its ability to share and exchange crypto for digital or real-life goods makes it as usable as real money. Some mine bitcoin using powerful computers to verify transactions which generate more bitcoin.
If you want to know more about how Bitcoin differs from other coins, Bytefederal has you covered. Check out their guide on the difference between Bitcoin from Dogecoin.
Ethereum is also a type of token crypto with a market cap of $150 billion, making it the second largest crypto. Its main difference is that it is programmable, and its purpose isn’t to support a currency. Ethereum enables network users to publish, create, and monetize decentralized applications.
Ethereum uses Bitcoin’s foundations while introducing innovative smart contracts. This allows developers to build crowdfunding platforms, digital games, and collectibles. Unlike bitcoin, there are no limitations on how much ETH can get created.
Tokens use an initial coin offering system for creation and distribution. An initial coin offering works like an initial public offering for stocks. This operates as a way to store value and get used in transactions.
The main difference between a token from a crypto coin is that a token comes from an existing coin, like Bitcoin or Ethereum. These cryptocurrencies have far more uses compared to other digital money.
You can also use tokens as value storage created on top of any existing blockchain. They also have other use, such as representations such as digital art known as NFTs. Tokens such as non-fungibles can get tied to physical assets like real art and estate.
Cardano or ADA is a token with a market cap of $16 billion. Its main function is to be a platform for proof-of-stake blockchain. This means it has the functionality of the smart contract.
Cardano gets used for academic research and TPS or high transactions per second. This third-generation platform uses proof of stake systems that can handle PoW calculations. Cardano does not need high energy for mining, unlike other cryptos.
More and more environmental issues about cryptocurrencies are coming to light. This is because of the high electricity to mine. What makes Cardano better is its energy efficiency when it comes to mining. This token also comes with identity management which helps prevent fraud.
Solano or SOL is a token with a market file of $14 billion. This platform uses blockchain to generate more cryptocurrency.
This is behind the well-known NFT known as the Degenerate Ape Academy. Solana brought proof-of history, which allowed greater scalability.
SOL helps in the facilitation and even creation of dApps. Its proof of history and proof of stake capabilities boosts its usage. Solana aims to make decentralized crypto more accessible on an even larger scale.
This token’s known for its groundbreaking short amount of processing time. SOL uses hybrid protocols that lessen the need for validation times. Solana promises that its users will not have increased taxes or fees.
Altcoin means an alternative to Bitcoin, which means any other coin besides bitcoin. In its early days, Altcoins aimed to help improve issues found in Bitcoin. There are many altcoins on the market; these include Binance USD, USD Coin, and Tether.
There are over 5000 Altcoins on the market today. Altcoins have certain functions besides exchanging the coin for other things of value. These also include some utility and security tokens.
Tether is under altcoins, particularly stablecoins, with a market cap of $66 billion. Tether’s value is dependent on the value of fiat currency. This token aims to offer crypto traders more stability and lower transaction fees.
Some investors were wary of the 1:1 value of Tether of the USD as the crypto market is unstable. Its 1:1 value makes Tether the bloodline of the crypto ecosystem.
USD Coin (USDC)
The USD coin is like the Tether but uses particular fiat money, which is the U.S. dollar. The USDC is a stablecoin with a market cap of $55 billion. Each USD Coin has a $1 backing in reserve to equal the U.S. Dollar.
This guarantees that the USD Coin token has a 1:1 ratio with the U.S. Dollar. Since the cryptocurrency market is unstable, the USDC offers stability and holds value. Unlike most cryptocurrencies, the USDC can get issued via centralized institutions.
Learn More About Types of Cryptocurrency Today
Cryptocurrency is one of the biggest things you can invest in today. If you play your cards right, crypto trading can be a great source of income. Knowing the types of cryptocurrency first is sure to give you a leg up.
The Common Types Of Cryptocurrency: An Informative GuideWant to learn more about crypto trading and stock investments? We got you covered! Take a moment to go through our guides that cover everything about cryptocurrency.