The notion of cryptocurrency is frequently brought up in discussions about money and is increasingly accepted as a viable alternative to conventional money.
Coins and tokens are the two types of cryptocurrencies. Coins run on their own blockchain and have value since they are utilized in transactions as payment. On the other hand, tokens are constructed on an already-existing blockchain.
Let's discuss the types of cryptocurrencies:
#1. Payment cryptocurrencies
Payment cryptocurrency is the first significant class of cryptocurrency. The first successful cryptocurrency used for digital payments was Bitcoin, which is possibly the most well-known cryptocurrency. As its name suggests, a payment cryptocurrency serves as a means of payment and peer-to-peer electronic cash to speed up transactions.
#2. Utility Tokens
Utility tokens are the second most prevalent type of cryptocurrency. Any digital asset that runs on top of another blockchain is a token. The idea of allowing other crypto assets to leverage its blockchain was initially introduced by the Ethereum network. A utility token, a use case, performs a specified task or function on the blockchain.
#3. Service tokens
Some cryptocurrency projects create Service Tokens, which provide the owner access to or let them conduct an action on a network.
#4. Finance tokens
Binance's Binance Coin (BNB), which was developed to provide the holder with reduced trading fees, is another illustration of a token. You may occasionally hear this form of token referred to as an "Exchange Token" because it provides access to a cryptocurrency exchange.
#5. Stablecoins
Stablecoins are intended to act as a store of value due to the volatility that is present in many digital assets. Despite being based on a blockchain, they preserve their value since this particular cryptocurrency may be traded for one or more fiat currencies.
#6. Central Bank currencies
Regional Bank A type of cryptocurrency issued by the central banks of different nations is called digital currency. CBDCs are issued by central banks in the form of tokens or electronic records linked to the currency and pegged to the national currency of the region or nation issuing the CBDC.
Final note
You now essentially know everything there is to know about the many sorts of cryptocurrencies that are available! In terms of the variety of cryptocurrencies available on the market, there are close to 22,145 different coins.
There will be even more altcoins and tokens as cryptocurrencies become more generally accepted by the general public. In the end, comprehending these principles will be very helpful to me in making better decisions for my future investments.