By now you may know that cryptocurrencies have crypto-secured digital currencies. But how many different types of cryptocurrencies are there? It’s not just Bitcoin and Dogecoin that are in the news; there are actually thousands of cryptocurrencies. In this article, we take a look at the top 10 (based on market capitalization) and give you information on other interesting crypto assets.
Table of Contents
Different Types Of Cryptocurrencies
Although many cryptocurrencies operate on a similar blockchain infrastructure, they have major differences. Broadly speaking, cryptocurrencies can be grouped into two distinct categories: coins (coins) and tokens (tokens).
Coins And Altcoins
A coin is referred to as a digital or cryptocurrency that has its own independent blockchain. For example, Bitcoin is a “coin” on the basis of the fact that it runs on its own blockchain which is its infrastructure. Similarly, Ether runs on the Ethereum blockchain.
The term “altcoin” simply refers to all coins other than Bitcoin. Many altcoins work similarly to Bitcoin. However, some, like Dogecoin, are quite different. The Doge offers unlimited coins, while for Bitcoin the number of bitcoins that can be created has been capped at 21 million.
Tokens
Tokens are also digital assets like coins that are being bought and sold. However, tokens are non-native assets, meaning they use blockchain infrastructure that is not their own. This includes Tether, which is hosted on the Ethereum blockchain, and others including TerraUSD, Chainlink, Uniswap, and Polygon.
The 10 Most Famous Cryptocurrencies And How They Work
1. Bitcoin (BTC)
Bitcoin is the first cryptocurrency that was invented. Its origin dates back to a white paper published in 2008 and it remains the most well-known type of cryptocurrency. It runs on its own blockchain with transactions verified (and new bitcoins created, up to a certain hard cap) by an army of decentralized miners. In January 2022, Bitcoin was the cryptocurrency with the largest market capitalization, with 896 billion USD.
2. Ether (ETH)
Ether is based on the blockchain of Ethereum. Like Bitcoin, Ether uses its own blockchain. On the other hand, unlike Bitcoin, Ether is not capped. This means that in theory an unlimited number of coins can be created. Ethereum also allows the creation of smart contracts, i.e. programs that reside on the Ethereum blockchain and that are executed automatically when certain conditions are met.
3. Binance Coin (BNB)
Binance Coin is native to Binance, the largest cryptocurrency exchange in the world in 2022. Transaction fees for this exchange are discounted for users who pay in BNB. This has encouraged the adoption of Binance Coin, which has become one of the biggest cryptocurrencies in the market. To ensure the stability of its value, Binance destroys or “burns” a fixed percentage of the coins in circulation.
4. Tether (USDT)
Tether is a type of stablecoin (stable cryptocurrency), designed to counter the problem of price volatility by being attached to an external asset. Each coin is in fact backed by an equivalent amount in US dollars, which allows it to avoid the price variations experienced by other cryptocurrencies. Even so, there is some disagreement regarding its actual backing to the dollar.
5. Solana (SOL)
SOL is the native coin of the Solana platform, which is based on a blockchain, just like Ethereum or Bitcoin. Solana’s network can execute an impressive 50,000 trades per second, which makes this platform particularly attractive to investors looking to trade quickly.
6. XRP (XRP)
XRP, which uses the Ripple network, has been described as the “cryptocurrency for banks” because it was tailor-made to meet the needs of the financial services industry. Designed to facilitate international payments, XRP acts as a bridge between different currencies to offer cheaper and faster transfers around the world.
Also Read About: What is a Decentralized Exchange?
7. Cardano (ADA)
ADA has its blockchain named Cardano blockchain from where its name originates. Ada is a so-called “third-generation” cryptocurrency. Cardano splits its blockchain into two layers to increase transaction speed, and it implements native tokens to ensure a better experience for ADA crypto holders.
8. Usd Coin (USDC)
Like Tether, USD Coin is a stablecoin pegged to the US dollar, which cannot be mined. Unlike Tether, on the other hand, USD Coin benefits from more transparent funds and better auditing processes. The goal is to eliminate some of the risks associated with cryptocurrencies. Indeed, users should always be able to withdraw their coins and receive the corresponding amount in the chosen currency.
9. Terra (Luna)
The LUNA is native to the Terra blockchain, and supports the various stablecoins created on its network. Terra has an algorithmic stablecoin that is backed by LUNA and uses a central pool of tokens that are controlled by smart contracts. For example, if the price of TerraUSD (a stablecoin on the Terra network and backed by the US dollar) exceeds 1 USD, the algorithm uses LUNA to produce more UST and bring the price down. If the price goes down, the algorithm exchanges the UST against the LUNA to make it go up. Token holders can stake (lock process) their LUNA tokens, thereby receiving a reward for offsetting the volatility. The LUNA can also be used to pay network fees and allows its holders to participate in the governance system of its network.
10. Avalanche (AVAX)
AVAX is the native corner of the Avalanche platform, which calls itself “the fastest smart contract platform”. Avalanche has some platforms where AVAX is used to pay transaction fees like some other coins. The Avalanche platform has also given permission to other developers to create new customized blockchains as “subnets”.
What To Consider Before Buying Cryptocurrency
There are many types of cryptocurrencies & their prices, so it is worth taking the time to learn about them to decide which coins or tokens are best for you. Whether you are a seasoned crypto investor or a novice looking to take your first steps into this exciting world, dedicating time to learning is a great way to reduce risk and make calculated and informed decisions when investing your money.
