Types of Cryptocurrency
Gone are the days when the different types of cryptocurrency could be counted on one hand. Nowadays, the number of cryptocurrencies continues to grow at a rapid pace. No longer are bitcoins the only type of cryptocurrency available to traders and investors.
There are currently a wide variety of altcoins as well as tokens from which to choose, each having its own set of advantages and features.
Of course, Bitcoin remains the most popular choice. However, more and more traders are choosing to get involved in the trading of other types of cryptocurrency in order to take advantage of the particular benefits that each type offers.
There are 3 basic types of cryptocurrencies, categorized as:
- Transactional cryptocurrencies
- Cryptocurrency platforms and
- Cryptocurrency applications.
Transactional cryptocurrencies allow for the exchange of value just like fiat currencies such as the US dollar or the British Pound Sterling. Examples of transactional cryptocurrencies are Bitcoin and Litecoin. Bitcoin is the most popular cryptocurrency which surged to a value of just under $20,000 in December 2017. The current value of bitcoin (according to CoinMarket Cap) is just above $7400 with a market capitalization of over USD$126 billion and a trading volume of over USD$5 billion. Bitcoin is a highly volatile type of cryptocurrency.
Cryptocurrency platforms provide the foundation upon which new blockchain applications can be built. These platforms use a computer code, known as a smart contract, that allows for the exchange of value. A popular cryptocurrency platform is Ethereum. These platforms eliminate the need for middlemen in the trading of cryptocurrencies and give developers the opportunity to store and access data in new ways.
Cryptocurrency platforms essentially eliminate the possibility of fraud, censorship or third-party interference. Ethereum was initially released in July 2015 and according to CoinMarket Cap, is currently priced at $559.31 with a total market capitalization of over USD$55 billion. These platforms are used in such processes as remittances and make the process much quicker and more secure. Both Western Union and MoneyGram have gotten involved in the use of cryptocurrency platforms to improve their remittance service offerings to customers.
Cryptocurrency applications are essentially decentralized cryptocurrency exchanges that facilitate processes such as Initial Coin Offerings (ICOs) which are used to raise start-up capital. When an investor invests in an ICO, they receive digital tokens which are quite similar to shares that an investor would receive in an IPO. The digital tokens will change in value over time depending on the success level of the ICO.
Cryptocurrency applications have helped developers to raise billions of dollars in start-up capital and have also facilitated the creation of wealth for those who have invested in successful ICOs. One example of a cryptocurrency application is Augur. “Augur is a trustless, decentralized oracle and platform for prediction markets” according to a certain whitepaper. Holders of Augur receive settlement fees if their predictions are proven to be correct.
With the growing number of cryptocurrencies, investors have a wide range of options to choose from. The cryptocurrency that you choose to invest in should depend on your transaction and investing goals. If your aim is to facilitate transactions, a transactional cryptocurrency may be your best option. If you are concerned about security and speed, a cryptocurrency platform may be a good choice. If you want to see capital gains, a cryptocurrency application may be best for you.