A Brief Guide to the Types of Cryptocurrency

Juliet D'cruz

Updated on:

Modern cryptocurrencies have been around for a little more than ten years now. However, they didn’t really take off until recently.

The coronavirus pandemic helped to bring the idea of crypto to even more people since people were stuck and home and looking for things to spend money on like Bitcoin up.

Cryptocurrencies are extremely volatile, making them exciting and lucrative investments. In fact, there are now around 100,000 bitcoin millionaires out there.

But what are the other types of cryptocurrency that you should know about? We’re glad you asked. So keep on reading and we’ll walk you through the top cryptocurrencies that you need to know about!

1. Bitcoin (BTC)

Bitcoin is seen as the original modern-day cryptocurrency. It has been around since 2008 and was created by an unknown entity who goes under the name Satoshi Nakamoto. 

Bitcoin is a decentralized digital currency. There is no single administrator or central bank that controls the production of bitcoin. Instead, bitcoins are mined by users who complete complex puzzles and add transactions to the blockchain.

The bitcoin blockchain is like a public ledger where everyone can see every bitcoin transaction. Bitcoin allows users to make anonymous transactions over the internet. 

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2. Ethereum (ETH)

One of the most popular alternatives to bitcoin is ethereum. Ethereum is a decentralized software platform where Decentralized Applications (DApps) and Smart Contracts can be run without any fraud or downtime. 

The goal of ethereum is to make a decentralized platform of financial products that anyone can have access to. This makes ethereum very attractive to people who are hiding from their governments or live in countries with unstable financial systems. 

Apps on ethereum are run on its cryptographic token, ether. Ether is like a car that you use to get around the Ethereum world. It’s mainly used by developers who want to develop and run programs in ethereum. 

Investors who are looking for a digital currency might also be interested in ether. 

Cryptos like bitcoin use proof-of-work in order to distribute tokens to miners. This system takes up a significant amount of energy.

Ethereum is trying to change to proof-of-stake in order to reduce energy consumption. This method will allow users to “stake” their ether to the network.

3. Litecoin (LTC)

If bitcoin is gold, then you can think of litecoin as silver.

It was invented by former Google engineers and is based on an open-source global payment network. The payment isn’t controlled by any central authority and uses “scrypt” as proof of work. Scrypt can be decoded by using consumer-grade processing chips.

While litecoin is similar to bitcoin in a lot of ways, it has a faster block generation rate and faster transaction times. 

4. Cardano (ADA)

Cardano is a crypto that was made by an engineer who worked on ethereum and became frustrated with the platform’s direction. The blockchain for cardano was made with a lot of research and experimentation. 

The goal of cardano now is to overtake ethereum and because easier, simpler, and faster. It wants to become the financial operating system of the world by providing decentralized financial products in a way that is similar to ethereum. It also wants to provide solutions for interoperability issues and legal contract tracing.  

5. Dogecoin (DOGE)

Dogecoin was created in 2013 by two software engineers. The logo for the currency borrows from a popular meme at the time of a Shiba Inu dog known as “doge.”

It started as a joke cryptocurrency and was made to make fun of bitcoin. The creators used publicity stunts to raise their profile. For example, they have sponsored NASCAR drivers and even funded the Jamaican Bobsleigh team in the 2014 Olympics. 

Dogecoin went from being a joke to being taken very seriously in early 2021. The currency developed cult status on the infamous WallStreetBets message board on Reddit. 

Dogecoin has since exploded in value and many people who thought they were buying a crypto as a gig a few years ago are now much wealthier than they ever expected to be. 

Dogecoin runs on a blockchain that is similar to bitcoin. Bitcoin and other cryptocurrencies have put a cap in place for how many coins can be mined. For example, there will never be more than 21 million bitcoins in existence.

This cap does not exist for dogecoin. This can make it very inflationary and means that it is not an effective store of value. 

If you’re interested in getting involved, you can buy dogecoin here.  

6. Polkadot (DOT)

This is a unique proof-of-stake cryptocurrency. Polkadot is designed to delivering interoperability between other blockchains. This means that it can connect permissionless and permissioned blockchains.

Instead of making just decentralized apps on the platform, like ethereum, Polkadot users can make their own blockchain while also using the security that comes from the platform. This is known as shared security.

Polkadot, like Cardano, was also created by a disgruntled ethereum engineer. 

The Importance of Knowing About the Different Types of Cryptocurrency

Hopefully, after reading the above article, you now have a better idea of what the different types of cryptocurrency are. As we can see, there are many different types that are worth knowing about. This will help you figure out which kind of crytpo is going to be best for your needs.

Are you looking for other helpful and interesting financial articles like this one? If you are, then you should make sure to check out the rest to of our site today for even more! 

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