Cryptocurrency and Types of cryptocurrency : Explained

Cryptocurrency as the word suggests is currency that is crypted or protected. It is digital money that is created by a technology which controls its creation and protects its transaction details, hides the transactor details and decentralizes the transaction.

Cryptocurrency is built on blockchain technology and on platforms which support blockchain technology like Blockchain, Ethereum, NEO etc. With Blockchain technology relentlessly growing there are thousand different types of cryptocurrency in the market. All these cryptocurrencies fall under three main categories:

  • Currency Cryptocurrency              
  • Utility Cryptocurrency
  •  App/Platform Cryptocurrency

Let explore each of them.

What is Cryptocurrency:

These cryptocurrencies are mainly meant to be used as digital money for transactions. Bitcoin is a perfect example of Currency cryptocurrency. But Bitcoin had a few drawbacks which led to consumers creating their own cryptocurrencies their own blockchain platforms and their own apps for creating and maintaining cryptocurrencies. There is no third party required in bitcoin transactions. The disadvantages of bitcoin were:

Less Scalable: Bitcoin scalability is restricted by two factors the size of the block and average block creation time. These two factors slow down the number of transactions that can be carried out per second. To tackle the scalability problem of bitcoin cryptocurrencies like Litecoin and Bitcoin cash were introduced.

Not Enough Privacy: This complaint is mainly by the black marketeers . The policy of Blockchain is to enable peer to peer transaction by keeping their identity hidden but the transactions are widely available for everyone to see in blockchain public ledger. But the black marketeers want an extra level of security which will hide the transaction details also from the public’s eye. To tackle the privacy issue of bitcoin privacy coins like Monero,Dash,Zcash were introduced.

 

Utility Cryptocurrency or Altcoins:

These coins are just like Bitcoins but they do not represent monetary value instead they are utility or infrastructure used to build on top of. Ethereum,Filecoin,NEO are examples of Utility cryptocurrency. These allow smart contracts to be built on top of them. Smart contracts are transactions which get triggered when some conditions are met. Using Utility Cryptocurrencies consumer can create his own custom smart contracts. Here transactions involve direct sales of property instead of bitcoin transactions. And the proof of these transactions is stored in the form of tokens in the blockchain.

 

App/Platform Cryptocurrency:

These are the applications that are built on the utility cryptocurrency platforms like Ethereum and NEO. These are decentralized applications or tokens which use smart contracts. They don’t always represent something physical like property or money. These token themselves are of value and can be sold for money. Augur and Ox are examples of App cryptocurrency. These are used to place bets and gambling.

Here is a list of some other cryptocurrencies currently popular in the market other than those mentioned above:

Ripple: Ripple aids the banking sector, primarily by facilitating global payments. Three of the top five global money transfer companies are expected to use XRP—Ripple’s cryptocurrency in payments this year.

Bitcoin Cash: One of bitcoin’s signature attributes is its decentralized structure. Rather than a central entity making decisions, the community of miners vote on things like how to improve the system. In 2017, there was a disagreement within the community over how to address scaling issues. That disagreement led to a fork and the creation of Bitcoin Cash.

Cardano: Cardano’s coin is used to transfer funds digitally and a platform that runs financial applications and smart contracts. Cardano balances privacy with regulation with the goal of promoting financial inclusion.

Litecoin: Like Bitcoin Cash, Litecoin was also created as a fork from Bitcoin. Its main claim to fame is its quicker settlement goal: Litecoin aims to settle transactions in two-and-a-half minutes, compared to 10 minutes for Bitcoin.

Litecoin can also be purchased and sold on mainstream exchanges like Coinbase. With the exception of Bitcoin Cash and Ethereum, buying alt coins usually starts with buying Bitcoin or Ethereum on an exchange like Coinbase and then going to another exchange.

NEM: NEM helps companies and industries improve things like payments and logistics. Its blockchain highly customizable.

Stellar: Stellar focuses the way people, banks and payment networks move money. Stellar’s currency is called lumens.

IOTA: IOTA stands for Internet of Things Application. The idea is that as the number of devices connected to the Internet grows—everything from iPhones to smart cars—so will the number of micropayments. That payments ecosystem will need a system to enable that quickly. IOTA also claims it can deliver this without fees.

Dash: Dash is one the few that is intended to be used by people to buy goods and services. Dash is supposed to be faster and cheaper than bitcoin.

TRON: TRON is looking to take on Internet giants like Facebook and YouTube for creative types. It aims to decentralize the web so that musicians, artists and others can share their creations with the world without having to rely on centralized services. TRON did an ICO to raise capital.

There will always be new inventions in Bitcoin world and new blockchains will get added everyday. It is difficult to keep track of each of them as there are thousands of them already created and thousand more in creation.

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