In the following article, we are going to examine the various crypto categories in detail. But first, let’s answer some commonly asked questions and give a general overview of cryptocurrency.
Bank in 2009 when Bitcoin was first launched, it did not have any notable competition. It was a unique asset, the first of its kind with little to nothing to be compared against. It wasn’t until 2011 that new types of cryptocurrencies started to emerge consequently posing as competition to Bitcoin.
Suddenly, there were thousands of cryptocurrencies in the market and the race to create more crypto was on. The cryptocurrency industry is not limited to one country but rather the whole world; it is, therefore, a very popular form of currency. Cryptocurrency is based on Blockchain technology which is a very decentralized technology. One of Blockchain’s outstanding features is that it is innovative and therefore has applications in various industries outside of finance. It is also very fast which makes it perfect for financial transactions.
How many Cryptocurrencies are there in total?
Today, there are thousands if not hundreds of thousands of cryptocurrencies. They are all founded on principles similar to those of Bitcoin; however, each is designed for a specific function. New cryptocurrencies are created every day which is only possible because they are not issued by one central body like fiat currencies.
Why do we have so many different cryptocurrencies?
As already explained, cryptocurrencies are not created and issued by a central body like the central bank. Instead, they are created on a decentralized platform by many independent developers all over the world. Different developers create different coins to tackle different issues in society thus arising many different cryptocurrencies. This is therefore the main reason behind the various crypto categories in existence.
Developers build crypto for almost anything; some coins are used as investment vehicles while others offer solutions to longstanding problems in many sectors of the economy. Such sectors include but are not limited to gaming, supply chain management, healthcare, agriculture, insurance, cybersecurity, real estate, insurance, medicine, and law.
FOMO also greatly contributes to the creation of many types of cryptocurrencies. In a bid to get in on any potential profit, entrepreneurs are continuously unleashing huge numbers of new coins into the cryptocurrency market.
With a large number of cryptocurrencies in the market, it can be challenging to keep up with the market. Tools like Algory crypto news aggregator are therefore crucial as they provide you with the latest crypto news from different categories. The Algory.io official website and their blog articles will also ease your crypto investment journey.
Before we embark on the crypto categories, let’s talk about the major cryptocurrency types. Bitcoin is the largest and most popular cryptocurrency. All cryptocurrencies other than Bitcoin are referred to as altcoins and the main types of altcoins include security tokens, stablecoins, and utility tokens.
Cryptocurrencies generally fall into one of two divisions, either coins or tokens.
- Coins – are a representation of an asset, a concept, or a project that are meant to function as a type of currency. They are usually built on a certain Blockchain on which they are used as a native currency.
- Tokens – can be represented as value tokens, security tokens, and utility tokens. They represent value but are not valuable themselves. A token differs from a coin in the way it’s constructed within the Blockchain of an existing coin such as Ethereum or Bitcoin.
Examples of crypto categories
Our first crypto category goes by the name stablecoins. As the name suggests, they are coins with a stable value. This is to mean that their value is somewhat predictable, it remains the same all the time. They are mainly backed by a stable or fairly stable-valued asset such as fiat currencies. Most stablecoins are backed with Euro, Dollar, oil, commodities, gold, and other precious metals.
Stablecoins tackle the issue of volatility in assets and other digital currencies. Most stablecoins are algorithmic stablecoins which means that they use software and rules to maintain the stable peg with fiat or another asset.
- Meme coins
These are simply cryptocurrencies whose creations, existence, or increase in value are inspired by memes or other viral online trends. Often the meme coin itself will go viral, forming a community of enthusiasts. If the community grows big enough, the coin’s demand rises causing the coin to gain sufficient value to be bought, sold, and traded on crypto exchanges such as Bitcoin.
The two most popular meme coins are dogecoin and Shiba Inu which have both seen tremendous growth since their inception a few years back. These coins exist as nothing more elaborate than a long-running joke; however, that doesn’t mean that they shouldn’t be taken seriously.
- Utility Tokens
These are digital units that represent the value on the Blockchain; that is to mean that they provide certain access to a product or a service that is run or operated by the token issuer. A person can gain access by either buying it or redeeming it for a defined access value to the product or service.
- Governance Tokens
This category of tokens accords stakeholders with a voice in directing future decision-making such as voting to pass new policies. Such a policy could be the decision to either increase or decrease gas fees. Often, owners with more coins get more votes.
In the case where minority coin owners have total control over the token’s governance, it may be collected as a decentralized autonomous organization or DAO.
- Non-fungible Tokens
This is a unique token that cannot be substituted or replaced by another. They often take the form of any digital asset from an image, a song, a video, or a piece of cloth. The NFT market has boomed in recent years as developers continue to find new ways to associate them with external objects. NFTs are taking cryptocurrency and Blockchain technologies into fields never imagined by the creators of the original cryptocurrencies.
- Smart contract platforms
A smart contract is a self-executing agreement between buyer and seller being directly written into lines of code. The code and agreements contained therein exist across a distributed, decentralized Blockchain network. The code controls the execution and transactions are trackable and irreversible.
Smart contracts permit trusted transactions and agreements to be carried out among disparate, anonymous parties without the need for a central authority, legal system, or external enforcement mechanism.
This final crypto category is therefore digital coins that operate on protocols intended to digitally facilitate, verify or enforce the negotiation or performance of a contract.
Other crypto categories:
- Ethereum Ecosystem
- BNB chain ecosystem
- Polygon ecosystem
- Yield farming
- Decentralized exchange, play to earn
- Privacy coins
Take not that this is not financial advice, you need to conduct further research before investing your money anywhere.