Travel internationally and you’ll encounter an array of currencies — dollars, euros, pounds, yen, — each backed by a different government or region, roughly 180 in all. But that’s nothing compared to the different types of crypto coins and tokens out there.
Currently, there are more than 19,000 different cryptocurrencies. In this article, we will take you on a tour of some of the more important types of coins and tokens.
But first, let’s start with what a cryptocurrency actually is.
Table of Contents
What’s a Cryptocurrency?Types of Crypto Coins and Tokens: What’s an Altcoin?10 Types of Crypto Coins You Should KnowTypes of Crypto Coins and Tokens: What’s a Crypto Token?5 Types of Crypto Tokens You Should Know
What’s a Cryptocurrency?
A cryptocurrency is a digital or virtual currency whose transactions and records reside in a decentralized system that depends on cryptography rather than a centralized authority.
The decentralized system that many cryptocurrencies rely on to enable their functioning is blockchain technology.
A blockchain is a digital ledger of transactions recorded on a decentralized computing network. Its technical protocol enables it to record validated entries agreed upon by the entire blockchain (consensus) in a manner that can’t be changed or overwritten.
A cryptocurrency, represented by the crypto coin as a unit of value, serves as the standard method of payment on a particular blockchain.
It’s important to note that some of these cryptocurrencies can be accepted as payment outside of the blockchain by payment services and vendors. But not all are.
As we mentioned above, there are thousands of cryptocurrencies with a corresponding number of crypto coins sometimes referred to as “altcoins.”
Types of Crypto Coins and Tokens: What’s an Altcoin?
An altcoin is any crypto coin other than Bitcoin, the oldest cryptocurrency with the largest market capitalization. But what’s the reason for alternatives to Bitcoin? And why so many different types of crypto?
Bitcoin illustrates the classic idea of cryptocurrency as an alternative to fiat currency — an alternative that doesn’t require centralized oversight or control.
While Bitcoin’s design was for an alternate means of exchange, intent doesn’t always equal actual usage.
In reality, cryptocurrencies may not be legal in all countries, nor may they be accepted by many vendors. So their use — even Bitcoin’s — as a medium of exchange equivalent to fiat currency has been somewhat limited.
But a new use has emerged: as a store of value.
Bitcoin’s rise in value over 13 or so years from pennies per coin (technically zero at inception) to tens of thousands of dollars per coin illustrates this use. This has attracted attention from others who’d like to create a cryptocurrency with that same kind of appreciation potential.
That’s one reason so many different types of crypto coins have come into being. Another reason: the blockchain technology underpinning cryptos is powerful and widely applicable, meaning developers can create apps to solve many problems in just about any industry.
So as software developers introduce new blockchains with targeted applications, audiences, and functionality — and app developers write more applications on them — the types of crypto with unique characteristics tend to increase. As with many innovations, the market and how users interact and support them will determine how many cryptos survive.
While it’s probably impossible to become an expert in all 19,000, here is a short list of the cryptos you should be familiar with.
10 Types of Crypto Coins You Should Know
Bitcoin (BTC)
The first cryptocurrency (launched in 2009), Bitcoin is the largest in the world with a market capitalization in excess of over $350 billion. At times, its market cap has soared as high as almost $900 billion. It is heavily traded and invested in as a store of value, despite its overall volatility.
Ethereum (ETH)
Ether (ETH) is the coin of the Ethereum Network, an ambitious blockchain launched more as an environment for developers to innovate than as a store of value. Ethereum is the second largest crypto by market cap (roughly $180 billion) but prides itself on the community that supports it and its innovations.
Tether (USDT)
Tether represents a specific kind of crypto coin that tries to avoid radical volatility by pegging — or “tethering” — its value to a fiat currency. You may have heard these types of coins referred to as “stablecoins.” In Tether’s case, the coin attempts to keep its crypto coin value at 1:1 with the U.S. dollar.
Litecoin (LTC)
Litecoin illustrates why crypto coins tend to multiply. One of the earliest altcoins dating back to 2011, Litecoin was designed to act as a simple, near-zero-cost payment method that was faster and less expensive than Bitcoin. Its market cap is a little under $10 billion.
USD Coin (USDC)
USD is another stablecoin that attempts to tie its value 1:1 with the U.S. dollar. It runs on the Ethereum blockchain and several others. Its intent was to be not only less volatile but also cheaper and faster to use than existing cryptos. Its market cap is roughly $50 billion.
XRP (XRP)
XRP is a crypto created to solve a very specific problem: to close financial transactions quickly on a currency exchange network “Ripple.” Ripple is a company that operates its own specialized blockchain that uses a different, faster consensus mechanism than most cryptos.
XRP is the native crypto for its blockchain, and its current market cap is just over $15 billion.
Cardano (ADA)
Cardano, similar to the Ethereum network, was designed to support application development and digital services with a noble twist: It wants to use these technologies to bring about global change.
Cardano’s blockchain protocol uses an environmentally-friendly consensus mechanism known as “proof-of-stake.” Its market cap is just over $15 billion.
Solana (SOL)
The Solana blockchain focuses on decentralized finance (DeFi) applications and smart contracts (automated transaction agreements). But its chief innovation is its hybrid consensus model.
It uses proof-of-history (PoH) that is supported by proof-of-stake (PoS). This enables the blockchain to provide incredibly fast processing time.
Its native crypto coin is SOL, and its market cap is roughly $11 billion.
Dogecoin (DOGE)
Dogecoin exemplifies another type of crypto coin: the meme coin. Launched with a strong sense of humor, it takes its name from its canine inspiration and bills itself as “an open-source peer-to-peer digital currency, favored by Shiba Inus worldwide.”
While attracting attention tongue-in-cheek from a breed of dog, it has had staying power from its origins in 2013 and has a market capitalization just under $8 billion.
Polkadot (DOT)
A relatively new entrant (2020) created by one of the Ethereum Network’s co-founders, the Polkadot blockchain goes after a different technical challenge: How can blockchains talk to one another?
In fact, the Polkadot blockchain operates two blockchains to get its work done — a primary one recording permanent transactions and a separate network of mini-blockchains that each break up the workload into tiny pieces (shards) to speed up processing times.
Its market cap is just under $8 billion.
Types of Crypto Coins and Tokens: What’s a Crypto Token?
In general, coins represent a cryptocurrency, whereas crypto tokens represent a digital asset functioning on a blockchain.
Think of it as the difference between a silver dollar and a subway token for a $1 ride. While they have similar value, the first can be used widely as a method of exchange; the second is good for one specific service, and you may or may not be able to sell it to someone else.
As with cryptocurrencies, there are innumerable crypto tokens, with new ones being created each day. So here are five broad types you should understand to help you on your crypto journey.
5 Types of Crypto Tokens You Should Know
Utility. Similar to the subway token mentioned above, utility tokens provide access to a particular service on the blockchain they’re a part of.
Financial Instrument. A digital representation of a financial instrument, such as a stock, bond, or option (often referred to as “securities”). Binance.US does not list securities on its platform.
Exchange. A token specific to a particular crypto exchange. A crypto exchange is a platform for buying, selling, and trading cryptocurrencies.
NFTs. NFTs are non-fungible tokens, a type of digital asset that emphasizes uniqueness and therefore may have value to collectors. They have been popular in the areas of digital art, music, video, and gaming.
DeFi Tokens. DeFi refers to decentralized finance, or financial applications specifically designed to run on decentralized networks, such as a blockchain. Each DeFi app uses DeFi tokens to enable its mini economy. Holders of the tokens can make use of the varied DeFi apps.
Using Different Types of Crypto Coins and Tokens
There are many reasons that a person might want to own, hold, sell, or trade crypto coins or tokens. Some are useful as stores of value, while others have specific utility.
All of this means it’s best to have an excellent partner, like Binance.US, to provide you with a simplified environment to learn about, research, and buy, sell, or trade your crypto assets.
Getting started is straightforward: Set up an account, fund it, do your research, make your decisions, then place an order. Binance.US will be there to help along the way.
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