The Four Main Types of Cryptocurrencies
The crypto world has come a long way since the introduction of Bitcoin – with 13,000+ active cryptocurrencies on the market and more being constantly added. However, some of the big players include not only Bitcoin but also XRP, Ethereum, Bitcoin Cash, EOS, Litecoin, Ripple, Tether and Stellar. Even though each currency is different in its function, development and purpose, what unites them is the underlying meaning of a cryptocurrency. Simply, this entails a digital currency that is created and secured by cryptography, the art of writing or solving digital codes. Though digital currencies existed before the development of Bitcoin, it is important to note that Bitcoin was the first, completely decentralised, secure digital currency that pioneered the creation of the multi-trillion dollar cryptocurrency market that exists today.
As the name suggests, Altcoins are alternative coins to Bitcoin. Some Altcoins are a close variant, or fork, of Bitcoin, they share the same open-source code that Bitcoin operates on, whilst others have created their own protocols. However, all Altcoins have a unique blockchain upon which their transactions occur.
If you’ve delved into the Altcoin space, you would have come across the idea of Forks. Forks represent a split in the blockchain and result in the creation of Altcoins. Specifically, forks can be divided into: Hard Forks. An upgrade in the protocol that cannot work with older versions, including Bitcoin Cash. Soft Forks. An upgrade in the protocol that can still work with older versions, including the Bitcoin Improvement Proposal (BIP).
Lastly, we have tokens. This is a fairly general term that is impacted by the context in which it is used. As such, a token can mean: A digital asset; for example a Bitcoin or Altcoin token. A unit of value.; for example, is used to describe how many Bitcoins a person has, ie: X number of Bitcoin tokens. A string of data; the transfer, storage and creation of cryptocurrencies is done through a string of data known as tokens. A utility token; allows a user to access a certain product or service. Generally speaking though, a token is any digital asset created on a blockchain, whereas a coin refers to a digital currency that specifically belongs to a certain blockchain. For example: ETH and BTC are coins, though Uniswaps’ UNI token is an ERC-20 token created on the Ethereum blockchain.