There are many things and terms that are often confused for being the same, but they possess different characteristics. Similarly, Cryptocurrencies are not just limited to cryptocurrencies; there is a substantial difference between them. Noting down the differences, primarily based on their emergence, technology and use-cases, cryptocurrencies can be classified into six types.
This article covers an in-depth analysis of types of crypto coins and tokens, along with a few examples.
- Payment currencies
- Meme coins
- Stable coins
- Utility tokens
- Security tokens
- Non-fungible tokens
Payment currencies are coins that can be used as a unit of transaction on buying goods and services. These coins serve as a store of value like fiat currencies.
Bitcoin and Litecoin are the most commonly adopted payment coins. The payment coins are widely suitable for cross-border transactions as no currency swap is required.
Meme-coins are famous for being famous; these coins are not backed up by any robust technology and do not offer broad use-cases. In fact, such coins and tokens became popular out of a joke.
Dogecoin was the first meme coin that originated in 2013. Later, many others like SHIBA INU, Floki, Safemoon and Babydogecoin joined the queue.
Stable coins are the solution to high volatile coins. These are pegged to fiat currencies like USD, So their value does not fluctuate much. Stable coins were built to escape investors from high risks.
In simple terms, stable coins are a digital variant of fiat currencies to help investors convert their cryptocurrencies into fiat-like value. USDT/Tether, USDC, DAI, TerraUSD are a few popular stable coins of the crypto market.
Utility tokens are introduced to empower the use-cases of a particular ecosystem. Many companies have utility tokens that serve as a payment unit to access their services or fuel the transactions in their ecosystem.
Utility tokens can also be earned as reward for becoming user of the ecosystem or accessing its’ services. For instance, Flitpay offers its’ FLT tokens to users on sign-up,
Security tokens represent tradable financial assets, it gives legal ownership right to the investor just like a share or bond from a company.
These are a form of investments, from which one can expect future profits if the technology performs well.
Usually, the company conduct security token offerings, when the tokens are listed at the lowest possible value. This helps the company to raise funds and if it made the grade, then investors are rewarded well.
Also read: 5 Reasons to Invest in Cryptocurrencies
Non-fungible tokens are linked with digital artworks in images, videos and audio.
Every token is unique and therefore cannot be exchanged for others. These tokens are stored on the blockchain and can be exchanged only for cryptocurrencies.
Pak’s “The Merge” was the most expensive NFT sold in 2021, for $91.8 million, followed by The first 5000 days, Beeple- Human one sold for $ 69 million.
Hope, this article was useful to gain knowledge about different types of coins and tokens.
We will be back with more such informative blogs.