Types of cryptocurrencies: an overview of bitcoin, altcoins, and tokens. In this article, we will tell you about the most popular types of cryptocurrency
The popularity of cryptocurrencies is growing, despite all the crises and pandemics. More and more people use them not only for settlements but as a means of payment and exchange trading. New coins appear and disappear from the market every day. Which one should I choose? To do this, you need to know the main options for digital money.
All cryptocurrencies and tokens are listed in the article for information only. They are not advertising or investment advice.
The theory of anonymous and decentralized networks has existed for a long time, but only Satoshi Nakamoto (anonymous personality) in 2008 managed to create Bitcoin the first successful implementation of a "blind" cryptographic signature, in which the data of the participants (nodes) confirming the authenticity of the transaction remains anonymous, and all data about payments are stored in a database called the "blockchain".
Most analysts predict only an increase in value, although there have been several strong falls in the history of stock trading. For large and long-term investments, this is the best option.
As the popularity of Bitcoin grew, two main basic algorithms became visible: a small block size in which payments are located, the complexity of the network grew rapidly, and required constant investment in the mining process. The LiteCoin was created to solve the problem based on the Bitcoin algorithm. It is faster but has no parent compatibility. It can be considered the first AltCoin.
In other words, AltCoin (alternative currency) is all "noBitcoin" digital coins:
Examples of AltCoin from the TOP-20 by capitalization: Cardano, Monero, Bitcoin Cash, Stellar, Filecoin.
Frequently asked question - can tokens be considered AltCoin? Answer: from a technology point of view, no, even if they are traded on the exchange along with other currencies. Answer: from the point of view of technology, no, even if they are traded on the exchange together with other currencies. These are more stocks than money, just at the moment there is no such thing as a "cryptocurrency stock exchange".
The Ethereum platform was the first to offer the technology of "smart" contracts in which the parties stipulate the conditions that must be met before making a transaction. The information is recorded in the blockchain, it cannot be changed. An open-source platform, everyone can create their contract (token) and execute it on the Ethernet Network.
There are two tokens available for trading on the exchange:
The rest of the exchange tokens on the ERC20 protocols are much lower in value than the leader of the EHT. These are more tokens of exchanges and platforms based on Ethereum. For example:
A variant of digital money, the rate of which is "attached" to the most stable world currencies. Compared to other cryptocurrencies that do not have real content and price movements of 10-30% within a day, StableCoin declares the rate to be unchanged. Fluctuations of no more than 0.5-1% cannot be used for speculative income. These assets are popular for hedging exchange transactions, savings, and converting fiat money.
The first and largest StableCoin in terms of capitalization is Tether. Originally «pegged» to the dollar (USDT ticker), since early 2021 the euro (USDE) has also been used as the underlying asset.
The availability of real confirmation of Tether tokens raises many questions from US owners and regulators. In 2021, there were several audited accounts, the results of which were not published. Perhaps the required amount is not available, while the owners continue to issue large blocks of USDT to the market.
Other Stables include the following:
Decentralized Finance (DeFi) - publicly available (peer-to-peer) financial distributed applications (DApps) based on smart contracts. It offers a whole range of financial services: from money transfers and currency exchange to lending and guaranteeing the execution of trade transactions. The role of intermediaries is minimized or they are simply absent.
Like Ethereum, DeFi technology cannot be called full-fledged "digital money". As mentioned at the beginning of the article, these are more securities than "money". But, on cryptocurrency exchanges, DeFi tokens are offered for trading. When viewed as a trading asset, they deserve to be in the article.
Trading is no different from Bitcoin or any AltCoin. A few examples of tokens:
The YFI example shows the "shadow" side of the DeFi idea - promises of quick profits without real projects and services, aggressive advertising. Remember this before purchasing tokens!
Mining and encryption algorithms
Additionally, in the reviews and analytics of the crypto market, there may be a division of currencies by the type of mining and the encryption algorithm. These are only technical differences, they do not affect the exchange value and the forecast of how the situation will develop!
The cryptocurrency market offers coins for any application. Long-term investments are Bitcoin, Ethereum. The conversion of large amounts of fiat money is StableCoin. Exchange trading and quick income on small investments - AltCoin and DeFi. The main rule is to constantly monitor the situation; the market has no "real" content like a currency or a stock. With a sharp increase in volatility, you need to be ready to quickly close the profit/loss on positions.