Types of Crypto Currencies

On hearing the word “Cryptocurrency”, we assume it to be a new kind of currency. We think it will be something that will replace standard currency such as Rupee, Euro or Dollar. But this isn’t completely true.

Cryptocurrency is much more than that. Today there are over 5000 use-cases of cryptocurrency in the market.

We are in the midst of a revolution in which cryptocurrencies are changing the way entire industries function. Experts believe cryptocurrency and the technology behind it, called blockchain, can bring about a change as huge as the one brought by the internet.

History of cryptocurrency and crypto trading

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The code of the original cryptocurrency Bitcoin was written back in 2009 by Satoshi Nakamoto. He was looking to create an alternate source of payment that could fight the existing economic inequality. Nakamoto kept the technology behind cryptocurrency, Blockchain, open-source code. This means that everyone can see, study, and understand the source code and use it to create their own cryptocurrencies. This led to a rise in cryptocurrencies and today, there are over 5000 such cryptos, all thanks to Nakamoto’s open-source code.

Now that we understand a bit about where and how Bitcoin, the original cryptocurrency, started, let us dig a little deeper.

Trading in cryptocurrencies, also called crypto trading, is the new bandwagon a great deal of people worldwide seem to be getting on.

Cryptocurrencies can be broadly divided into two major categories according to their function for the purpose of crypto trading and investment.

Crypto Coins

Built on their own personal blockchain, crypto coins are meant to be used as or in place of actual currency. For example, Ether is a cryptocurrency that is based on the Ethereum Blockchain. It is important to note that all blockchain-based cryptocurrencies that are not Bitcoin are all referred to as Altcoins.

USD Coins, Peercoin, and Litecoin are all examples of Altcoins. The basic framework of altcoins can be similar to that of Bitcoin but most of them provide their users with different features.

Crypto Tokens

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These are built on the existing blockchain. Instead of being used as currency, they let you execute unique contracts. These tokens can represent anything of value, like digital assets, money, and electricity, and can be both received and sent. Tokens are given out in a fashion that is very similar to how a stock offering takes place — via an Initial Coin Offering (ICO).

The top cryptocurrencies today

Here is a list of the top cryptocurrencies in the market that you should definitely know about:

1) Bitcoin

Easily the most recognizable cryptocurrency, Bitcoin is what started the entire crypto-revolution. Currently, there are around 19,028,000 bitcoins in circulation. This number is always changing as new blocks keep getting mined. The capped limit of Bitcoins is 21 million.

The limit on the total amount of these crypto coins is one of the factors that make them so valuable. A parallel can be drawn with, say, physical gold. Just like the amount of physical gold that is present in the world is finite, so is the case with Bitcoins.

Bitcoin is based on Blockchain technology, which is a ledger that contains each and every Bitcoin transaction in history. This ledger is public and can be viewed by anyone. Bitcoin miners are those who use powerful computers to verify Bitcoin transactions and, in the process, generate more Bitcoins. This process of generating more Bitcoins through mining is called Proof of Work.

Of late, there has been much talk surrounding the environmental aspects of Bitcoin mining since an increasingly large amount of energy is used up in the mining process.

2) Ether (Ethereum)

The number two cryptocurrency in the world, Ether shares both similarities and differences with Bitcoin. Like Bitcoin, Ethereum is a blockchain network, but it wasn’t created to support currency or as an alternate payment method. Instead, it was made to enable users to create and use applications. Ether is the cryptocurrency used as a mode of payment on the Ethereum network.

Unlike the limit on the number of Bitcoins that can be in circulation, no such limit exists for Ether. This cryptocurrency is created using the proof of work methodology, just like Bitcoin.

Ethereum is behind the recent boom in NFTs, which are sort of like the tech version of collectibles. It is also the key player behind the surge in initial coin offerings (ICOs) as a lot of ICOs use Ethereum.

3) ADA (Cardano)

Founded in 2015 by the founder of Ethereum, Charles Hoskinson, Cardano is a third-generation blockchain platform. The cryptocurrency used on the Cardano network is called ADA, named after Ada Lovelace.

Ada Lovelace was a 19th-century mathematician who, interestingly, is considered to be the world’s first programmer and is known for her work on Charles Babbage’s Analytical Engine.

Instead of the proof-of-work method used to mine Bitcoins and Ethers, ADA coins are created using a process called proof-of-stake. This is considered to be a much less complicated and less energy-consuming alternative to the proof-of-work process, making the network more efficient, as well as more sustainable and green, when compared to Bitcoin.

4) Tether

Tether is one of the world’s first stablecoins. The value of stablecoins is associated with exchange-traded commodities, fiat money or other cryptocurrencies. This can make stablecoins more stable than the rest of the volatile cryptocurrencies out there.

For example, the value of Tether is pegged on the value of the US dollar. Hence, Tether offers both stability and transparency and cannot be termed a speculative investment like other cryptos. As per data from February 2021, almost 60% of Bitcoin trading across the globe was being done using Tethers.

5) Dogecoin

Perhaps one of the most talked-about cryptocurrencies in the world, thanks to a singular tweet by Elon Musk, it’s hard to believe that Dogecoin started out as a joke. In fact, it’s popularly called the first joke cryptocurrency and was started as a way to poke fun at Bitcoin!

After Musk famously tweeted positively about Dogecoin in April 2019, Dogecoin saw its value skyrocket and it gained a certain legitimacy in the crypto world. Dogecoin is an altcoin. It is similar to both Bitcoin and Ether and uses the proof-of-work model for its mining. There is no cap on the number of Dogecoins that can be mined.

Author: Michael Ellis

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