Types of cryptocurrencies and their differences

Cryptocurrency – This is digital money that is not tied to banks, countries or other currencies. Conventionally, there are 4 types of cryptocurrencies:

1. Bitcoin;
2. Stablecoins;
3. Tokens;
4. Altcoins.

Digital assets are created using cryptography and mathematical calculations based on the blockchain. Cryptocurrency can be exchanged for fiat (dollars, euros, etc.) money using online services, for example, through mason-ex.com. 

Features of types of digital assets

Bitcoin and altcoins – These are types of cryptocurrencies, but in our usual understanding, they are not considered finance. This is a specific digital product with a cryptographic code and encrypted recording. Before becoming assets, they are transformed using special technologies. Let's consider each type of cryptocurrency separately:

1. BTC is a leading digital asset, its system is completely decentralized. All transactions are carried out directly between users. Bitcoin ranks first in capitalization among all digital assets.
2. Altcoins – These are all cryptocurrencies that were created after Bitcoin. At the moment, they make up approximately 40% of the entire digital asset market. At the same time, there are cryptocurrencies that are very similar to Bitcoin. For example, Litecoin, the creator of which called this asset an analogue of BTC. But some altcoins are still different from BTC. For example, Ethereum – a programmable blockchain-based platform with which you can create DApps applications and smart contracts. Despite the fact that BTC is the founder of the cryptocurrency market, all altcoins are unique and have their own variations of source codes.
3. Stablecoin – This is digital money tied to fiat currencies or gold and other assets. Their course is supported by other values. This helps reduce price fluctuations. For example, Binance USD, USDT, Tether. It should be noted that not every stablecoin has reinforcement. Havven – the exchange rate is regulated by burning or issuing coins.
4. Token – This is a type of cryptocurrency that does not use blockchain. The token has the ability to replace other financial assets in the world of digital currencies. That is, in fact, these are digital receipts from the developer, according to which he will have to provide certain assets. Tokens only function on top of an already running network. To access them, you need to use special software.

Types of tokens

We found out what types of cryptocurrency there are. But tokens are also divided into subtypes:

• capital – these are securities of organizations;
• service – for game tokens;
• active – represent obligations for goods or services.

Active tokens deserve the most attention. They can be linked to any investment instrument. Such tokens are of great value for traders and open up new prospects.

DeFi tokens

DeFi tokens deserve special attention. Such projects are decentralized platforms offered by exchanges, services and wallets. The advantageous feature is that only users have access to funds, and all operations are carried out directly between them. And so, not so long ago, platforms began to create their own tokens. That is why their prices have increased. So, on July 18, 2021, the Earn Finance platform released its YFI, the initial cost was $35, and by October 22 it had risen to $13,533.

Forks – what is this?

Essentially, fork cryptocurrencies are copies of other digital assets, but with certain changes. There is a soft fork and a hard fork. In the first case, the changes are not global and it is easy to return everything to the original protocol. In the second – This is a major modification that is very different from the main protocol.

Today there are many different cryptocurrencies on the market and their number is increasing every year. But the main role in this was played by Bitcoin, which laid the foundation for crypto investing. Crypto coins are deservedly very promising investments. It is important to know which assets are worth investing in. Digital currency makes the crypto ecosystem independent of banks, governments, and regulators. This is precisely why it is valuable.