You may or may not have heard of etherium, but you probably know something about bitcoin. But what if I told you that there are many other types of cryptocurrencies? Web3 tokens, ICO tokens, ERC20 tokens, DeFi tokens, and Stablecoins. You’d be surprised at what the crypto space has to offer.
With the onset of the bullish season, altcoin and bitcoin prices continue to rise, especially when Elon Musk changes his Twitter bio to #bitcoin. The crypto market is like a colossus, the industry is turning into something even more substantial.
So, if you’re wondering what’s next after bitcoin, read on, we’ll break down the different types of cryptocurrencies. You might also find ideas to diversify your investment portfolio.
What is a cryptocurrency?
Just like any type of fiat currency (your average dollar bill), cryptocurrency is decentralized, relying only on a peer-to-peer community computer network made up of user devices or “nodes.” This means it is independent, it is not governed by a central bank or monetary authority. Also known as virtual currency or digital currency, cryptocurrency is often recognized as a medium of exchange for transactional purposes.
Unlike the U.S. dollar, ownership of a cryptocurrency is usually recorded in a blockchain, a program that uses several important components. In the case of bitcoin, it is a registry consisting of nodes in the network, encrypted transactions, a timestamp server, consensus of work, and the network of working nodes itself.
Sound too complicated?
This setup increases the possibilities of cryptocurrency compared to regular money, which you will see in the example of crypto tokens. But more importantly, being the first currency built differently, bitcoin started a big trend of decentralization, where governments and traditional banks no longer have a say in your personal life.
What is the difference between coins and tokens?
There are 3 types of cryptocurrencies: bitcoin, altcoins, and tokens.
In 2008, an anonymous developer known as Satoshi Nakamoto published a white paper describing the first electronic money independent of the government or banks – bitcoin (BTC). Unlike traditional online payments, it has lower transaction fees and is fully decentralized.
There are no physical bitcoins, only accounts stored in a decentralized public registry known as the blockchain. These bitcoin token accounts are subsequently stored using public and private keys for decryption. Simply put, a public key is like your bank account number for sending or receiving bitcoin. In comparison, a private key is a secret key to authorize a bitcoin transfer.
As a cryptocurrency, bitcoin is accepted as a means of payment for goods or services provided, meaning it works just like fiat currency. Although it is decentralized, the most intriguing part of bitcoin is its exchange rate against the dollar, which attracts potential investors and traders. Although bitcoin has not been officially adopted, it remains a popular type of cryptocurrency. It has inspired many creators to launch their own cryptocurrencies, called altcoins.
Initially, bitcoin was the only cryptocurrency, but later other projects, altcoins, began to appear. Have you heard of ethereum, lightcoin, ripple, Bitcoin Cash, or Monero? All of them and many others were born on their native platforms, native blockchains, and all of them were slightly different from the bitcoin blockchain.
These new coins, such as Monero, were basically designed for one purpose: to become a digital currency that could somehow be better than bitcoin, at least according to the developers of these projects.
Simply put, they were created to compete with bitcoin. But in the process of creation, some rules were changed to attract different users. And while some of them do challenge bitcoin after all these years, ironically the good old 10-year-old granddaddy still strongly dominates the market. All other types of crypto coins are popularly called altcoins or alternative coins.
Now, crypto tokens are usually developed to launch a crypto-related ecosystem. You know, it’s almost like bonus miles. You can’t buy a loaf of bread with accumulated miles, but you can buy a plane ticket, and the more miles you have, the better it is for the airline ecosystem. The same approach works with crypto tokens!
Don’t worry, you’ll find some practical examples later in this article. For now, just understand that crypto tokens don’t necessarily have their own blockchains and can easily be developed on top of other platforms. Compared to crypto coins, which play the role of currency, tokens often serve a function, such as voting for changes or rewarding people for participating in the network.
Types of crypto tokens
According to the functions that tokens perform, they can be divided into several categories:
One way for a crypto trading platform or exchange to differentiate itself from its competitors is to support a variety of currency pairs and trading types, such as OTC, margin, or futures trading, and, of course, to support its own exchange tokens.
These tokens are value-added, as users can use them to pay fees, buy and sell other cryptocurrencies, or perform certain transactions such as community voting for new coin listings.
Perhaps the best known and most liquid of all exchange tokens is BNB’s own token for the Binance exchange. However, there are of course other exchange tokens such as Huobi Token (HT), KuCoinShares (KCS), Bibox Token (Bix), etc.
DeFi was a trend last summer. Nevertheless, the DeFi exchange grew to $50 billion on the back of a bullish bitcoin. So, does this mean it’s an opportunity to disrupt the crypto niche? If so, how?
Believe it or not, the crypto niche is still centralized. Take Binance as an example. It is still owned by a group of people, which contradicts Satoshi’s vision.
DeFi defines its goal as staying away from traditional crypto platforms. DeFi’s projects aim to allow users to borrow and lend within a peer-to-peer network, to use credits, to “farm” tokens just to be active.
These “farmed” tokens or tokens produced on top of these platforms are DeFi tokens, which include, but are not limited to, Chainlink (LINK), Uniswap (UNI), Aave (AAVE), Dai (DAI), and many others.
Compared to the traditional centralized network owned by a few giant corporations, web3 tokens create a new Internet standard.
Did you know there are over 700,000 miles of submarine cables in use today? Google, 6,605 miles and 8.5% of all cables; Facebook, 5,7079; Amazon, 18,987; Microsoft, 4,014.
Web3 tokens are tokens designed on top of crypto platforms that aim to stop the trend. They reward users of their crypto platforms with web3 tokens for contributing to another trend.
For example, in the decentralized Filecoin project, network users store other users’ data for a reward in Filecoin tokens.
ThreeFold tokens are awarded to participants who have authorized their node in the ThreeFold ecosystem, which advocates a free Internet from global corporations.
One major difference between ERC20 tokens and all other types of tokens is that ERC20 tokens are created on top of the Ethereum blockchain.
The truth is that ERC20 is not even a token, but rather a token standard. Let’s say a company decides to launch a DApp, a decentralized application, on the Ethereum platform. For their token to work, they have to produce it according to the ERC20 standard, which includes a set of rules.
Now, this type of token could be the next significant thing in crypto, once regulators around the world come to their senses and decide how to define cryptocurrency. Security tokens are responsible for a phenomenon known as “tokenization,” a process that helps turn real assets, such as real estate, into digital tokens.
Let’s say you want to buy part of an apartment in New York City as an investment, but not the whole apartment because it’s too expensive. You can do that by buying digital assets that can easily be shared.
Security tokens have been around for quite some time, but they require a lot of proper regulation and standardization. That’s why we haven’t heard much about them.
About three years ago, ICOs (Initial Coin Offering) appeared and took off immediately. Crypto projects, sometimes of dubious origin, sought to raise money, and to do so they often created a new coin as a way to raise funds. Simply put, ICOs are a source of capital for startup companies.
The best cryptocurrencies
So, which are the best cryptocurrencies, which are worth your time and investment? Here’s what we think:
1. bitcoin (BTC).
Maximum price: $41962.36
Circulating supply: 18616.043 BTC
Maximum supply: 21000000 BTC
The year 2020 has truly been a rollercoaster for everyone, even the crypto market. Bitcoin prices continued to rise more than 200% and soared to their all-time high. While the sudden surge is reminiscent of 2017, it is different in reality.
Four years ago, bitcoin was seen simply as an investment for retail investors to profit from the exchange rate. This time around, some big institutional investors decided to join the market. For example, the multimillion-dollar business intelligence company MicroStrategy announced it would buy more than $1 billion worth of bitcoins in 2020. While Elon Musk, the founder of Tesla, is showing curiosity by questioning the movement of large transactions into bitcoin.
Today, bitcoin trades at an average of $33,000 to $35,000.
2. litecoin (LTC).
Maximum price: $375.29
Circulating bid: 66394765 LTC
Maximum supply: 84000000 LTC
Lightcoin is one of the earliest altcoins that has managed to hold its own in the market for many years. Charlie Lee created the cryptocurrency to provide fast, secure and inexpensive payments. Although it is very similar to bitcoin, there are still some differences between the two. For example, the hashing algorithm used, the harddrop, the timing of block transactions and others. The main difference is that the bitcoin network can never exceed 21 million coins, whereas Lightcoin can offer up to 84 million coins.
The highlight of lightcoin is that it allows up to 56 transactions per second and transaction fees are extremely low. This makes it suitable for micro-transactions.
3. the Etherium (ETH).
Maximum price: $1,467.78
Circulating bid: 114486822 ETH
Maximum supply: no maximum
ETH is keeping up with bitcoin. Not only did it start the DeFi hype this summer, but it also slowly transformed into the new consensus algorithm in Ethereum 2.0.
Globally, bitcoin’s annual carbon footprint is equal to New Zealand’s carbon footprint of 36.95 million tons of CO2. This is all because the Proof of Work consensus creates a scalability problem.
Once everything is updated, once more DeFi projects are launched, it will be hard to imagine anyone being able to stop the inventor of ethereum, Vitalik Buterin, on his way to market dominance.
4. Chainlink (LINK).
Maximum price: $25.65
Circulating bid: 404009556 LINK
Maximum supply: 1000000000 LINK
Chanelink aims to be intermediaries that drive interconnectivity by relying on oracles. This means that you can build applications that can interact and receive data using smart contracts to interact with autonomous data sources.
Unlike other projects, chanlink does not compete with its competitors. In fact, it is being used to complement the crypto ecosystem while building a sustainable, decentralized and trust-free system that benefits developers and the public at large. Partnerships with Google Cloud, Intel, T-System and others help chanlink gain public trust. Thus, its ranking is stable and it is considered one of the best cryptocurrencies to invest in 2021.
Find out what the future holds for cheinlink and whether it is a good investment.
5. Teaser (USDT).
Maximum price: $1.21
Circulating bid: 26601641890 USDT
Maximum offer: no maximum
The teaser, known as USDT, is a stabelcoin that replicates the price of the U.S. dollar. What it means. It has a stable value because it is pegged to the U.S. dollar, it also eliminates volatility. This stability is achieved by keeping the amount of dollars in teaser reserves equal to the amount of USDT in circulation.
Or at least that’s what they say, because USDT is rumored to be tied not only to U.S. dollars, but also to other reserves such as cryptocurrencies.
According to Teaser, all tokens are 100% backed by their reserves. These reserves include traditional currency, and cash includes other assets and receivables from loans made by Teaser to third parties.
If you consider yourself a long-term investor, USDT could be good for you. Many experts have predicted that it will yield good returns in three to five years as a stable asset.
Now you know almost everything you need to know about the different types of cryptocurrencies! There are about 5,000 different coins on the market right now. As cryptocurrency becomes more popular, more altcoins and tokens will emerge. Ultimately, understanding these basics will be very helpful to help you make the best choices for your future investments.