Once an unheard-of concept, cryptocurrency has exploded into an industry worth upwards of $4.67 billion over the past couple decades. The number of types of cryptocurrencies have grown rapidly since the launch of the first digital currency Bitcoin in 2009, with interest in the field rising every year.
So what exactly is cryptocurrency and what makes it so popular? How many types of cryptocurrencies are there? Read on to find out more about some of the top types of cryptocurrencies dominating the market today.
What is Cryptocurrency?
Simply put, cryptocurrency is a decentralized digital form of payment where verification and transparency of transactions is secured by cryptography. What this means is there is no reliance on any centralized entity such as banks or government for backing of the currency. Instead, all transactions are recorded on the blockchain technology in a manner that is immutable and transparent. These characteristics are what make cryptocurrency so popular.
Coins vs Tokens
Often incorrectly used interchangeably, cryptocurrency coins and tokens are not the same. Although both reside on the blockchain and are digital assets that you can sell or buy, there is a distinct difference between coins and tokens.
A cryptocurrency coin is any digital currency that is a native asset of their own dedicated blockchain. Although other currencies may exist on the same blockchain, none of them will be deemed coins. Examples of coin cryptocurrencies are Bitcoin (BTC) and Ether (ETH) which operate on Bitcoin and Ethereum blockchains respectively. Coins are mostly used as a form of payment and do not serve any other purpose, unlike tokens which are more versatile in their applications.
Tokens, on the other hand, do not have their own native blockchain and instead operate on other blockchains using their infrastructure. They are often used with decentralized applications where they act as redeemable coupons or vouchers offering some sort of incentive. Examples of popular cryptocurrency tokens are Tether (USDT) and Uniswap (UNI) which use Ethereum blockchain.
Types of Cryptocurrencies
According to crypto asset price tracking website CoinMarketCap, approximately 23,082 cryptocurrencies currently exist as of March 2023. The nature of cryptocurrency is such that anyone can create their own coin or token, by either creating their own blockchain or modifying an existing one. This is why the number of cryptocurrencies is only expected to increase as new coins and tokens are launched every day. The following are some of the top types of cryptocurrency that dominate the market today.
Responsible for the revolution that digitized currency as a whole, Bitcoin holds the title of being the world’s first ever cryptocurrency. Launched fourteen years ago in 2009 by Satahoshi Nakamoto, Bitcoin is still the most popular and most valuable cryptocurrency there is, holding the highest market cap out of all cryptocurrencies at a staggering $539.57 billion.
Even if you know nothing about crypto the industry, you probably have heard of Bitcoin, such is its prominence. Bitcoin operates on its own dedicated blockchain, where transactions are managed using peer-to-peer technology. In November 2021, Bitcoin traded at its all time highest of $68,000.
As of March 2023, it is valued at $27,940.
Ether is the second largest cryptocurrency in terms of value after Bitcoin, with a market cap of $214.94 Billion. Ether operates on its own blockchain known as the Ethereum network, where it is its native cryptocurrency. The Ethereum platform is a decentralized global software which allows the creation of other decentralized applications (dapps) and smart contracts on top of it. This means that other tokens or software can be launched on the Ethereum network independently, making it a hub for blockchain based programming.
Unlike Bitcoin which has a cap of 21 million coins, there is an infinite number of ETH available to the public. Its dual nature of being both a cryptocurrency and a blockchain software space is what makes Ethereum so popular.
Unlike Bitcoin and Ether which are based on decentralized platforms, Tether is a centralized cryptocurrency backed by the US Dollar. What makes Tether so interesting is it is a stablecoin rather than a traditional cryptocurrency, allowing it to enjoy the best of both worlds. Although Tether is built through blockchain technology, having its monetary value pegged to the US Dollar (a stable currency issued by the US government) means it does not have to face the volatility and price fluctuation of other decentralized cryptos.
The native coin of the Cardano blockchain has risen to become one of the ten cryptocurrencies around the world with a market cap of $12.03 Billion .Often referred to as a third-generation blockchain, Cardano was the largest cryptocurrency to adopt the use of the more environmentally friendly proof of stake protocols at its launch in 2017.
This sets Cardano apart from other cryptocurrencies like Bitcoin and Ethereum which use proof of work protocols and consume much more energy. Cardano is a globally reputable cryptocurrency that aims to improve upon its predecessors shortfalls. The native token ADA is named after 19th century mathematician Ada Lovelace (and the RTX 4000 GPUs) and is currently valued at $0.35.
The cryptocurrency SOL is a native coin powered by the Solana blockchain. Solana is famous for its processing speed, to the point that it is part of a group of cryptocurrencies known as Ethereum Killers in the community. Solana has the ability to perform at the incredibly fast rate of 50,000 transactions per second which is the highest among all major blockchains. This is much faster than Ethereum which was previously known for its faster speeds compared to Bitcoin.
Developed by the technology company Ripple, XRP is the native cryptocurrency of XRP Ledger, which is an open source, publicly available blockchain. XRP is mainly used for the handling of global financial services such as cross-border payments, remittance, and international money transfers.
XRP has been premined, which means it has a maximum token cap of 100 billion that has been decided beforehand. This is in contrast to most cryptocurrencies where tokens are mined by the public. XRP prides itself in its fast transaction speeds and energy efficient processing, and is available on many top exchanges. XRP currently has a market cap of $48.19 billion
USD Coin (USDC)
USDC is a cryptocurrency that shares many similarities to Tether. Both currencies are stablecoins pegged to the US dollar where mining is not an option. However, USD Coin provides much more transparency than Tether which has faced lots of criticism for not being clear about its financial reserves.
The 1:1 ratio is maintained by USDC by depositing a dollar for every coin minted, keeping the price of the currency stable at any point in time. The goal of USD Coin is to reduce the risk-related stigma around cryptocurrency as a whole, and encourage users to make it a part of their lives.
The Avalanche platform’s native coin AVAX (sometimes abbreviated as AVA) has quickly risen to become a part of the top ten cryptocurrencies in terms of market capitalization since its launch in 2020. Speed and scalability is what Avalanche is known for.
It has the accolade of being the first smart contracts platform that is able to confirm transactions in under a second, with a speed of 4,500 TPS and block than two seconds. The platform is able to support users in the millions, making it one of the most scalable blockchain solutions today. Avalanche uses a proof stake protocol with an innovative tri-layered blockchain system designed for the future.
AVAX is currently priced at $16.42 and is available to buy at top exchanges.
MATIC is the native cryptocurrency of the Polygon network, where it is used in government, security, and payment of transaction fees. MATIC is an ERC-20 token, which is a standard used for the creation of smart contracts issued on the Ethereum blockchain.
What this means is that MATIC was created using the Ethereum platform and resides on its blockchain. MATIC has a limited supply with a maximum allowed cap of 10 billion coins. Polygon was developed to focus on improving some of Ethereum’s shortfalls, which are low transaction speeds and high costs. Polygon essentially provides a faster and cheaper framework to build new and existing projects on Ethereum.
MATIC currently has a market cap of about $9.5 Billion.
Polka Dot (DOT)
DOT is the native token of the platform Polkadot which is one of the most innovative crypto protocols. Polkadot allows the transfer of any data or asset across multiple blockchains, something that had not been deemed possible before.
Known as a shard blockchain, Polkadot connects several different chains under a single network, allowing the parallel processings of transactions all in a safe and secure manner. DOT is used for the verification of transactions and maintaining network security across the platform, and can be bought or sold at top exchanges like Coinbase.
In just two decades, the cryptocurrency industry as a whole has gone from incredibly niche to bordering mainstream. This increased interest along with access to better technology stacks has resulted in constant launches of new cryptocurrencies. Every year, there is a crypto-based solution or platform being showcased to the public.
Not all cryptocurrencies are able to survive, however, and many do fail in the process of making their name in the world. Before putting your hard earned money towards investing in a cryptocurrency, make sure you do your research on whether it will provide you benefit in the long run. Once you’ve found your match, check out our guide on the best ways to cash out your crypto.