Pop quiz: how many cryptocurrencies are out there on the market right now? There’s Bitcoin, obviously, then Dogecoin, then Ethereum, then… hm, do NFTs count? Either way, there’s definitely around 5 or 6, right?
Wrong! There are over 13,000 cryptocurrencies whizzing their way round the internet right this second, with more popping into existence every day like mushrooms after rain.
The mainstream news might focus on the big titans like Bitcoin and Ethereum, but the truth of the matter is that the bulk of the crypto world is taken up by these smaller coins that only true crypto nerds have ever heard of.
Let’s take a look at what sets these different types of cryptocurrency apart, shall we?
Are the Different Types of Cryptocurrency All Different Coins?
When you hear the phrase ‘different kinds of cryptocurrency’, you might default to thinking about different crypto coins. Ethereum is different from Bitcoin, which is different from Dogecoin in the same way that US dollars are different from British pounds, which are different from European Euros.
But the differences between cryptocurrencies go deeper and higher than that: some kinds of cryptocurrencies aren’t ‘coins’ at all! Some of them are ‘tokens’, which are a kind of asset that lives on the blockchain of a particular platform.
Let’s go deeper into it.
On the one hand, you have coins. Everyone knows what these are because they’re analogous to the normal currencies we all use every day. Coins are built on their own blockchain and are traded back and forth like currency. Also, there are thousands of them, with Bitcoin — the granddaddy of them all — being a single example.
Tokens are a bit different. Tokens are known as ‘programmable assets’ that establish and verify the ownership of things that aren’t on the blockchain. This is how NFTs work: tokens verifying the ownership of artwork which is not itself on the blockchain are stored using that tech.
It doesn’t have to end there. Hypothetically, one could use tokens to verify ownership of anything: houses, pets, films, videogames. Think of them as an indelible way to authenticate ownership of things that aren’t coins.
Okay, but What Different Kinds of Cryptocurrency Coin Are There?
If you’re investing in crypto or know someone with crypto investments, what you’re probably most concerned about are the many and varied crypto coins. Which ones are popular? Which ones offer a high return? Which ones are plain cool?
With thousands of different coins out there, that can be a hard question to answer in a comprehensive way. Nevertheless, we can take a look at some of the most popular examples of cryptocurrency and see what makes them all tick.
The Big Three
Let’s start with Bitcoin, because it all started with Bitcoin. Bitcoin is a titanic figure on the crypto stage, and for many people remains synonymous with cryptocurrency as a concept. There are around 19 million of them in circulation. Considering that there can only ever be 21 million Bitcoins at a maximum, we may soon reach the day when no new Bitcoins enter circulation.
Also, you can withdraw it from a literal ATM run by Byte Federal, which is incredibly futuristic.
Controversially, Bitcoin operates on a ‘proof of work’ system which requires volunteer ‘miners’ to verify transactions on its blockchain with energy-intensive computing work.
That sets it apart from Ethereum, another huge cryptocurrency that has been transitioning to a much less intensive ‘proof of stake’ system for the last few years. Another thing that sets Ethereum apart is that its blockchain, unlike Bitcoin, wasn’t designed solely to facilitate currency trading. The Ethereum blockchain is the chain of choice for people running applications on the blockchain, and for NFTs!
Completing the trinity of ‘examples of cryptocurrency that regular people have heard of’ is Dogecoin, the Elon Musk-backed ‘memecoin’ that was actually started as a way to make fun of cryptocurrencies. Because irony is dead, Dogecoin now has a market cap in the billions of dollars.
Dogecoin is distinct in that it has a potentially infinite supply. Unlike Bitcoin, there’s no hard limit on how many coins there can ever be. That means Dogecoin investors rely on celeb endorsements and word of mouth to keep the price rising, since a functionally infinite supply means prices would otherwise trend downwards.
The Smaller Guys
But like we said earlier, you could fill multiple books if you wanted to write about every cryptocurrency out there. Still, there are a few smaller coins that are worth talking about.
The first is Cardano, which was actually started by one of the co-founders of Ethereum. Unlike Ethereum, Cardano has operated on a proof of stake system from the outset, and its main uses are in traceability and identity management. It’s designed to facilitate data collection from multiple sources and to verify a product’s journey through the supply chain.
One day, you might scan a barcode on a chocolate bar and be able to trace its production journey with Cardano!
There’s also Tether, a so-called ‘stablecoin’ whose raison d’être is that it doesn’t fluctuate in price the way that cryptocurrencies are known for. Tether is pegged to the value of the US dollar, meaning it only changes in price as the US dollar does. That makes it a great choice for people looking to use crypto as a means to actually make purchases, rather than as an avenue for investment.
Aside from these guys, there’s no end to the number of coins out there. Still, these two work as a great intro to concepts like ‘proof of stake’ and ‘stablecoins’.
It’s a Crypto World, We’re Just Living in It
So there you have it, a quick but comprehensive guide to the wild and woolly world of different types of cryptocurrency. There’s really no end to the cool applications that blockchain tech can be put towards, and those possibilities only get wider every day.
So get out there and get interested!
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