A Guide to the Different Types of Cryptocurrency

Did you know that thousands of cryptocurrencies are all very different from each other? Learning the different types of cryptocurrency is crucial to ensure that you invest in the best digital asset.

Then you can also cut your risk because a lot of cryptocurrencies are subject to high fluctuations in value. So, to protect your money and sanity from the wrong investments, here is everything you need to know to buy cryptocurrency.

What Is Cryptocurrency?

Cryptocurrency or crypto is an exciting digital payment system that does not need banks to verify any transactions. Think of trading cryptocurrencies as a peer-to-peer system.

This lets anyone from anywhere receive or send payments without any hassles. However, instead of physical money being transported and exchanged around the world, all your crypto payments will exist solely as digital entries.

They will be in an online database that describes specific transactions. So, when you transfer your cryptocurrency, the transactions will get recorded in a public ledger.

Then your cryptocurrency gets stored in a digital wallet. Cryptocurrencies received the name because they use encryption to verify transactions. This means advanced coding is involved.

This is needed for transmitting or storing crypto data between public ledgers and digital wallets. Encryption aims to provide safety and security. So, we are more grateful for cryptocurrency transactions than regular banks.

How Does Cryptocurrency Work?

Cryptocurrencies are run on a distributed public ledger. This ledger is known as the blockchain. On the blockchain, you will find a record of all the transactions that are held and updated by currency holders.

Then units of crypto are created using a tricky process called mining. If you are into mining, you will need to use computer power to solve a series of complicated mathematical problems.

When you solve these successfully, you can expect to generate coins that can be exchanged. Crypto enthusiasts can also buy currencies from brokers and then spend or store them in cryptographic wallets.

So, if you own cryptocurrencies, you do not hold much in the tangible sense. Basically, you pretty much own a key that lets you move a unit of measure. Or a record from one person to another without the interference of third parties.

Types of Cryptocurrency

Bitcoin is usually always considered to be the first cryptocurrency ever created. The other individual cryptocurrencies are known as "altcoins." This word is derived from the term "alternative coin."

It is tricky to pinpoint one "best" cryptocurrency. Each type of crypto has its own unique features built-in depending on what the developer designed it for. Here are the most popular cryptocurrencies to help you choose the right ones for your investment.

Bitcoin

Bitcoin is the first decentralized cryptocurrency that uses blockchain technology to facilitate digital transactions and payments.

So, instead of using a central authority like the Federal Reserve in tandem with the US Department of the Treasury to control all the money supply in your economy or third parties like local banks and credit card issuers, Bitcoin's blockchain becomes a public ledger of all the transactions for as long as the crypto has been in existence.

This ledger then lets someone prove they own the Bitcoin they are trying to trade. This way, you are protected from fraud and any other unapproved tampering involving the cryptocurrency.

Since Bitcoin is a decentralized currency, it can effectively make peer-to-peer money transfers less expensive and faster. This will be as though you are sending money to someone overseas without the added fees and delays.

Using Bitcoin has a lot of appeals compared to traditional currency because it offers more protection, and there are no third parties to give you a hard time.

The best part is that cryptocurrencies also have their own ATMs if you want to exchange some for cash or transfer funds to another account. Locate Bitcoin ATMs for your next convenient transaction.

Ether (Ethereum)

Ether is a token that facilitates transactions on the Ethereum network. This is an exciting platform that uses blockchain technology to allow the creation of decentralized applications and smart contracts, which are programs that run on the Ethereum blockchain and are executed instantly when certain conditions are met.

This means that the digital software does not need to go through app exchanges like the Google Play Store or the App Store. The best part is that since decentralized applications can be created, there does not need to be a 30% cut of revenue to tech giants like Alphabet or Apple.

So, you can expect to have easy and fast transactions with very low fees that will make you want to never use cash again.

Ethereum is a cryptocurrency where the actual coins are measured in units that are called Ether. It is also a software development sandbox that is uncapped. So, an infinite number of coins can theoretically be created.

Tether

Tether is another type of cryptocurrency that is also called a stablecoin. Stablecoins are cryptocurrencies that aim to peg their value to another asset. In most cases, this is often a fiat currency.

So, in this case, the crypto would be tied to the US dollar. The idea behind Tether is to combine all the incredible benefits of a cryptocurrency without the need for any financial intermediaries with the stability of a currency that is issued by a sovereign government.

This is an excellent option for those skeptical about cryptocurrencies and how they operate. At least by investing in stablecoins, you are paying more attention to the fiat currency that it is tied to.

This way, investors do not need to rip out their hair whenever there is another wild price fluctuation in the world of crypto.

Cryptocurrencies can be scary and volatile. So, if you are a first-time investor, you may want to purchase cryptocurrency that has a tie to regular currency to help you get your feet in the water before stocking up on a lot of Bitcoin.

Binance Coin

Binance Coin is another exciting type of cryptocurrency found on the Binance cryptocurrency exchange platform, with other digital coins you may want to trade.

The best part is that Binance Coin can typically be used as a type of currency, but it also facilitates tokens that are used towards fees on the Binance exchange.

The platform also powers Binance's decentralized exchange to build apps. Transaction fees are significantly lowered for users who choose to pay using Binance.

This has encouraged the hardcore adoption of Binance Coin, which makes it one of the largest cryptocurrencies in the market. The best part is that Binance also burns or destroys a fixed percentage of digital coins that are in circulation.

This keeps the value stable and secure for investors to get in on all the digital action without too much risk.

USD Coin

Remember when we talked about stablecoins earlier? USD Coin is another amazing stablecoin like Tether that is pegged to the US dollar. So, like Tether, your USD Coin will also be hosted on the Ethereum blockchain technology.

The main idea behind creating USD Coin was to invent a dollar that would be entirely digital. However, it would also have the stability of US fiat currency without the need for a bank account.

The holder of the USD Coin also does not need to live in any particular country. This is an excellent investment for people who are nervous about going all out on crypto.

The value of cryptocurrencies can be highly volatile and will give you a lot of anxiety each day. So, it always helps to have crypto options tied to the US dollar to provide some stability.

However, many people do not treat stablecoins as an investment because a USD Coin is more for everyday money that can be spent with internet merchants you want to trade with.

XRP (ARP)

XRP runs on the Ripple network and is the top cryptocurrency for banks. This is because this crypto is made to serve the financial services industry's needs.

So, it is conceived as the best way to facilitate international payments. XRP is the best bridge between two different currencies if you are looking for quick and cheap global transfers.

Cardano (ADA)

Cardano is another incredible blockchain network, and ADA is their native digital coin.

The best part is that Cardano splits its blockchain into two main layers. This helps speed up transactions while implementing native tokens. This provides a better experience for ADA enthusiasts.

Purchase Cryptocurrency Today

There are thousands of different types of cryptocurrency out there utilizing blockchain technology. So, it is always worth putting a lot of thought into understanding which tokens or coins will be the best choice for you.

Even if someone else you know is making a lot of money investing in Ether or Tether, you want to ensure that you do your own research. This helps to make the most informed decisions to protect your funds.

Whether you are a seasoned crypto investor or looking to take your first baby steps in this exciting digital world of cryptocurrencies, learning about different coins and digital trends is the best way to cut risks.

If you enjoyed reading this cryptocurrency trends guide, check out some of our other posts for more information.