Table of contents
- What is cryptocurrency?
- What are the two categories of crypto?
- Are crypto coins and tokens the same?
- What are altcoins?
- What are the types of cryptocurrencies?
In today’s context, we hear the term cryptocurrency a lot. You open the television, and you hear it, on radios, newspapers, and social media (Facebook, Instagram, Youtube, and LinkedIn) literally everywhere. Well, do you know what is a cryptocurrency? Don’t freak out and continue reading to know about the new star, cryptocurrency.
What is cryptocurrency?
Cryptocurrency is the digital currency using which you can buy products or services on the digital platform. It uses an online ledger strongly encrypted for safe and secure online transactions. It is a form of a digital asset in a network that is spread over a large number of computers. These unregulated currencies can be traded for a profit with speculators when the value of the currency skyrockets.
Many cryptocurrencies are decentralized networks that work based on blockchain technology. Since they are decentralized, they exist beyond the control of the governments and central authorities. Blockchains ensure the integrity of the data that undergoes transactions. The technology is spread over a large network of computers and can manage and record transactions happening within these computers. They are the most essential component of cryptocurrency. Blockchain technology is expected to disrupt many fields like finance and law.
Cryptocurrencies also face criticism on the same grounds as blockchains for their illegal activities, exchange rate volatility, and the vulnerabilities of the infrastructure beneath them. However, cryptocurrency has got great portability, divisibility, inflation resistance, and transparency.
What are the two categories of crypto?
Most of the crypto falls under two categories: coins and tokens. Coins include Bitcoins and altcoins. Tokens are programmable assets that are present in the blockchain of a given platform.
Are crypto coins and tokens the same?
No, crypto coins and tokens are not the same though they are forms of cryptocurrency. They both serve different function. Coins are built on their own blockchain and is considered as a form of currency. For example, the blockchain Ethereum has Ether as a cryptocurrency built on them.
Though tokens are built in a similar way as coins, on their blockchain platform, they are not considered currencies. Tokens are considered programmable assets that can be used for the creation and execution of smart contracts which establishes ownership of assets outside of the blockchain network. These tokens represent value in the real world and can be sent and received. For example, the Basic Attention Token, or BAT is a token that is built on the Ethereum platform and used on digital advertising platforms.
Tokens are created and given out through stock offers, Initial Coin Offering, or ICO. They can be represented as value tokens, security tokens, and utility tokens. Value tokens are similar to Bitcoins, security tokens are same as the stocks, and utility tokens are tokens that are authorized for specific uses.
What are altcoins?
Altcoins refers to non-Bitcoin cryptocurrencies. It got the prefix ‘alt’ as a short form for an alternative to Bitcoin. Namecoin, Litecoin, Peercoin, Ethereum, and USD coin are some of the examples of altcoins.
Most altcoins are built on the same structure as Bitcoin. They share similar characteristics, but each coin has a different thing to offer to its investors. Some altcoins undergo a different production process and authenticate blocks of transaction whereas some altcoins are like smart contracts and have features like lower price volatility.
Some coins including Bitcoins are limited in terms of supply which increases the demand for that coin and thereby its value. The number of Bitcoins that can be created is fixed, which is 21 million. It is decided by the creator of Bitcoin.
What are the types of cryptocurrencies?
There are so many types of cryptocurrencies in the market which are available at varying cryptocurrency prices. Let us look at the 10 most common types of cryptocurrencies.
Bitcoin is the first cryptocurrency that was created. It was created in 2009 by Satoshi Nakamoto, a pseudonym for the creators of the Bitcoin cryptocurrency. Bitcoin has got a fixed number for the maximum coins that will be produced, and it is 21 million. Nearly 19 million Bitcoin have already been out in circulation.
The idea behind Bitcoin was to be independent of any government or central bank but to rely on blockchain technology. It relies on a decentralized public ledger which contains a digital record of every Bitcoin transaction. The basic system of cryptography and consensus verification was founded by Bitcoin. Both systems are now the foundation for most of the crypto.
In order to generate more Bitcoins and to verify large blocks of transactions, Bitcoin miners use a powerful computer. They do this through a very complex and time-consuming process called proof of work ( POK ). These transactions are logged permanently on the decentralized public ledger and are used to validate and secure each bitcoin and the network.
The production of Bitcoin uses vast amounts of energy, and this has raised some questions about environmental pollution.
Ethereum is a blockchain network that was devised as a programmable blockchain. It was not meant to represent a currency but to enable its users to create, publish, monetize, and use applications. Ether ( ETH ) is the native currency of Ethereum and was used as a form of payment in the Ethereum platform.
Bitcoin is the number one cryptocurrency with Ether standing just behind it. It is also created in a similar manner using the complex and time-consuming process called proof of work, which was used to create Bitcoins. The creators of Ether have not set any limit on the number of creations of Ether.
Many of the Initial Coin Offerings used the Ethereum blockchain and therefore, Ethereum has been able to fuel up the Initial Coin Offerings. The credit for the boom in non-fungible tokens also goes to Ethereum. Non-fungible tokens or NFTs are the digital version of collectibles or art that are linked to a blockchain. NFTs can be only found once as there are no copies.
Cardano or ADA
Cardano refers to itself as a third-generation blockchain platform. They are trying their best to make their network more efficient and sustainable by replacing the complex and time-consuming proof of work process. Instead of this process, they use proof of stake ( POS ) for generating ADA crypto. This does not use the amount of energy that proof of work uses.
ADA is the cryptocurrency of Cardano blockchain network. It derives its name from a 19th century mathematician, Ada Lovelace.
The main application of Cardano is in identity management and traceability. In identity management, Cardano can be used for streamlining the collection data from multiple sources, whereas in the field of traceability, it can be used to audit a product’s manufacturing path and to prevent fraud and counterfeit products.
It was built in five phases with the goal of developing a decentralized application platform using a multi-asset ledger and verifiable smart contracts. Each phase of Cardano has undergone a research-based framework and peer-reviewed insights. This has helped its high scholarly reputation.
Binance can be said as one of the world’s biggest cryptocurrency exchanges. Binance coin or BNB is the cryptocurrency token of Binance and was used as a medium of exchange for the Binance platform. Binance was built on the Ethereum platform initially, but now Binance is an independent blockchain network.
It was created in 2017. At that time, it was designed as a utility token that allowed traders to get discounts on trading fees on Binance platforms. Now it can be used for payments, travel bookings, entertainment, and online and financial services.
Binance coins were built on a maximum of 200 million coins of which around 100 million Binance coins were made available to investors during its Initial Coin Offerings. In order to drive the demand of BNB, every quarter they destroy some Binance coins by buying them back. It has destroyed 1.29 million Binance coins as of July 2021.
Tether is the first crypto coin to be sold as a ‘stable coin’. Stablecoins are a breed of crypto called fiat-collateralized stablecoins. The value of the tether is measured in a fiat currency. Tether was designed to offer stability, transparency, and lower transaction charges like other stablecoins.
It is commonly used by investors who want to get rid of the extreme volatility of the crypto market. Tether is not a speculative investment. Though tether is pegged to US Dollars, tethers cannot be exchanged for US dollars. It maintains a 1:1 value with US dollars but there is no guarantee provided by Tethers, Ltd. for any redemption of tethers.
Solana is a blockchain network that has Sol as its native cryptocurrency. Sol is generated on the Solana blockchain platform. It is among the most volatile currencies. The presence of Sol in the crypto market is increasing steeply. This is because Solana has taken large steps in decentralized finance.
Solana mainly focuses on smart contracts technology which is a set of programs that run on the platform based on preset conditions like paper contracts without the middlemen. Solana create the non-fungible token called Degenerate Ape Academy. This non-fungible token was launched in August 2021.
Ripple, a global money transfer network developed XRP, it’s a cryptocurrency in Ripple Labs, Inc. The Ripple network is used by financial service companies globally. XRP was designed as a crypto to use on the Ripple network.
Are XRP and Ripple the same?
No, Ripple and XRP are not the same though they are used interchangeably by some people. XRP is a cryptocurrency developed by the Ripple network, whereas Ripple is the blockchain platform on which XRP is generated.
XRP can be seen as an investment. You can use it as a coin to exchange for other cryptocurrencies and as a mode for doing financial transactions on Ripple. XRP cannot be mined like other cryptocurrencies. 100 billion XRP coins already exist which is the limit for the number of coins. Bitcoin and other cryptocurrencies are complex digital processes using blockchain technology. XRP does not rely on this system process.
Instead of this, the Ripple network has a unique system for validating transactions in which participating nodes perform a poll to verify the transactions done on the platform. Because of this system, XRP transactions are faster and also cheaper than Bitcoin.
The popularity of being known as the first joke cryptocurrency is owned by Dogecoin. Dogecoin was launched in 2013. It was launched to make fun of Bitcoin. The scene changed when the people caught Dogecoin in attention and the network received a fair investment. Dogecoin was upgraded to a legitimate currency when Elon Musk in a tweet showcased a positive review about Dogecoin in 2019.
It is an altcoin which is similar to Bitcoin and Ethereum in terms that it uses the proof of work system in the blockchain platform for mining coins. There is no limit for mining Dogecoins. Though Dogecoin is one among the most common types of cryptocurrencies, it is traded at very low price.
Polkadot ( DOT )
The co-founder of Ethereum, Gavin Wood, is the co-founder of Polkadot. It was designed to increase the capabilities of blockchain technology. Dot is the cryptocurrency of the Polkadot network.
Polkadot employs two blockchains: relay and para chain. The relay network is the main network, and the transactions are permanent in this network. Parachain is a parallel network of user-created blockchains. Parachains have the option of being customized for building apps, supporting other coins, and benefiting from the security of the main blockchain. Polkadot is different from another crypto in terms of its core mission to solve the problem of interoperability by creating bridges between blockchains.
USD ( USDC )
USD coin is a stablecoin that runs on blockchain platforms like Ethereum. USD coin is pegged to US dollars like Tether. This means that one USDC is one US dollar. Stablecoins like USDC makes transactions easier, cheaper, and faster. USDC is more transparent unlike Tether as the reserves are monitored by an American arm of Grant Thornton LLC, which is a global accounting firm. There are nearly 24 billion USDC in circulation now.
Cryptocurrency is a new extension of digital or virtual currency designed to work as a medium of exchange. In the current digital swapping world, investors and interested parties are eager to know further information about, and the capabilities of, this new type of currency. One of the implicit paths to recoup the word automatically and snappily is through a chatbot.
There’s also the term crypto art, it’s a mask term chased to represent the emulsion of art and blockchain technology. As a sub ecosystem within the world of cryptocurrencies, crypto art intends to save inflexible performances of digital art similar to music compendiums, oils, awards, and a wide range of cairn. The really cool side effect of this crypto art thing is that you’re seeing a lot of motion design taking on the mindset of a traditional fine artist.
Still, have doubts about cryptocurrency? Feel free to comment below!
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