Understanding the Different Type of CryptocurrenciesUnderstanding the Different Type of Cryptocurrencies
Everyone wants a slice of the crypto pie these days, but do you know what the different kinds of cryptocurrencies are out there? You must have heard people referring to some of these digital assets as coins and the rest as “tokens”. The truth is cryptocurrency includes more than simply those coins which can be speculated upon or “mined”. Crypto assets are essentially those which can be created on a blockchain and have intrinsic value.
Cryptos use cryptographic techniques and are emerging as a possible alternative to traditional fiat currencies. However, they do not get their values from banks or centralized authorities. Rather, they are decentralized and not controlled by any government or financial institution. You can choose from 3 main types of cryptocurrencies:
- Bitcoin: This is a completely decentralized peer-to-peer payment system created by Satoshi Nakamoto in 2009. Its market cap is more than $100 billion and currently prices hover around $66,000. The Bitcoin is powered by the blockchain technology and not backed by any government. It can be used for transferring money between parties without intervention by a third party and can also be easily traded via auto trading bots like bitcoin prime crypto robot. Not just that, bitcoins can be traded on almost all crypto exchanges and by trading bots, as it’s one of the popular cryptocurrencies. You only need a computer and wallet for transfers. A single Bitcoin may be split into 8 decimal places and the smallest unit is a “Satoshi”. The blockchain is run by multiple users through a P2P network. Rather than any central organization verifying transactions, it is verified at the same time by everyone on the blockchain. Users from anywhere on the globe can conduct transactions once they solve complex cryptographic puzzles. All validated transactions are added to this blockchain in a chronological order. This means transactions cannot be deleted, changed, or duplicated; they are totally transparent. So, the Bitcoin shares all the key qualities of fiat currencies like divisibility, fungibility, portability, and scarcity. Moreover, Bitcoin can be purchased on almost all crypto exchanges and trading bots. Purchasing bitcoin is no longer hard or confusing as users can also buy BTC with iTunes card now.
- Altcoins: These offer competition to the Bitcoin and claim to be its better versions. Some of these altcoins operate in the same way as the Bitcoin, using the blockchain with simple tweaks. Some altcoins, however, have been created from major deviations from the Proof-of-Work algorithm which the Bitcoin endorses. Instead, they use a Proof-of-Stake method/smart contracts for verifying transactions. The Ethereum or NEO are types of altcoins allowing you to build blockchain-based apps on their platforms. The smart contracts are essentially self-executing contracts with terms of reference coded into the blockchain directly. These execute instructions once specific conditions have been met. The only downside is that altcoins do not have the kind of acceptance that Bitcoin has.
- Tokens/dApps: These are becoming rather popular, issuing many ICOs annually since innovators find these more effective. These let you decentralize almost anything using the smart contracts. DApps refer to decentralized applications which do not operate through a single system; a dApp will operate on a blockchain/P2P platform. Since dApps are platform-independent, they offer many more opportunities for blockchain efforts. Instead of having a blockchain, they use smart contracts for running commands and getting information from blockchain systems. For rewarding users, dApps reward native tokens which may be exchanged for real money.
These are the different types of cryptocurrencies these days which new investors should be aware of. Many more are expected to enter the crypto scene in the future.