Know About the Types of Cryptocurrencies
Cryptocurrency innovation brought many people to the new digital payment network who almost lost their hope in the conventional banking system. Though some were vacillated, many others followed the bandwagon after the first Bitcoin rolled into the digital financial market almost a decade ago. Although after the initial apathy towards the new form of digital investment, many cryptocurrencies grew strength to strength as more and more investors got handsome returns on their investments. If you are planning to trade bitcoins, you might consider a reputable platform like BitPrime Gold to help you out in your trading journey.
Although all cryptocurrencies are being hammered in the market, many financial pundits believe the best time for new investors to invest in cryptocurrencies is when the market is sluggish. Presently there are over 18,000 brands of cryptocurrencies circulating in the market. If you are new to the subject and want to invest, knowing the types before investing is best.
The Cryptocurrency Types
If we categorize the types of cryptocurrencies, we can broadly classify them into four categories. The cryptocurrencies are segregated based on the crypto’s utility. Many pundits name them currency, object, asset, and joke coin. Again many others term them as payment, utility, privacy, and stable coin. It is time to discuss them a bit in detail.
- Currency Type – As the name suggests, this type of cryptocurrency is considered similar to fiat currency. Each has it’s token and they are eligible for use on any decentralized public blockchain. The transactions are faster and cheaper.
For example, bitcoin, Ethereum, etc are currency-type cryptos. Ethereum has Ether as the token, or Solana has SOL so that they can be used by the investors as currency and transact on many platforms. Today more and more payment gateways like PayPal and others accept payments through these types of cryptocurrencies.
- Asset or Stablecoin – The volatility of assets or stable coins is much less than other types of cryptocurrencies because they are backed by either fiat currency or any commodity like gold. We can also term it a hybrid type as it includes both the currency and commodity parts. It is trendy amongst regular traders as these types of cryptocurrencies do not fluctuate much in price and aim to hold on to the price using different techniques. Thus the investment in these cryptocurrencies is less risky. Again, investors can sell their assets, sniffing some future downslide in their assets and shifting to other cryptocurrencies. Today, one can transact on various platforms through cryptos like these.
PAX, GUSD, TUSD, and USD coins are some of the best examples of hybrid cryptocurrencies.
- The Object Type or NFTs – These are crypto tokens and called Non-fungible tokens. The platform of these cryptocurrencies is entirely decentralized. There is no need to signups or maintain a server or involvement of any third party leveraging blockchain technology to store data. The technique is more robust, and it cuts down the cost of cloud storage provided by the service providers. More and more platforms are working to adapt to the algorithm of these decentralized models but without compromising on security.
Many financial pundits believe that the future of all cryptocurrencies depends on this type as they are used to fund specific financial goals of the world or particular projects. One can buy virtual land-based on NFT utilizing this type of cryptocurrency. Again, like SIA, some of them aim to solve the cloud storage system that is otherwise quite expensive.
- The Joke Coins – These types of currencies evolved in the market for fun; however, they have become the mainstream coins with time. The currency grew around the fantasy of doing inter-planetary transactions when technology becomes so advanced in the future. However, they are too speculative, and the trading is pumped-up artificially. It is one of the riskiest types of investment, and the introducer can loot the investor’s money and run away.
However, some coins like Dogecoin and Shiba Inu entered the market with this philosophy and fantasy, but they have changed a lot over time and entered the mainstream.
Investment in cryptocurrencies is always a risky affair as they have no backing from the central banks. One has to judiciously choose between the four types of cryptocurrencies based on their risk-absorbing capacity. However, one should always open an account in one of the best platforms to shift from one kind to another to minimize the risks during the downslide of the type of cryptocurrencies they hold. Also, one should always select the best platform and others to keep every penny of their investments safe and able to transfer assets from one crypto to another.