What are the different types of cryptocurrencies?
Learning about blockchain assets can be daunting when there are over 2,000 of them! Luckily, it can be a bit easier to understand these assets when you separate them into different types of cryptocurrency.
In this article:
- What are payment currencies?
- What are blockchain economies?
- What are privacy coins?
- What are utility tokens?
- What are stablecoins?
What are payment currencies?
As the name suggests, these assets are mainly for payments and are hence called payment currencies. For example, you could use payment currencies to pay for goods or services, pay your bills, cash out from digital currencies to local fiat currencies like the dollar, etc.
While every digital asset can theoretically be used to pay for things, merchant adoption or acceptance by providers of goods and services is more widespread for payment currencies.
In particular, cryptocurrencies like Bitcoin (BTC), Litecoin (LTC), Bitcoin Cash (BCH), and others are popular and well-known payment currencies.
What are blockchain economies?
Blockchain economies, also known as blockchain platforms, take the functionality of blockchain technology further than just payments.
These platforms allow you to create your own digital assets (usually referred to as tokens), decentralized applications (Dapps), etc. on their platform. Therefore, blockchain platforms become their own “blockchain economies” with different assets, applications, and more.
Some blockchain economies you may have heard of include Ethereum (ETH), Ethereum Classic (ETC), EOS (EOS), NEO (NEO) and Tron (TRX).
What are privacy coins?
Some digital assets are created with a focus on privacy. In privacy coin transactions, only the sender and receiver know the number of coins transacted. The balance of a privacy coin wallet address is only known by the owner of the wallet. This is in contrast to blockchains like those of Bitcoin, which show transaction amounts for each transaction as well as wallet address balances.
Crypto assets like ZCash (ZEC), Monero (XMR), PIVX (PIVX), and so on are examples of privacy coins.
What are utility tokens?
Utility tokens are digital tokens that are used for a blockchain-based product or service. They run on a blockchain platform, or in other words, are part of a blockchain economy. Most utility tokens are ERC20 tokens that run on the Ethereum blockchain but with the continued release of other blockchain platforms. Other token types like TRC10 and TRC20 tokens have emerged as well.
An example of a utility token is Golem (GNT). Golem is a platform where users can pay GNT to rent computing power for memory-intensive tasks.
Aside from GNT, other examples of utility tokens include Basic Attention Token (BAT), Civic (CVC), OmiseGo (OMG) and 0x (ZRX).
What are stablecoins?
These assets are very popular among regular traders, as they always have the same price (or aim to), unlike other digital assets, which can fluctuate greatly in value. For example, if a trader thinks that an asset is going to lose value soon, they could sell the asset for a stablecoin to prevent financial loss.
Different stablecoins follow different methods to maintain a stable price. For an in-depth explanation of how stablecoins work, check out our stablecoin guide.
Examples of stablecoins include USD Coin (USDC), Paxos (PAX), Gemini (GUSD), TrueUSD (TUSD), Tether (USDT), Dai (DAI), etc.
We hope you now have a better idea of the different types of cryptocurrencies!