A Brief Tour Through Some Common Cryptocurrency Types

Cryptocurrency has developed a market valued between $1 and $2 trillion, but “crypto” doesn’t only mean Bitcoin and Dogecoin. There is a constantly proliferating number of crypto types and brands: at least 10,000 as of the spring of 2021. Some get the nod from experts as being particularly good investments, while others seem—at least for now—to be relegated to the fringes of the financial world. 

Novice investors, as well as those with more experience, might want to take a look at a run-down of the most prominent crypto types. Each is designed to answer different needs and specifications, and each offers its own profile in terms of ease of use, degree of user adoption, special characteristics, and investment potential. 

Remember that most cryptocurrencies can be categorized as either coins or tokens, and these terms can be fluid, depending on whom you ask. The term “altcoin” typically refers to non-Bitcoin, alternative crypto coins that are quite literally alternatives to Bitcoin, although they tend to be structured along the same general kind of open-source framework. 

Altcoins

The best-known altcoins out there include Namecoin, the first known iteration of this type. Namecoin originated in 2011, about three years after the introduction of the concept of Bitcoin. Other altcoin types include the “green crypto” Peercoin; Auroracoin, developed in Iceland; and, of course, the still-popular Dogecoin. 

Unlike the types listed above, some coins don’t use the Bitcoin model of open-source protocol. These function instead within their own systems, using their own protocols.

Ethereum and its relatives

Ethereum is an open-source blockchain platform with its own branded cryptocurrency, which is known as “Ether” or “Ethereum.” Ethereum garnered headlines after it caused a market swell in the first week of August. That’s when it dropped its “London” upgrade, boosting not only its own price, but that of the entire cryptocurrency market. 

Other big news for Ethereum: its developers are planning to switch from a proof-of-work consensus algorithm (the energy-intense type used by Bitcoin) to one based on proof-of-stake. The change will permit Ethereum’s network to operate on vastly less energy, while upgrading the speed of its transactions. The change is expected by 2022 but could be released at the end of the year.

Tokens

While the term “cryptocurrency” typically refers to the native digital asset associated with a particular blockchain protocol, “crypto tokens” are digital products constructed by platforms on top of existing blockchains. 

Tokens can possess value and serve as mediums of exchange, similar to how cryptocurrency coins are used. But tokens more typically represent some designated physical or digital asset (such as real property or a piece of artwork), or even a utility function or a service. 

The various types of crypto tokens include “value” (or “payment”) tokens, the utility tokens created to help access blockchain-related functions, non-fungible tokens, and security tokens, which are designed to help protect a user’s account. Bitcoin and Litecoin can be considered types of value tokens.