What Are the Different Types of Cryptocurrency?
Cryptocurrency is a form of virtual money that’s created on, protected by, and controlled by technology instead of a centralized authority. While it may sound like fictional payment used by video game characters, it’s very real and allows consumers to skip the use of banks completely. Cryptocurrency transactions are processed using blockchain, a type of platform that cryptically encodes data to protect the identity of its users.
Just like the stock market, values fluctuate and investors buy and sell cryptocurrency in an attempt to grow their investments. If you’re interested in a high-risk, high-reward investment, the exciting peer-to-peer trading network of cryptocurrency may be just what you’re looking for.
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Top 10 Cryptocurrencies in 2019
With the cryptocurrency market constantly evolving, the top 10 cryptocurrencies can change from time to time. The values of cryptocurrency fluctuate and new types can be created at any time.
Bitcoin is the most recognizable cryptocurrency because it forged the way for this online market. Bitcoin was created in 2008 as the first digital dollar. The creator of Bitcoin, who goes by the alias Satoshi Nakamoto, has yet to be tracked down. The mystery surrounding Bitcoin and the anonymity of this currency’s creator is what began to attract investors and collectors alike.
The value of a bitcoin fluctuates rapidly; in 2009, it was worth less than one-tenth of a cent, while in 2017, it was worth $20,000. These huge potential returns are what made investors begin to pay attention to the cryptocurrency market. Since Bitcoin is considered a storage of value, it’s impossible to calculate its true worth at any time.
Ethereum is another type of distributed public blockchain network. While Bitcoin only focuses on peer-to-peer payments and the online trading of cryptocurrency, Ethereum uses blockchain to mine for Ether, the type of crypto that keeps the network running.
Ether is used as a cryptocurrency within the network but also to pay for transaction fees and services. The Ethereum network allows you to buy and sell cryptocurrency, build contracts between peers, and create blockchain-based applications, expanding on the functionality of Bitcoin.
XRP is commonly referred to as Ripple and uses blockchain technology to lower the cost of international payments. It was developed in 2012 and already works with over 100 financial institutions in its system. Using XRP, international banks and financial institutions can internationally transfer funds in real time.
This cryptocurrency was designed to eliminate delays in international funding transactions and remove currency exchange charges and fees from online agreements. Unlike other cryptocurrencies, XRP attempts to work with the current banking industry to improve international online transactions.
4. Bitcoin Cash
Bitcoin Cash was created in August 2017 as a solution to the rapid growth of Bitcoin and its inability to handle the number of transactions. When Bitcoin gained popularity, it became apparent that the system didn’t have the capacity to handle the growth it was experiencing. The developers created Bitcoin Cash as a new system that offers more scalability, with faster transaction speeds and the capacity to handle around two million transactions a day.
Tether was created in June 2017 as a solution to the volatility of the cryptocurrency market. Since cryptocurrency is known to fluctuate dramatically, it’s considered too unpredictable for everyday transactions. Focused on everyday transactions, this system is referred to as “stablecoin” because its value doesn’t fluctuate constantly like other cryptocurrencies such as bitcoin and ether.
The value of Tether currency is pegged to the U.S. dollar or other fiat currencies, which is currency not backed by a physical commodity but by a government. Tether allows for the transfer of real cash to digital cash. Tether is a unique cryptocurrency platform because it allows international currency trades at a dollar-for-dollar ratio. This is more appealing to users who aren’t looking to make money off their transactions, but simply need to convert or engage in international business online.
Litecoin is a faster and cheaper version of Bitcoin, which gives Litecoin a competitive edge. In addition to trading and mining, Litecoin can be used to make online purchases and complete online transactions. The fees to complete international transactions using Litecoin are usually lower than those charged through financial institutions and these transactions are completed instantaneously. However, the platform is limited to 84 million litecoins, so inflation will not affect the community. As it stands, there are only about 30 million litecoins left.
EOS was started in June 2017 with a focus on providing fast and free online blockchain transactions. The designers aimed to create a platform that works like an operating system, making it easier for users to understand and navigate. It can process millions of transactions per second and similar to Ethereum, the platform can also be used to build and host contracts between users.
8. Binance Coin
Binance Coin runs on the Ethereum blockchain and has a limit of 200 million tokens. With this type of cryptocurrency, a user can trade on the market, pay for transaction fees on the Binance Exchange, or make in-store purchases. With partnerships from other major platforms, including Uplive, an Asian video streaming platform, and the VISA debit card of Monaco, Binance Coin has continued to experience growth since its launch in July 2017.
9. Bitcoin SV
Bitcoin SV was introduced to the cryptocurrency market in August 2018 as a result of Bitcoin’s decision to branch off with different products. Referred to as the “original Bitcoin,” it provides the same functionality as Bitcoin, in a new platform. This cryptocurrency offers security, cheaper merchant costs, and stability.
Stellar was developed in October 2017 through a partnership with IBM. Similar to XRP, the platform focuses on making international transactions and conversions fast, easy, and affordable. It allows users to send money globally, convert assets, and use currency-backed tokens within the marketplace.
How Many Cryptocurrencies Are There?
When you think of cryptocurrency, the most popular type that comes to mind is probably Bitcoin. While it was the first cryptocurrency created and remains the largest to date, there are many other types of cryptocurrencies. Currently, there are 2,828 cryptocurrencies and the list keeps growing.
While the market continues to grow and the number of new cryptocurrencies is on the rise, many of these currencies are not solid investments. If you follow the trends of cryptocurrency values, you’ll find that many are valued low and haven’t experienced much increase. Many cryptos are valued at zero and are constantly fluctuating, which can make it impossible to profit.
Learning about the different types of cryptocurrencies, why they were created, and what they can do is helpful for potential investors. It’s important to carefully investigate and research the different cryptocurrencies before investing.
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This post was updated December 3, 2019. It was originally published December 3, 2019.