Cryptocurrencies are digital currencies secured by cryptography, as you might have heard. How many kinds of cryptocurrencies are there? Bitcoin and Dogecoin aren’t the only cryptocurrencies making waves-there are actually thousands of them.
We take a look at the top 10 crypto assets (based on market capitalization) and provide some insight into other crypto assets you should know about.
What are the different types of cryptocurrency?
There are some striking differences between cryptocurrencies, despite the fact that they share a blockchain-based infrastructure. Cryptocurrencies can generally be divided into two distinct categories: coins and tokens.
Coins and Altcoins
A coin is a cryptocurrency with its own independent blockchain. Bitcoin, for example, is considered a “coin” due to its own infrastructure; you can store your Bitcoin in your Bitcoin Wallet. Ether, meanwhile, uses the Ethereum blockchain.
Altcoins are coins other than Bitcoin. Many altcoins work like Bitcoin. However, others, like Dogecoin, work differently. Bitcoin has a maximum supply of 21 million coins, while Doge has an unlimited supply.
Tokens are also digital assets that can be bought and sold like coins. Tokens, on the other hand, are a non-native asset, which means that they use another blockchain’s infrastructure. Tether, which runs on the Ethereum blockchain, is among them, as are TerraUSD, Chainlink, Uniswap, and Polygon.
Listed below are 10 different types of cryptocurrencies along with their workings
1. Bitcoin (BTC)
Bitcoin is the world’s first cryptocurrency, originating from a white paper published in 2008, and remains the most widely used type. Using its own blockchain, transactions are verified (and new Bitcoins are created, up to a fixed cap), by an army of decentralized miners (Bitcoin Miners). In January 2022, Bitcoin had the largest market cap, at US$896 billion.
2. Ether (ETH)
Ethereum is a cryptocurrency that runs on the Ethereum blockchain. In the same way as Bitcoin, Ether operates on its own blockchain-however, unlike Bitcoin, Ether is uncapped, meaning an infinite number of coins can theoretically be created. Additionally, Ethereum supports smart contracts, which are programs that run on the Ethereum blockchain and execute automatically when certain conditions are met.
3. Binance Coin (BNB)
As of 2021, Binance Coin is native to Binance, the world’s largest cryptocurrency exchange. Users who choose to pay in BNB have lower transaction fees on this exchange. Consequently, Binance Coin has become one of the largest crypto coins in the market due to its adoption. Binance destroys or “burns” a fixed percentage of the coins in circulation to maintain its value.
4. Tether (USDT)
Tether is a stablecoin, designed to have a less-volatile price by being tied to an external asset. In this case, each coin is backed by an equivalent number of US dollars, which prevents it from experiencing the same kind of price volatility as other cryptocurrencies. It is however debatable whether it is truly backed by the dollar.
5. Solana (SOL)
SOL is the native coin of the Solana platform, which operates on a blockchain system, just like Ethereum and Bitcoin. Traders looking for a quick way to trade can benefit from Solana’s network, which can process 50,000 transactions per second.
6. XRP (XRP)
In the financial services industry, XRP is often referred to as a “cryptocurrency for banks” due to its tailored design. XRP was designed to facilitate international payments by providing a bridge between two currencies to offer cheaper, faster transfers.
7. Cardano (ADA)
Cardano’s native coin is ADA. A “third-generation” cryptocurrency, Cardano splits its blockchain into two layers to increase transaction speeds and implement native tokens to ensure a better user experience.
8. USD Coin (USDC)
USD Coin is a stablecoin linked to the US dollar that cannot be mined like Tether. USD Coin, however, offers more transparent funding and a better auditing process than Tether. By removing some of the risks associated with crypto, users should always be able to withdraw their coins and receive cash in exchange.
9. Terra (LUNA)
LUNA is the native coin of the Terra blockchain, and it backs the stablecoins created on it. Terra uses smart contracts to manage the price of its algorithmic stablecoins, which are backed by LUNA.
If the price of TerraUSD (a stablecoin on the Terra network tied to the USD) goes above $1, the algorithm uses LUNA to produce more UST to bring the price down. When the price falls, the algorithm swaps UST for LUNA to push it back up. Token holders can stake LUNA to receive rewards for absorbing volatility. LUNAs can also be used to pay for network fees and to participate in matters relating to the governance of the network.
10. Avalanche (AVAX)
AVAX is the native coin of the Avalanche platform, which bills itself as the “fastest smart contract platform.” AVAX is used to pay transaction fees on the Avalanche platform among other things. As a “subnet”, developers can create new custom blockchains on Avalanche. Solidity, the programming language of the Ethereum blockchain, is compatible with Avalanche’s blockchain, making it easy for Ethereum developers to build subnetworks on Avalanche.