The different types of crypto
Cryptocurrency comes in various different types and forms, so it’s very important to understand the ins and outs of these currencies, how they work and the value they provide to their users. With that in mind, we created a list with the most common types of crypto, while also showcasing what they entail and why they are so popular.
Coins and tokens
Generally, we will have a combination of tokens and coins, each with their own benefits. Cryptocurrency coins are built into a blockchain, they need significant skills and resources to create, and they are usually distributed via mining. They are valid with any merchant, and can be used to transfer/store money. Tokens on the other hand are built on top of a blockchain, they are easy to cerate and usually they are distributed via initial coin offerings or ICOs. Unlike coins, they are valid with a single merchant, but they do have a large variety of uses.
Privacy tokens
These tokens are created specifically to provide privacy applications. You will normally find them in situations where you want to have better privacy within crypto transactions. These tokens will use anonymity techniques and even offline transactions as the means to ensure your privacy while using them. Some of the more popular privacy tokens are Verge, Beam, Dash or Monero.
Asset-backed tokens
As their name suggests, these are tokens that are backed by a real world asset. The asset type will vary, it can be precious metals, real estate, but also bonds or stocks, maybe even fiat currencies. These also tend to be offered as a security token, and some people need them in order to ensure their transactions are safe. Some of the more common asset backed tokens are OilCoin, but also the Green Energy Token, The Energy Web Token, Wheat Token and others.
Stablecoins
Cryptocurrencies are known to be very volatile, and stablecoins are here to help offer stability in the entire process. These are backed by a stable asset, including fiat currencies. These are designed to help eliminate volatility, which is a major challenge in the cryptocurrency world. With stablecoins like TruSD, USD Coin, Gemi Dollar and many others it becomes easier to perform transactions without worrying about any price changes in the near future.
Decentralized finance tokens
These are focused specifically on financial apps that are built ion the blockchain. These decentralized finance tokens are offering financial control to the user, and they can use peer to peer methods to transact, while also relying on global markets. Such tokens are great if you want to borrow, lend, earn interest, invest in stocks, funds or securities. Examples of decentralized tokens include Solana, Pokadot, Uniswap, Chainlink, Aave.
Non-fungible tokens
Also known as NFTs, these tokens can be seen as a certificate of ownership. They show you own a unique item that can’t be replaced. That’s why NFTs have become very popular, because they allow you to show the ownership over a certain digital item. As we move more and more assets and transactions to the online world, having a system to show that we own a specific item is very important, and this can indeed make a huge difference from a business standpoint. It allows artists to better monetize their work, while also eliminating many of the third parties that were making money from them.
Exchange tokens
These tokens are created for and used by cryptocurrency exchanges. They are designed to help users that use these exchanges in order to pay for various fees, access benefits, sometimes they might be used for staking. In some cases, owning an exchange token might also allow you to access various discounts on the exchange/marketplace too. Examples of exchange tokens would include the Binance Coin for the Binance platform, CRO from Crypto.com, OKB for the Okex exchange and many other similar ones.
Payment tokens
The role of a payment token is very clean, you use it to buy or sell services and goods on a digital platform. There’s no intermediary, so the transaction is fast and smooth. With that in mind, a payment token is replacing securities, you can’t invest in it. That also means these tokens will not be seen as an asset security according to the financial regulations. Payment tokens are very common and there are dozens of them, but Ethereum, Bitcoin and Monero are a prime example here.
Security tokens
A security token is a secure cryptocurrency that usually derives value from a dedicated, external asset. It can also be traded in the form of a security. These tokens are backed by financial regulators. One of the advantages of using security tokens is that because they are regulated, the founders are responsible and thus user funds are guaranteed. Science Blockchain, Bcap or Sia Funds are well-known security tokens.
Utility tokens
These utility tokens are vouchers or coupons, but they are also showcasing the value of an item on a blockchain. You can purchase such a token, then you redeem it for a specific service. However, the utility token is not a replacement for any regulated asset, bond or stock. On top of that, the various applications presented here showcase things like decentralized storage, but also rewards tokens. There are a multitude of utility tokens on the market. These include Golem, Timicoin, Funfair, Brickblock, but also the Sirin Labs Token or the Basic Attention Token among many others.
Conclusion
It’s very important to understand the nature of cryptocurrency and its uses, that’s why it makes a lot of sense to educate ourselves about the different types of cryptocurrency present on the market. Each type of crypto has different uses, and it might or might not be regulated by the government and authorities. With that in mind, it’s important to note that some types of crypto are focused on security, while others are all about utility and delivering the means to an end. All of them have a crucial role on the crypto market however, and it all comes down to when and how users need them to fulfill their own transactions!
