Did you know that Bitcoin was the first cryptocurrency created back in 2009? If you are tired of sitting on the side lines watching a ton of people become millionaires because of crypto, but are confused by the different types of crypto, you’re in the right place. We have put together this guide to share more information about the types of cryptocurrency, you too can purchase.
Read on to learn more.
Table of Contents
Bitcoin
We will start with more information about Bitcoin or BTC, since this is like the grandfather of all cryptocurrency types. Even those that haven’t invested in Bitcoin yet, have more than likely heard of it. It is the most popular of all the cryptocurrencies, even though it has been highly volatile since its release date.
Originally, BTC was less than pennies to buy one but as it became more popular and more people started buying Bitcoins, it drove the price up. In 2011, Bitcoin reached $1 and in 2016, it reached $500. As of the writing of this post, Bitcoin is hovering around $23,000 (for just one coin).
Those that saw the value in this coin early on and held on to their coins have become really wealthy. In more recent times, more businesses have started accepting Bitcoin as a form of payment. If you are thinking that you don’t have $23,000 to spend on a coin, don’t worry, you don’t have to.
You can spend as much or as little as you want because you are allowed to buy a piece of the coin. So if $50 is all you can spare, you can own a piece of a Bitcoin and if the value goes up after you invest $50, you will see your $50 grow accordingly. Because of its volatility, you might see your $50 go down in value as well, but usually the drops in value are short-lived in the world of crypto.
The reason for the price increase is that there is a limited supply of coins. As more people buy coins, the higher the price goes. When people sell a part of their Bitcoin or entire Bitcoins, the price drops down.
The maximum supply of coins created is 21 million, and no one can duplicate Bitcoins or create more.
Ethereum
Ethereum or ETH is the second most popular cryptocurrency. ETH was created to create a suite of decentralized finance products that anyone around the world could have access to. It launched in 2015 and has become the second-largest currency in the crypto world.
The technology behind ETH allows for people and companies to build organizations and apps. People can also hold assets, communicate, and send and receive transactions without giving all of their personal information to Ethereum. A person is in charge of their own data and what they want to share.
One of the main differences between Bitcoin and Ethereum, is that ETH is programmable, so it allows for unlimited innovations to be created on the Ethereum network. Bitcoin, on the other hand, is only a payment network. You can view more differences between the two oldest cryptocurrencies.
Cardano
The abbreviation for this coin is ADA. This crypto was co-founded by one of the initial founding members of Ethereum, Charles Hoskinson. He left the ETH world because he disagreed with the direction the company was going and helped create Cardano.
The blockchain for Cardano has been created thanks to a lot of research. Around 100 papers on blockchain technologies have been written about different topics, and all this research makes it stand out against other cryptocurrencies.
Cardano’s goal is to become a global financial operating system. They want to provide solutions for voter fraud, legal contract tracing, etc. As of the writing of this post, ADA is trading for around $0.50.
XRP
More commonly known as the coin of the Ripple digital payment network. This coin was created in 2012 for the XRP Ledger. XRP coins are a bit different because they don’t use proof-of-stake or proof-of-work for validation.
Instead of proof, client applications sign and send transactions to the ledger servers, and then the servers compare the transactions to conclude that the transactions are candidates to go into the ledger.
Binance Coin
BNB is used as a payment method for the fees that come with trading on the Binance exchange. This is considered a utility cryptocurrency.
Whoever chooses to use BNB as a payment method for the Binance exchange, receives discounts while trading. The Binance exchange is one of the most used exchanges around the world based on how high the trading volumes are.
Originally, the Binance coin was an ERC-20 token, meaning that it operated on the Ethereum blockchain. Eventually, they created their own main net launch for the coin to not be dependent on the ETH blockchain and network.
Tether
This is one of the more popular stablecoins that emerged because it was the first one of its kind. Stablecoins are tied to a fiat currency and their price does not go up and down like other cryptocurrencies. This stable coin is tied to the U.S. Dollar and its price is always $1 per coin.
Many people use this coin as a “middleman” when they are trading from one cryptocurrency to another. For example, instead of moving their money from Bitcoin back to U.S. dollars to then buy another coin, they trade their BTC to Tether and then use that to buy the new coin they are interested in.
Or sometimes people will buy a bunch of Tether because they know the price won’t go up and down, and then study the market. Based on their studies, they then quickly swap their Tether for the coin they prefer.
One concern that people have with Tether is that it is not backed by dollars that are held in reserve.
Solana
SOL was founded in 2017. It is a blockchain platform that was designed to help support decentralized applications. Some people refer to Solana as the “Ethereum killer” because it has the ability to perform a lot more transactions per second than ETH. Plus, it charges a lot lower transaction fees than ETH.
Solana has the ability to use smart contracts like Ethereum. These smart contracts are needed when running non-fungible tokens, or running-edge applications.
One main difference is that Solana uses proof of stake (PoS) when validating transactions. This method of validation is less harmful to the environment than using proof of work (PoW).
PoW blockchain is when miners compete to solve complex puzzles in order to validate transactions. This technology requires more energy, which is more damaging to the environment.
Polkadot
DOT was created to help exchanges between other blockchains. It uses a PoS blockchain that was designed to connect permissionless and permissioned blockchains along with oracles so that they can work together under one “roof.”
Developers can not only create dApps on the Polkadot network, but they can also create their own blockchain. An advantage to this is that they can use the security that the Polkadot chain already has in place. Unlike ETH where developers can create new blockchains, but they also have to create their own security measures which is sometimes difficult for smaller projects to do, leaving them open to attacks.
Polkadot’s concept is shared security.
Dogecoin
DOGE coin was created as a sort of joke and is known as the “memecoin.” An image of a Shiba Inu dog was used as the avatar for the coin. Dogecoin was created in 2013 by two software engineers who were commenting on the wild speculation of the crypto market.
Suddenly, in 2021, the coin caused a stir and the price of it skyrocketed. It is even accepted as a form of payment by some major companies. Soon after the rise of DOGE coin, another memecoin known as Shiba Inu (SHIB) was created and quickly caught on.
TRON
TRX was developed by the Tron Foundation in 2017. TRX tokens originally were ERC-20 tokens on the ETH network, but after a year they were moved to their own network. The goal of TRX is to make the technology suitable for daily use.
Smart contracts are supported by the TRON software, along with dApps, and different kinds of blockchain systems. The transaction model used, is similar to Bitcoin. The transactions take place in a public ledger, and then users can track the history of operations if they choose.
There is no central authority for the data that is hosted on the TRON network and it’s free. TRON invites those that are consuming content to reward content makers with TRON tokens. They want to help content creators that barely receive a fraction for their work on platforms such as YouTube, Apple, or Meta.
The TRON platform was also built to create a decentralized internet. Anyone that chooses can create dApps on the TRON network and offer content. In return, those developers can receive digital assets as payment for their work and efforts.
Ploygon
AKA Matic, this coin works on the infrastructure of the ETH network and is designed for developers of ETH projects. Originally the project was called Matic, but in 2021 it was rebranded as Polygon.
Before the rebranding took place, the existing Matic project had more than 80 applications. These applications performed around 7 million transactions for approximately 200,000 users.
One of Polygon’s main goals is to make ETH and the ETH blockchain easier for developers to use. Keep in mind that ETH was built to create smart contracts which could be validated and executed without needing the approval of a third party like a lawyer or a judge.
Because of user-experience issues and scalability issues, mass adoption of the dApps and smart contracts was constrained. This is when Matic decided to use sidechains to help process contracts and apps on Ethereum.
Sidechains are separate blockchains that are attached to a “parent” blockchain with a two-way peg. This then allows and enables interchangeability. The sidechain create turned out to be effective and allowed for the goals of Matic to be reached without slowing down the entire network.
Litecoin
LTC is another early coin, created in 2011. It is actually one of the first altcoins created. Litecoin is built on Bitcoin’s original source code therefore it shares certain similar features as BTC. It was created from a fork in the BTC blockchain.
It was created to improve some of BTC’s issues. For example, BTC is known for having slower transaction speeds, LTC, on the other hand, is a lot faster. It was designed to have almost instant exchanges.
Another bonus of LTC is that the fees are extremely low compared to coins such as ETH and BTC. LTC uses a PoW system like Bitcoin when verifying transactions on the blockchain. The main difference with BTC and LTC, is that LTC uses a mining algorithm which enables much faster transaction times.
A new block to be mined is generated by Litecoin approximately every 2.5 minutes vs Bitcoin which is around 10 minutes. The supply of LTC coins is 84 million.
Now You Know the Most Popular Types of Crypto
Now that you know about the different types of crypto, hopefully you’re feeling less confused. You can feel more confident making a decision on whether you should invest some of your money or not. Please always keep in mind that cryptocurrency can be volatile, so you never want to spend more than you can afford to lose.
If this article came in handy, please continue browsing the rest of our finance section to stay in the know of all things finance.
