Cryptocurrency is digital money that exists solely in the digital world and is used to purchase goods and services. It is the result of a decentralized financial system that utilizes cryptography to secure transactions. In recent years, cryptocurrency has become increasingly popular, with more people investing in it and using it to make purchases. With the rise of cryptocurrency, there are now many different types of cryptocurrency available. Let’s take a look at the different categories of cryptocurrencies.
What is Cryptocurrency?
Cryptocurrency is a digital asset that is used as a medium of exchange to secure transactions. It allows users to transfer funds and exchange goods and services without the need for a third-party intermediary. Cryptocurrencies use a decentralized system that is secured using cryptography and blockchain technology. Cryptocurrency transactions are irreversible, making it a secure and trustless form of payment.
Types of Cryptocurrency
Cryptocurrencies come in a wide range of types, each with their own unique characteristics. Here are the primary categories of cryptocurrencies:
- Utility Tokens
Utility tokens are digital coins used to grant users access to specific blockchain-based decentralized applications. They are not designed to be used as a medium of exchange, but rather as function-specific tokens within the application. Some common examples of utility tokens are Augur (REP), OmiseGO (OMG), and Golem (GNT).
- Security Tokens
Security tokens are tokens that have been issued in order to raise funds for a business venture. When buying and selling securities tokens, investors enter a legally binding contract and are provided with special rights and obligations. These tokens are backed by the underlying assets of the company and often represent a claim on future profits. Examples of security tokens include Polymath (POLY) and TokenDesk (TDS).
- Payment Coins
Payment coins, also known as transactional tokens, bridge the gap between cryptocurrency and fiat money. The most popular example of a payment coin is Bitcoin (BTC). Since Bitcoin’s release in 2009, it has become the most widely used payment coin. Other popular payment coins include Litecoin (LTC) and Ethereum (ETH).
- Stablecoins
Stablecoins are cryptocurrencies whose value is pegged to an external asset, such as the US Dollar. They aim to provide users with stability, allowing them to securely and confidently store their money in cryptocurrency form. Some of the most popular stablecoins include Tether (USDT), USD Coin (USDC), and TrueUSD (TUSD).
Cryptocurrency has become increasingly popular in recent years, with more people investing in it and using it to make purchases. As cryptocurrency continues to grow and evolve, new types of cryptocurrencies have emerged. This article provided a brief description of the four main categories of cryptocurrencies: utility tokens, security tokens, payment coins, and stablecoins.
