Types of cryptocurrencies and their purpose – a complete overview

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What are the types of cryptocurrencies

10 years ago, when the first cryptocurrency just appeared, no one even imagined that all this grows to an entire industry, and to have several digital coins in your wallet will become everyone’s dream. Most did not take it seriously, but the increase in cost, the huge number of transactions and the introduction of all sectors of the economy proved that cryptocurrency is the currency of the future.

The main purpose of cryptocurrencies is easy settlement. All cryptocurrencies have a common feature: they are built on the basis of blockchain technology, which stores all transaction information encrypted using cryptography. But each cryptocurrency has its own characteristics. Considering what cryptocurrencies are, you can see that they all differ in cost, network consensus, cryptography algorithm and basic functions.

There are decentralized cryptocurrencies that are controlled by equal communication nodes – miners. Others have a central governing body and are controlled by the creator. Cryptocurrencies have long gone beyond the limits of the functionality originally laid down in them and, in addition to fast transactions within the network, can be a valuable financial asset, give the owner certain privileges on the platform where they are launched, or provide access to unique platform options. Now in the world there are a huge number of cryptocurrencies and conditionally all of them can be divided into three main types: bitcoin, altcoins and tokens.

Bitcoin

The main form and the most expensive digital currency to date is Bitcoin. It is isolated in a separate form, because it was with her that everything started and the rest of the cryptocurrencies are built according to its changed code.

Bitcoin was developed by a person under the pseudonym Satoshi Nakamoto in 2008. The main purpose of the creation was the need to provide the world with an alternative to fiat money means of payment, which will not be regulated and depend on state bodies.

Altcoins

Bitcoin is considered the forefather of all other cryptocurrencies, so other digital coins are called altcoins, that is, cryptocurrencies alternative to Bitcoin. Now there are a great many of them. Many of them really have the same algorithm and functionality almost identical to Bitcoin, others are endowed with completely different functions and the motive for launching them was the desire to improve bitcoin and provide solutions to those problems that it cannot cope with.

If the main function is a decentralized calculation tool, then most altcoins are based on promising projects built on the blockchain, which should change the usual course of things in the world.

Ethereum

Ethereum is the second most popular and cost cryptocurrency. It was developed by Vitalik Buterin, a Canadian programmer of Russian origin. The official year of release is 2015, but development has been ongoing since 2013.

Ethereum can act as a means of settlement, but its main function is to be the fuel for the smart contracts of its platform. It is smart contracts that make Ether special, expensive and popular. On their basis, any action with automatic and guaranteed execution can be launched. The user can create a contract with the terms “if – then” and enter any information there, and the system will automatically execute the second part of the contract as soon as the first is observed. To start the contract, the platform will need to pay and payment will be made in ETH.

With smart contracts, you can easily create decentralized applications on the blockchain and new cryptocurrencies. Ethereum has opened up unlimited possibilities to the world, and now, on the basis of smart contracts, many other useful projects have been launched and their implementation in state systems is planned.

Ripple

Ripple is a centralized cryptocurrency with a high transaction speed and minimal fees. Unlike most other cryptocurrencies, Riple has a central governing body and it is the creators who have the final voting right.

Ripple was released in 2012 and now thousands of transactions per second are carried out through its platform. All money that is sent through the Ripple protocol is automatically converted to XPR, and then converted again to the currency that the recipient needs. This feature has attracted the attention of Riple banks and is now using it to modernize banking operations.

Dash

DASH appeared in 2014 and originally had the name DarkCoin. This is the first completely anonymous cryptocurrency whose main purpose is to be Darknet’s means of payment.

DASH operates on a peer-to-peer system. Bitcoin users are forced to put up with the fact that all transaction information is stored on the blockchain. DASH also uses anonymizers, which divide transactions into small parts and mix them together, which makes it impossible to track transactions, the sender and the recipient.

Litecoin

Litecoin is the first altcoin, the motive of which was the desire to facilitate mining and accelerate cryptocurrency transactions. It was released in 2011 by Charles Lee. Litecoin was developed based on the outcome of the bitcoin code, but the developer made constructive changes to it that improved the algorithm and made it possible to quickly cope with a large number of transactions.

 IOTA

The IOTA cryptocurrency appeared in 2015 and should be a real breakthrough in the world of the Internet of Things. The main purpose of cryptocurrency is instant transactions for the minimum amount. The applied technique will allow you to pay for any minor actions and manage all automatic processes. The project is still at the initial stage of development, but experts predict that in the future there will be millions of devices from around the world connected to the network that can be controlled through transactions, launching actions, and paying for work.

Tokens

Tokens are both a unit of value and calculation that exists within a specific project. Most often they are issued for conducting ICOs and attracting investments, but in the future they receive a certain value and can be traded on cryptocurrency exchanges and exchanged for other cryptocurrencies. In addition, tokens perform various functions by which they are divided into three types:

  1. Appcoins (application tokens) – the platform’s internal payment tool that provides settlement operations within the system. For such tokens, the products or services of the issuer company are bought.
  2. Accumulative (credit) coins – designed to attract credit investment in the project. Users can purchase credit tokens of the project and after a while get their money back with interest, while the project sets forth the condition that tokens cannot be sold before the established date.
  3. Asset tokens (stocks) – issued by platforms to attract investment. Such tokens are a necessary impetus for the development of the project. In turn, the investors who bought them can expect to increase capital by increasing the value of the coin and dividends from company profits.

OmiseGO (OMG)

The OmiseGO token was issued by an Asian company as part of an ICO in order to attract investment. By selling the token, they managed to attract $ 19 million, which is needed to create a decentralized platform for exchanging fiat and cryptocurrency funds. The exchange was launched in 2017 and since then the value of its token has strengthened, bringing investors income.

Eos

The EOS project issued a token of the same name to attract financing and raised more than $ 200 million. The platform positions itself as an “Ethereum killer”, because it offers a platform similar to it, where third-party developers will be able to create applications on the blockchain.

 TETHER (USDT)

USDT is a stable token, the value of which is provided by the dollar. The platform is unique in that it is built on the blockchain, but allows transactions on it in fiat money. Fiant stocks are stored in the accounts of the creator – the company Tether Limited. Such an approach should rid the coin of the high volatility of the exchange rate and provide the world with a stable digital means of calculation.

Tron (TRX)

The Tron platform is designed for decentralized placement of entertainment content and was developed on the Ethereum blockchain. The project token is intended for internal settlement between participants and for payment of its services. The maximum token emission is 100 billion. Dollars. All coins were issued as part of the ICO, in which 40% of all coins were sold, which allowed attracting investments for the development of the platform. 35% froze on the accounts of the company, and the rest went on free sale.

 Binance Coin (BNB)

Binance Coin is an internal token of the Binance cryptocurrency exchange. It was also released to attract financing, but also acted as an advertising product to attract attention to the trading platform. At BNB, you can pay the trading commission on the platform at a discount, which increases with each year of active use of the exchange.

How many cryptocurrencies exist

The term cryptocurrency was first applied in 2009 to the description of the first decentralized means of payment – Bitcoin. After the launch of Bitcoin, many enthusiasts rushed to create new cryptocurrencies based on its source code. But the real cryptocurrency boom happened after the release of Ethereum. Smart contracts have greatly simplified the creation of blockchain projects and cryptocurrencies, as a result of which the market began to develop rapidly.

As of November 23, 2018, according to investing.com, there are 2504 cryptocurrencies in the world, and the total market capitalization is $ 136.348.554.804.

But it should be noted that not all cryptocurrencies have significance and popularity. The lion’s share of the total market capitalization falls on cryptocurrencies from the TOP-20. Many coins are just starting to enter the market, while others only serve to pay for the services of a particular project, they are not traded on exchanges and do not represent investment value.

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