When Bitcoin (BTC) first burst onto the scene in January 2009 as an obscure, decentralized, and blockchain-based version of money, few could have imagined that we would now have over 19,000 cryptocurrencies (and growing).
BTC was influential in the implementation of deconcentrating currency away from central banks and financial institutions. It wasn’t until the arrival of Ethereum in 2015 that we saw how digital currencies could be used as ‘programmable money.’
Since then, the number of coins on the market has expanded rapidly. With such immense variety, it begs the question of the types of cryptos everyone should know.
Payment cryptos
A payment cryptocurrency usually has one plain vanilla function of facilitating a medium of exchange between users. With these coins, you can settle your bills, transfer money to friends, pay for goods and services from different merchants/businesses, convert between other currencies, and so on.
Aside from Bitcoin, the most prominent examples of this crypto class include Litecoin and Bitcoin Cash. Other digital currencies such as XRP (Ripple) and XLM (Stellar Lumens) process payments for clients of financial institutions (most notably banks) as a cheaper and quicker alternative to SWIFT.
Stablecoins
A stablecoin is a token that maintains a volatility-free, stable price on a 1:1 basis to another asset, typically a fiat currency like the US dollar or euro. Stablecoins can also be pegged to commodities or be algorithmically backed.
Although stablecoins are used for payments, they are popularly utilized when you want to keep your money in crypto without a volatile coin like BTC. Tether (USDT), USD Coin (USDC), Dai (DAI), Gemini USD (GUSD), TrueUSD (TUSD), and TerraUSD (UST) are some of the most familiar stablecoins.
Smart contract cryptos
These coins form part of the most dominant sectors in the industry. Aside from the creation of smart contracts, these cryptocurrencies are also used in application-building blockchains (like an NFT marketplace, exchange, etc.) to fulfill some operations such as settling transaction fees and other tasks.
Ethereum remains the largest of this class, but others vying for this position include Solana, BNB, Cardano, Avalanche, Algorand, Fantom, and many others.
DeFi cryptos
These cryptocurrencies have similar purposes to payment-based coins. However, they operate in DeFi (decentralized finance) networks that carry out financial services like lending, exchanges, and other marketplaces without any go-between or intermediary as in traditional finance.
Aave, Avalanche, Dai, Uniswap, Maker, and Wrapped Bitcoin are examples of DeFi-focused cryptocurrencies.
Exchange-based cryptos
These are utility tokens found on centralized exchanges like Binance (BNB), Crypto.com (Cronos), FTX (FTT), and KuCoin (KCS). Such coins offer several benefits to their holders, typically in the form of lower trading fees, discounted merchant offers, voting power, free withdrawals, and other perks.
Content creation cryptos
The most popular crypto-based content creation facilities revolve around social media, video streaming, advertising, gaming, and metaverses. Thus, such cryptocurrencies are used to pay creators or could be earned by creating something a digital asset (like a virtual world) or playing a game.
Examples include Decentraland, Axie Infinity, The Sandbox, Steem, Basic Attention, TRON, etc.
Interoperability cryptos
Interoperability in cryptocurrencies refers to the connectedness between networks where data can be transferred without restrictions.
Projects in this sector are usually referred to as third-generation blockchains, the most dominant of which include Cosmos and Polkadot (although plenty of others exist as well).
Privacy cryptos
These coins are also payment-focused. However, they come with several privacy-enhancing technologies like zero-knowledge proof, overlay networks, or similar mechanisms to conceal the identity of users in transactions.
Popular examples of privacy coins are Zcash, Monero, Verge, Dash, Pirate Chain, and so on.
Storage cryptos
You find these cryptocurrencies on decentralized cloud storage networks like Filecoin, Arweave, Ankr, Storj, and Arweave. Their purpose is to incentivize storage miners or providers to offer users unused hard drive space on a marketplace.
Such platforms are usually cheaper than services like Dropbox, Amazon Web Services, and Google Drive, prioritize data privacy and generally have fewer corporate structures.
Meme cryptos
A meme token is a cryptocurrency created out of an internet meme, online community, influencer, pop culture reference, or a combination of these. For instance, Dogecoin is based on the Shiba Inu dog and Doge meme.
Many of these coins are perceived in a light-hearted and comedic manner. However, they can process payments like Bitcoin and offer other utilities in their ecosystems. Dogecoin and Shiba Inu are the most popular in this class, but other meme tokens include Dogelon Mars, MonaCoin, Shiba Predator, Samoyedcoin, Hoge Finance, etc.
Oracle cryptos
In blockchain technology, an oracle is a third-party facility providing smart contracts with off-chain or external data (usually in the form of application programming interfaces), acting as a bridge between the outside world and distributed ledgers.
Therefore, an oracle platform (most popularly Chainlink) consists of a decentralized network of oracles with a utility token rewarding operators for providing data. Other well-known services in the oracle industry include Augur, API3, Band Protocol, and many others.
Curtain thoughts
It’s worth noting the list we’ve provided is not full-scale but covers the vast majority of cryptocurrencies. Broadly speaking, you find two main kinds: Bitcoin and altcoins (the rest of the coins other than BTC), the latter of which is sometimes to as utility tokens.
Most literature considers Bitcoin as its own entity. However, other than first-mover advantage and the perception of being a so-called store of value, BTC has nothing exceptional as it’s primarily a payment-based digital currency.
Technically, all cryptocurrencies can facilitate payment from one person to another. Yet, the exciting part is many of these were built for a different purpose or utility, like adding a privacy element, creating a smart contract, paying for file storage, etc.
This is why there’s not a set number of crypto types, owing to the diverse needs of networks and the versatility of blockchain technology. Moreover, one digital currency can serve more than one function simultaneously.
