The crypto market brims with all possible digital assets, and looking at the countless heaps of existing cryptocurrencies, an inexperienced person may scratch their head, wondering what the difference among all these crypto titles is. Though the amount of available cryptocurrencies tends to infinity, they can all be divided into several major categories. Here they are: general types of cryptocurrencies with simple explanations and examples.
Coins
A coin is a cryptocurrency that is natively built into a blockchain (a publicly viewable database or ledger distributed across a large network of computers).
Coins can originally be obtained via mining or staking. The process of issuing new coins depends on the consensus structure of a blockchain. Mining is available for proof-of-work or PoW blockchains (like Bitcoin), while staking is available for proof-of-stake or PoS consensus systems (like Ethereum).
Since a coin is the default cryptocurrency of a given blockchain, the number of existing crypto coins coincides with that of existing blockchains. The most notable crypto coins are:
- Bitcoin or BTC – native to Bitcoin Blockchain
- Ether or ETH – native to Ethereum Blockchain
- Binance Coin or BNB – native to Binance Smart Chain (BSC)
- SOL – native to Solana Blockchain
Tokens
Token is a variety of cryptocurrency that also utilizes blockchain technology. Yet, unlike coins, tokens are not native blockchain currencies. These are rather real-world use cases of blockchain.
Any blockchain is operated by a set of smart contracts – sophisticated computer programs that monitor and support every aspect of a blockchain system. Before buying these or other cryptocurrency tokens, it is important to know whether the market trend is bullish or bearish. In our article, we described in detail how to determine crypto market trends https://trends.aax.com/how-to-know-whether-were-in-a-bull-or-bear-market.
Developers of a particular blockchain can share their smart contract codes with other development teams to help the latter create their own crypto platforms and issue their own electronic assets. Digital currencies that employ the infrastructure of an already existing blockchain are called tokens.
There are over 400 thousand tokens in existence today, with new token projects appearing veritably every day. Some prominent token examples include:
- Uniswap (UNI) – built on top of Ethereum Blockchain
- Serum (SRM) – built on top of Solana Blockchain
- Pancakeswap (CAKE) – built on top of Binance Smart Chain
Stablecoins
A stablecoin is a cryptocurrency that is designed to be resistant to drastic market fluctuations. This stability is achieved by programming the cryptocurrency is a way that its price is pegged (closely tied) to the price of an external asset that can effectively withstand market volatility. Generally, the price of stablecoins is linked to the price of fiat money (the US dollar, GBP), precious metals (gold, silver), or even other cryptocurrencies. Some popular stablecoins are:
- Tether (USDT) – pegged to the U.S. dollar
- Tether gold (XAUT) – pegged to gold
- FEI – pegged to Ether
Altcoins
An altcoin (alternative coin) is any cryptocurrency that has appeared after Bitcoin. Bitcoin was the very first crypto to enter the scene, and it is still enjoying the first-mover advantage in terms of adoption speed, popularity, and price. All the other cryptocurrencies that have sprung up after Bitcoin are just alternatives to the pioneer. Ethereum (ETH) is the classiest of altcoins.
DeFi Tokens
DeFi is a buzzword in the global crypto community, and it denotes “decentralized finance.” The emerging DeFi industry aims to provide an easily-available and affordable alternative to a traditional banking system.
DeFi projects are a popular use case for blockchain technology, and they offer various financial services, like real banks do. Staking, savings accounts, borrowing, lending, insurance, transfers, trading, and investments are typical services offered by decentralized finance platforms. And DeFi tokens are necessary just to access the services of DeFi platforms. Some DeFi token examples include:
- YFI – a DeFi token of Yearn.finance, a project that specializes in decentralized financial services.
- SUSHI – a DeFi token of SushiSwap, a popular decentralized exchange where users can buy and sell digital currencies without relying on third-party middlemen.
- ATOM – a DeFi token of Cosmos, a crypto project that facilitates cross-chain interoperability.
NFTs
NFT stands for non-fungible token, and it is a sort of electronic collectible. Non-fungible means unique, existing in a single copy, and unable to be replicated. Usually, NFTs present pieces of digital art such as images, videos, soundtracks, or GIF files. Play-to-earn (P2E) games leverage NFT technology to create in-game characters, items, and even complex virtual universes.
The one-of-a-kind properties, as well as ownership rights, are encoded into an NFT during the creation stage. The underlying blockchain records all the transactions where a given NFT is involved. Often regarded as precious collector’s items existing on the Internet, many NFTs come with five-figure price tags.
There are many platforms that allow you to easily create and sell your own NFTs, such as OpenSea. As for gaming, a new NFT asset is created when a player obtains a new character, an item, or something else in the NFT game. Some illustrious NFT examples consist of:
- Bored Ape Yacht Club – an NFT collection
- Axie Infinity – an NFT game
- STEPN – a move-to-earn NFT game
- Sandbox – an NFT game
