There are thousands of cryptocurrencies in use now, and more are being created every day. There are subtle and not-so-subtle differences between them, even though they all operate on the same principle of a consensus-based, decentralized, and irreversible ledger to transfer money digitally between trustless parties. Other specific cryptocurrencies are referred to as “altcoins” (a combination word derived from “alternative coin”). Bitcoin is thought to be the first cryptocurrency established. It’s challenging to rank the top cryptocurrencies, but due to their scalability, anonymity, and range of features, Bitcoin and other of the biggest altcoins are excellent choices.
Depending on their particular use case, different cryptocurrency kinds offer varying capabilities. In contrast to conventional methods, cryptocurrencies provide a means of conducting business that is more decentralized and peer-to-peer. There may be multiple sectors within each category. There are thousands upon thousands of distinct initiatives in the bitcoin market today. Almost all of these projects have unique features and technology to offer.
Crypto coins vs. tokens:
First things first: Understand the distinction between a token and a coin. You may often hear the terms “coin” and “token” used while talking about cryptocurrency. Despite the fact that the terms may seem similar, they are not. It’s critical to maintain their integrity.
A digital coin functions similarly to conventional money and is created on its own blockchain. It can be exchanged between two parties conducting business with one another and used to store value. Coins like Litecoin (LTC 3.09%) and Bitcoin are examples.However, tokens are much more than just digital currency. Tokens can be used in software applications to allow access to apps, confirm identification, or track things as they move through a supply chain. They are generated on top of an already-existing blockchain. They can stand in for digital art (e.g., through the use of NFTs, or “non-fungible tokens,” which attest to an item’s uniqueness).
These five categories can be used to group most cryptocurrencies:
- Bitcoin:
Regarded as the pioneer of decentralized cryptocurrencies, Bitcoin employs blockchain technology to enable digital transactions and payments. Bitcoin’s blockchain serves as a public ledger of all transactions in the history of the platform, replacing the need for a central bank (such as the Federal Reserve working with the U.S. Department of the Treasury) to control the money supply in an economy or for third parties (like your local bank, credit card issuer, and the merchant’s bank) to verify transactions. The ledger helps stop fraud and other unauthorized tampering with the currency and enables a party to demonstrate that they are the owner of the Bitcoin that they are attempting to use. Peer-to-peer financial transfers, such as those between individuals in two different nations, can be quicker and less expensive with a decentralized currency than with conventional exchanges that include a third-party organization.
- Ether (Ethereum):
The token that makes transactions on the Ethereum network easier is called ether. Using blockchain technology, Ethereum is a platform that makes it possible to create smart contracts and other decentralized applications. This eliminates the need for the software to be distributed on app exchanges like Alphabet’s (GOOGL -1.92%)(GOOG -1.8%) Google Play Store or Apple’s (AAPL -2.17%) App Store, where users may be required to give the tech giants a 30% cut of any profits. Ethereum serves as a sandbox for software development as well as a cryptocurrency (the real coins are measured in units called Ether).
- Tether:
Stablecoins, such as Tether, are currencies that are linked to fiat currencies, in this example, the US dollar. The goal of Tether is to combine the advantages of cryptocurrencies—like the elimination of the need for middlemen—with the stability of a national government-issued currency (as opposed to the volatile price swings that characterize many cryptocurrencies).
- Binance Coin:
On the Binance cryptocurrency exchange platform, Binance Coin may be found trading alongside other digital coins. Although Binance Coin can be used as a form of money, it also enables tokens that can be used to power Binance’s DEX (decentralized exchange) for developing apps as well as to pay fees on the Binance exchange.
- USD Coin:
Similar to Tether, USD Coin is a stable coin that is based on the US dollar. USD Coin is housed on the Ethereum blockchain, just as Tether. The goal of USD Coin was to produce a “fully digital” dollar that would have the stability of fiat money from the United States but not require a bank account or the residency of the holder. USD Coin is meant to be used as regular cash that can be exchanged for goods and services from online retailers, not as an investment.