Did you know that there are more than eighteen thousand different cryptocurrencies that exist today?
Even if you don’t understand what they are and how they work, chances are you’ve heard of cryptocurrencies. They profoundly influence the lives of consumers, investors, and businesses.
To help you make sense of this exciting industry and the types of crypto available, we’ve created a guide. Keep reading, and we’ll tell you what’s important to know.
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The Basics of Cryptocurrency and Why It Matters
When most people think about currencies, the first thing that probably comes to mind is bills and coins that can be physically held. Despite the fact that it’s possible to make electronic money transfers by using apps such as PayPal and Venmo, consumers also know that they can easily go to an ATM to withdraw their funds to hold in their hands.
Cryptocurrencies are different. They only exist electronically, which means that they’re stored, managed, and exchanged on computer networks. There is nothing about them that is physically tangible.
The Various Types of CryptoCurrencies
There are two main kinds of cryptocurrencies. There are coins, which include bitcoin and altcoins. There are also tokens, which exist on the blockchain of a certain platform.
It’s common for people to make the mistake of using the words crypto, coins, and tokens as if they were the same thing. But if you want to understand the basics of cryptocurrency investing, it’s important to know how they are different from one another.
The Relationship Between Crypto Coins and Tokens
Crypto coins and tokens are both types of cryptocurrency, but they function in different ways. Programmers create coins to function on their own blockchain. It’s also possible for them to be their own form of currency. For example, Bitcoin is a cryptocurrency based on the Bitcoin blockchain.
If you’re wondering about what an altcoin is, don’t worry. Most simply, an altcoin is any cryptocurrency based on a blockchain that is not Bitcoin.
Even though tokens are similar to coins, there are several important ways that they’re different. Most importantly, people do not consider them to be a currency. They are actually programmable assets that make it possible for people to create and execute smart contracts.
It’s possible to use these contracts to establish ownership of assets that exist outside of a blockchain network.
It’s possible for tokens to represent units of value. This includes tangible things such as electricity, fiat currency, works of art, and other kinds of digital assets. It’s also important to understand that it’s possible to send and receive tokens.
The Basics of Altcoins
The word “altcoin” came into existence because people were looking for a way to talk about coins that are not Bitcoin. Developers who wanted to improve upon Bitcoin created them. Several popular altcoins you might have heard of include Litecoin, Solana, Dogecoin, and Cardano.
Most altcoins resemble Bitcoin in fundamental ways. The majority of them, just like Bitcoin, have a limited supply. This makes it possible to create demand. There are only twenty-one million Bitcoins that will ever be created.
If you’re interested in crypto investing, it’s important to recognize that every altcoin attracts investors for different reasons.
There are many altcoins that people invest in because they use different processes than Bitcoin does to produce, validate, and block transactions. There are other altcoins that have novel features such as lower volatilities in price or smart contracts.
Tokens: the Basic Features and Purposes
The most common way for people to attain tokens is through an Initial Coin Offering (ICO). This is very similar to the concept of a stock offering. There are several possible ways that they can be represented. This includes value tokens (such as Bitcoins), security tokens (similar to stocks), and utility tokens.
It’s possible for tokens to represent a particular value. But just like a paper, a one hundred dollar bill is not actually $100; they do not have any value in themselves. Therefore, the reason tokens are important is because it’s possible to use them in transactions for other valuable assets.
Tokens do not exist on their own blockchain. Instead, programmers build them within the blockchain of a coin that is already in existence, such as Solana or Cardano.
For example, the Illuvium is a token that is based on the Ethereum blockchain. It lets users capture and collects non-fungible tokens (NFTs). You can find out more about Illuvium at https://www.bytefederal.com/illuvium/.
Top Kinds of Cryptocurrency an Investor Should Be Interested In
Even though there are literally thousands of types of cryptocurrencies, there are several which are more popular than others. The following cryptocurrencies have the biggest market capitalization.
Because the prices of virtual currencies have so much variation, the market cap makes it easy to know which cryptocurrencies have the highest value.
This cryptocurrency came to life in two thousand and nine. It was created by a person (or a group of people) that goes by the name Satoshi Nakamoto.
There is a capped limit of twenty-one million Bitcoins that will come into circulation. There are almost nineteen million Bitcoin tokens that have already been created.
The original idea behind Bitcoin was to create a type of currency that is independent of any government body or central banking institution. To make this happen, the coin’s creator designed blockchain technology.
This decentralized public ledger holds a digital record of every Bitcoin that has ever been bought or sold. The coin established a simple system of cryptography and consensus. This method of peer-to-peer verification has become the foundation for the majority of digital currencies that are in existence.
It’s the job of people known as Bitcoin miners to create powerful computer networks for verifying transactions. When miners verify transactions, they create more Bitcoins. This is a complicated and time-intensive process that’s known as proof-of-work (PoW).
Every transaction gets recorded on the blockchain, where it will permanently reside. This makes it possible to validate every single Bitcoin. It also secures the network as a whole.
Since the process of Bitcoin mining is so energy-intensive, many experts worry about the way that it contributes to climate change. This is one of the reasons why people have developed altcoins that are more environmentally friendly.
Ethereum has many things in common with Bitcoin. For starters, it is a blockchain network. It also uses proof-of-work as its consensus protocol.
Unlike Bitcoin, the blockchain is currently in the process of transitioning to a consensus protocol that is less energy-intensive and therefore more environmentally friendly.
One thing that makes Ethereum different from other cryptocurrencies is that its blockchain is programmable, which means that it’s not designed to support a single currency. Rather, its purpose is to help users of the network to create, publish, monetize, and run applications.
These applications are known as dApps and can have a variety of purposes. One of the most popular ways that people use the platform is for creating non-fungible tokens, also known as NFTs.
The blockchain’s native currency is known as the Ether (ETH), which people use as a method of payment on the Ethereum platform.
The Ether is the second most popular cryptocurrency, behind Bitcoin. In contrast to Bitcoin, there is no limit to how many Ethers can be created.
Advocates of Cardano call it a third-generation blockchain technology. They say that it’s a next-level player that will eventually make other cryptocurrencies obsolete.
Unlike Bitcoin and Ethereum, it uses a proof-of-stake (PoS) consensus protocol. This means that it doesn’t need to consume huge amounts of electricity to mine its coins and verify transactions. This excites investors because it’s likely the cryptocurrency will be more efficient and sustainable than other coins.
The coin that Cardano uses is called the ADA. The platform’s creators named it after Ada Lovelace, who was a mathematician who lived in the nineteenth century.
The most popular applications on the network are used for identity management and for traceability.
To manage identity, the first application works to streamline the collection of data from numerous sources. The other application works to keep track of a product’s manufacturing path. This app can also prevent fraudulent activity.
There are five phases to Cardano’s development. The ultimate goal is to make the network into a decentralized application (dApp) that can make verifiable smart contracts.
The platform’s creators have created a framework that’s based on research to carry out each phase of Cardano’s growth. This is why many it’s building a positive reputation among many of the world’s scholars.
Binance is one of the planet’s most popular exchanges for cryptocurrency. The Binance Coin is a token that people use as a method for exchange on Binance. Even though it started on the Ethereum blockchain, it now operates on Binance’s own blockchain platform.
The original purpose behind creating the Binance coin was to give traders discounts on trading fees. But as the coin has matured, developers have created new and important uses. It’s now possible to use the Binance coin to make payments, book travel, and for entertainment.
The Binance coin has one main similarity to Bitcoin since there are a maximum number of tokens that will exist.
About half of the platform’s two hundred million tokens were offered to its first investors. Every three months, Binance will buy back these tokens. It will then permanently destroy some of these tokens. The goal of doing this is to increase demand.
Solana is one of the more volatile cryptocurrencies. In one year, its value rose from a bit more than three dollars to nearly two hundred dollars. This blockchain platform’s native cryptocurrency is known as Sol.
Many people choose to invest in Solana because it has unique smart contract technology. This means that it is one of the leaders in decentralized finance (Defi). Solana is also responsible for bringing to life the “Degenerate Ape Academy,” an NFT that quickly went viral after it was launched in the middle of two thousand and twenty-one.
Solana has quickly grown in popularity because the blockchain platform can conduct many transactions at much higher speeds than other blockchains are able to.
An organization that’s known as Ripple Labs, Inc. developed this cryptocurrency. Even though many people use the terms XRP and Ripple interchangeably, there is a big difference between the two.
Ripple is a network for transferring money that many financial service companies use. XRP is the token that exists on the Ripple network.
There are several cryptocurrency options if you want to invest in XRP. You can invest directly in the coin, or you can use it to exchange for other cryptocurrencies. It’s also possible to use the coin to finance transactions on the Ripple blockchain.
One thing that makes XRP unique from other cryptocurrencies is that it’s not possible to mine it. There is a limited amount of coins (100 billion), all of which already exist.
To verify transactions, XRP makes use of participating nodes to conduct polls. This means that it’s faster and cheaper to conduct transactions on XRP than it is to do on bitcoin’s network.
The Many Types of Crypto: Start Investing Today
Since there are thousands of types of crypto, it’s easy to feel overwhelmed. If you’re trying to figure out which cryptocurrency is best to invest in, keep in mind that every coin has its strengths and weaknesses. It’s usually a good idea to start by investing in established cryptocurrencies such as Bitcoin, Ethereum, and Solana.
Are you ready to learn more about the exciting world of cryptocurrencies? Then don’t forget to visit the Technology section of our blog.