Has someone in your circle come asking about Cryptocurrency or Bitcoin? Have they consulted with you about whether it is a financially wise decision? You are not the only one. The talk around cryptos that has been dominating the financial world has started to pique the interest of retail investors like us. Let’s find out which way the future of our crypto investments are headed. There are different types of Cryptocurrencies in the market today vying for an acceptable form of transactional value alongside legal tender.
How Cryptocurrencies are Differentiated?
The main differences relate to how coins are produced and spent. Some coins, like Bitcoin, Dash and Monero, are created in a process called “mining” which involves using powerful computers to solve complicated cryptographic puzzles. Another major difference between these various types of cryptocurrencies is the privacy and transaction speed that a cryptocurrency offers. For example, bitcoin and dash are two different types of cryptocurrencies; in the case of bitcoin, there is a lack of sufficient privacy and speed than dash cryptocurrency.
Understanding the Crypto World Basics
Cryptocurrency is virtual money without a bank or financial institution as a middleman. The transaction between two parties is direct. It does not require ratification by a federal institution. A digital transaction in any type of Cryptocurrency is recorded and secured in a shared ledger over an open-source platform. Blockchain is one such platform, and every type of cryptocurrency trusts it.
A virtual currency is called a Cryptocurrency, and it is secured by cryptography. It serves the same transactional purpose as legal tender in a country, such as the Rupee in India. The primary difference between the two is that cryptocurrency is not issued as fiat money collateralised by a federal institution, but created by private individuals or corporations. There are different types of Cryptocurrency in India in circulation. These include Bitcoin, Tether, USDC, Ether, Binance Coin, and ADA.
Bitcoin is the revolutionary Cryptocurrency that has become a benchmark for all altcoins and tokens created and used for transactions on the blockchain. With a market capitalisation of more than USD 600 billion, it is also the most valued among all types of Cryptocurrency currently in circulation.
Since its introduction in 2009, it has proven that virtual money without the backing of a federal or financial institution can be successfully employed to carry out transactions between two parties. Now is the right time to ask: how many types of Cryptocurrency are there? While there are newer options in cryptocurrencies every day, there are primarily two kinds of virtual currencies secured by cryptography.
All types of Cryptocurrency can be classified as coins and tokens.
- Coins are native to the blockchain, being used as a platform by the creator. Bitcoin is the most valued crypto coin, while Tether is a token. Coins are difficult to mine, but are accepted across merchants.
- Tokens use a host blockchain instead of creating their own. Tether, USDC, and Binance use Ethereum’s blockchain for releasing tokens. Tokens are easier to make because they are created on top of an existing blockchain. Unlike a coin, they hold a defined value that can be redeemed for the purpose it is meant for with an available merchant.
- All types of Cryptocurrency are transacted through an open-source network or blockchain, which means every transaction gets recorded. This ensures transparency but makes them unregulated and risky as private issuers manage them.
- Most countries do not accept them as legal tenders. There are different types of Cryptocurrency in India, but you cannot trade them for goods or services.
- Any type of Cryptocurrency transaction is immutable (permanent). This inspires trust. However, crypto is a decentralised currency and is prone to high volatility.
Also Read: What is a Cryptocurrency Hardware Wallet?
Most Popular Cryptos in Circulation
|Cryptocurrency||Network||Native Coin, token or stablecoin||Capped circulation or limitless|
|Bitcoin||It is the first Cryptocurrency created and is available on the Bitcoin network since 2009.||It is a coin and is named after the network.||There is a cap on mining bitcoin. Only 21 million bitcoins can be mined. Of these, 18.8 million are in circulation.|
|Ether||Ethereum is the most traded altcoin among all types of Cryptocurrency after bitcoin.||Ether is a token-based currency.||What makes it a different type of Cryptocurrency than Bitcoin is that there is no cap on creating Ether.|
|Binance coin (BNB)||Binance is one of the biggest exchanges that allow trading of all types of Cryptocurrency.||Binance coin (BNB) is a very popular token on the crypto exchange platform.||BNB uses Ethereum’s blockchain and has a cap of 200 million tokens.|
|Cardano||Cardano claims to run on the latest blockchain platform.||Its virtual coin is named ADA, after mathematician Ada Lovelace.||There can only be 45 billion ADA; 32 billion are already in circulation.|
|Tether||Tether is the platform and the crypto is named after it, like Bitcoin.||Tether was developed as the first stablecoin and is the largest held token in terms of market cap.||Tether’s valuation is figuratively paired with that of a dollar and as such, there is no cap on its creation.|
|XRP||Ripple||XRP is a token-based Cryptocurrency introduced by Ripple Labs Inc, a money exchange network.||Ripple has already introduced the token currency to the tune of 100 billion XRPs. It cannot be mined.|
|USD Coin||USDC runs on the Ethereum blockchain.||USDC is a different type of Cryptocurrency that is called stablecoin. Its valuation is collateralised by the value of a dollar.||There is no cap to creating USDC.|
Popular Terms That One Should Know About Cryptocurrencies
A fork is a term which creates a departure from the chosen path in a blockchain. In short, it is a kind of course correction, which results in a change (minor or major) in the original blockchain protocol.
A community uses blockchain protocol to add new features to the crypto or a new upgrade to the platform. In a soft fork, all transactional memory and data are retained in the new path followed by the blockchain.
Bitcoin is the most popular and most valued Cryptocurrency on the market. It has a market cap of $635 billion dollars.
Also Read: How Blockchain Works?
Where Do You Find Different Types of Cryptocurrency in India?
Although all types of Cryptocurrency in India are denied the status of legal tender in India, one can buy and trade cryptocurrencies in India through an exchange counter like WazirX. When it comes to circulation, the types of Cryptocurrency In India are the same as in the rest of the world. The popular ones include Bitcoin, Ether, Binance Coin (BNB), Tether, Cardano, and USD Coin. According to data, 100 million Indians, 80% of them being men, own cryptocurrencies.
Word to Remember
Blockchain is an open-source platform trusted by all types of Cryptocurrency that allows secure real-time peer-to-peer transactions. It records digital transactions in any type of cryptocurrency. Blockchain platforms are the owners and issuers of bitcoins and altcoins. There are several applications of blockchain other than crypto used by different businesses around the world.
Also Read: Benefits of Using Blockchain Technology
Like money, virtual currencies have come to represent a unit of account that holds a value, making them acceptable in transactions. As a result, such currencies secured by cryptography are taking the financial world by storm owing to the ease and independence of transactions in a decentralised set-up. However, investing or transacting in all types of Cryptocurrency comes with inherent risks of volatility and hacking. Although cryptocurrencies are traded in several countries, only two nations have accorded them legal tender status. India, too, has maintained a strong stand against cryptocurrencies as a transactional alternative to the Rupee but has decided to come out with a sovereign digital currency.
The four major different types of cryptocurrencies are utility, payment, security and stablecoins.
Currently, the five biggest types of cryptocurrencies are Bitcoin, Ethereum, Tether, USD coin and Binance coins.
Currently, there are approximately 1800 different types of cryptocurrencies.
Bitcoin is the world’s largest cryptocurrency. It is a type of decentralised currency.
Blockchain platforms are the owners and issuers of bitcoins and altcoins. Ethereum is a blockchain network, while Ether is its native currency or coin.
Blockchain is a technology that powers a shared network to exchange and transaction of information, services, and goods. Bitcoin is a type of Cryptocurrency that happens to be one of the many blockchain applications.
While cryptocurrencies have found acceptability as a peer-to-peer currency, only two countries – El Salvador and the Central African Republic – have recognized them as legal tenders.
No. All types of Cryptocurrency are issued and managed by private individuals/organisations. They represent a decentralised tender, not vetted or backed by any federal institution.