Different Types of Cryptocurrency in the Market Right Now
When Bitcoin (BTC) was conceived around 13 years ago, there weren’t countless digital coins and crypto types yet—there was only BTC. If you look at the industry today, you’ll now find over 17,600 digital currencies available. If this number seems overwhelming, you’ll be glad to know that these can be categorized into different types according to their uses and applications.
If you’re interested in diving deeper into the space and are interested to know how many types of cryptocurrencies there are, here are the four most common types of digital currencies you’ll encounter in the market right now.
The four most common types of crypto on the market today
The crypto market consists of digital currencies, assets, objects, and meme or joke coins. Let’s start with the most dominant one—currency.
This is probably the most common type of cryptocurrency you’ll encounter in the market. A currency is a type of cryptocurrency made for utility, of which Bitcoin is the leading example. Satoshi Nakamoto created BTC to facilitate direct payments and money transfers, eliminating the need for third parties and intermediaries.
It also paves the way for people to access financial services without providing confidential information. Because of this, digital currencies like BTC are considered suitable for money transfers or remittances and payments. While currencies are also known to have a very volatile nature, they are considered a good store of value.
This is why many people in nations with challenging economic situations turn to Bitcoin as their safe haven.
Because of the volatile nature of digital currencies, many people also use them to make a profit by buying and selling them and engaging in other money-making activities. Thousands of exchanges and marketplaces are emerging, making it even easier to jump into the trading game right away.
Another notable thing about currencies is that they aren’t issued, regulated, or backed by any central authority like banks and other financial institutions. It is generated using a distributed ledger system or blockchain that runs on specialized computers and software.
If you’re going to look at the definition of the word “asset” from a financial perspective, you’ll discover that it is any resource that represents a value of ownership that can be converted into cash. It is also defined as anything that can be used to produce positive economic value.
In the crypto world, stablecoins are considered assets. This is because the value of these tokens is derived from the value of another asset. Let’s take Tether (USDT) as an example. Tether is a digital asset pegged at a 1-to-1 ratio with a matching fiat currency, like the United States dollar (USD). Tether tokens are 100% backed with reserves like traditional currencies, cash equivalents, and other potential assets of its platform.
An asset like Tether is called a stablecoin because of its capability to offer a stable value or price. This is why many crypto traders, investors, enthusiasts, and business practitioners are turning to assets like USDT for low volatility solutions in the crypto market.
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The object is probably the least common among all types of cryptocurrencies in this list. On the flip side, we’re pretty sure you’ve encountered a lot of coins of this type in the crypto space. The object type of crypto is designed to support or fund special projects that aspire to provide solutions to the world’s problems.
Some examples of this type of crypto include Siacoin (SC), Terra (LUNA), and Decentraland (MANA), among others. Siacoin is the utility coin of Sia—a blockchain-based decentralized and distributed cloud storage platform. Sia is designed to “create a data storage marketplace that is more robust and more affordable than traditional cloud storage providers.” Simply put, it aims to solve the problem of costly cloud storage.
Terra (LUNA), on the other hand, is designed to bring decentralized finance (DeFi) closer to the masses. Another good example of an object is Decentraland’s MANA. Decentraland, as per its website, is the first fully decentralized world controlled via decentralized autonomous organization (DAO). MANA can be used to pay for lands and in-game items in Decentraland, where users can connect with others, trade digital assets, and explore the virtual world.
Meme or joke coin
As the name suggests, a meme or joke coin is a type of crypto made with no particular purpose or objective. These coins were mostly based on Internet memes, jokes on social media, or funny characters online. Some examples of this crypto type include Dogecoin (DOGE) and Shiba Inu (SHIB).
One reason behind meme coins’ growing popularity is the attention it gets from different online communities, endorsements, and fear of missing out (FOMO). Meme or joke coins also have a vast supply—like SHIB with one quadrillion token limit—or limitless supply like DOGE. This is why you can buy thousands or even millions of meme or joke coins with just 1 USD.
However, many crypto enthusiasts and experts consider meme or joke coins as risky assets. Meme coins’ value is often dictated by the community’s activities or involvement, which can eventually lead to pumps and dumps. Additionally, the coin can also crash at any time and eventually lose its value.
Apart from that, crypto rug pulls, a scheme where users are tricked into giving out or investing money in a fraudulent product, are also prevalent with meme or joke coins. Because of these potential risks, many crypto enthusiasts don’t recommend buying meme or joke coins. In fact, a lot of experts in the industry highly discourage investing in such coins.
If you’re looking into trying your hands on this type of coin, these are some insightful thoughts that you might want to consider before you make a move. Remember, it would be best to invest your hard-earned money in an asset that doesn’t carry a lot of risks and involves various financial fraud schemes.
What type of cryptocurrency should you invest in?
There are a ton of options when it comes to choosing a crypto to invest in. Thousands of new coins have flooded into the market and, understandably, it could overwhelm newcomers. And although some of those newer coins have made names for themselves in the space, nothing is as tried and tested as Bitcoin is.
Time and time again, it has proven to be the leading cryptocurrency—developing real-use cases for sending and receiving money, wealth preservation, philanthropic efforts, and more. Not only has it been around the longest—allowing you to access communities of people who have been using it for years—but its adoption has also been growing steadily over the course of its existence.