Every day new cryptocurrencies are released on the market with different goals. Unfortunately, you can lose the overview fast. We would like to be helpful here and want to explain to you the different types of cryptocurrencies.
Let’s start with the diversification of a crypto coin or token:
A coin is a cryptocurrency, which is using its own blockchain, the biggest examples are Bitcoin and Ethereum.
A token is created on an existing protocol. The most newly released tokens are built on the Ethereum blockchain.
In general, a coin is used for payments while a token can have different kinds of functionality.
Let’s separate them into 6 different types: currency coins, security tokens, blockchain, economics, privacy coins, utility tokens and stable coins.
These assets are mainly used for different kinds of payments. Well known cryptocurrencies like Bitcoin (BTC), Litecoin (LTC), … are popular payment currencies.
Currency coins are the best representation of a decentralized online alternative to government-controlled fiat currencies.
This pretty wide term includes many projects which take the functionality of blockchain technology further than just payments. These platforms allow you to create your own decentralized applications (Dapps), digital assets, … on their platform.
Therefore, blockchain platforms become their own “Blockchain Economies” with different assets, applications, and more. Projects you know for sure are Ethereum, EOS and NEO.
A stable coin is also called as the traders save haven. Stable coins are cryptocurrencies whose price is aimed at through an active or political monetary policy. The best known Stablecoin is Tether (USDT), each Tether should be covered by one dollar.
Security Tokens are issued in Security Token Offerings (STOs) and allow real assets to be converted into digital tokens. In this way, it is possible to have tradable financing instruments such as shares or profit participation certificates listed as digital assets on blockchain technology – i.e. without a certificate or commercial register.
Payments to the owners, such as dividend payments, can also be mapped using security tokens.
Security Tokens thus represent a further development of classic securities such as shares or participation certificates.
Blockchain Capital (BCAP) is one example of a security token.
Other digital assets like Monero (XMR) and ZCash (ZEC) have their primary focus on privacy.
During coin transactions, only the sender and receiver know the number of coins transacted.
Whereat Bitcoin for comparison transaction amounts and also wallet balances are shown to everyone who knows the wallet address, this information is hidden from everyone, except the holder of a privacy coin wallet.
The main usage of a utility token is to access different services of the protocol they are integrated. Those token can be used for any payments within their specific ecosystem.
One famous example is Basic Attention Token (BAT), where users can use the token to obtain a variety of advertising and attention-based services within the Brave browser.
You could certainly further subdivide into more different types, but with this list, you should get a good first impression.