Types of Cryptocurrencies to know about before starting to trade

Cryptocurrencies

Cryptocurrencies can be said to be a new concept in a world where people are still using conventional methods of fund transfers. It is just adecade-old concept. Since the beginning and till now, many cryptocurrencies have entered the market, but the first cryptographic techniques that started all these is Bitcoin. Back in 2008, an unknown person or a group, we don’t know, Satoshi Nakamoto from Japan, created Bitcoin and brought it in front of the world in 2009.

After seeing Bitcoin, other new currencies also jumped into the competition, and since then, there has been no looking back at them. There are many different types of cryptocurrencies in circulation now that are dividends on the bases of their application, designing of codes, and other aspects. In the article will be learning about their differentiation and different types of cryptocurrencies.

How Cryptocurrencies are Different?

Cryptocurrencies can be differentiated as coins, tokens, and Altcoins. The use of these terminologies is very interchangeable, but they carry a significant difference in their meaning and how they work. So let’s discuss each.

Coins

The coins are generally interchanged with altcoins because they, in many ways, overlap in the way they work. But the difference is on which platform they work on like coins works are used on the Blockchains of the local platform. Coins are the native currency of a particular platform. The best example of this is ether. Ether is the native currency or coin of the Ethereum Blockchain system.

Tokens

Tokes arereferred to as representatives of a cryptoasset on a Blockchain where the crypto is circulated. It is just like a fiat currency which is said to be the representative of the gold that the government has. The tokens are used in all the chains, unlike the coin, which is on a particular chain of platforms. Or in other words, they are a non-native currency that does not belong to a particular Blockchain and uses other crypto’s blockchain.

Altcoins 

The function of altcoin and coins can be found to be very similar, which is why it creates problems for people to distinguish. After Bitcoin got famous, the currency that came as competition became the altcoin. In other words, except for Bitcoin, all the currencies are called altcoin together. They can generally be called coins too.

Different Types of Cryptocurrencies

Now let’s have an understanding of the different types of cryptocurrencies thatare there in circulation. The four main types of cryptocurrencies are Stablecoins, utility tokens, payment tokens, and security tokens. Let us discuss them one by one.

Stablecoins

The Stablecoins in the crypto arereferred to as the tokens which are stable and are not subjected to violation like other Cryptocurrencies. The name is pretty self-explanatory; they bring stability to the prices. And the means to do so is by backing them with an underlying physical asset to control the violation. It is a digital unit that holds some value on the Blockchain, just like a fiat currency, but the underlying asset can be more than one commodity.

Utility tokens

Utility tokens are used for severalspecific purposes.But the most important use of it is it gives you access to a service or product with the Blockchain. Unlike the security token, the utility token does not give ownership or any kind of guarantee of returns, as it is not a permanent or real investment.

Payment tokens

The payment tokens are used to make payments. A payment token allows you to buy and sell goods and services and gives a unique ID while making payments and the information is stored in your crypto account. They can be worked on all the platforms.

Security tokens

The security tokens are different from utility tokens. In utility tokens, you do not get any ownership. But, in security tokens, you get ownership. They are called security tokens as their values are calculated on the bases of external assets, which can be regulated by respected authorities.

Conclusion

Cryptocurrencies have taken the challenge to change the way we used to make payments with their decentralized models. There are several Cryptocurrencies in the market which are different from each other based on their usage, application, and not to mention many other important factors. These stablecoins are in a demand for investment now.

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