Cryptocurrency Definition: A Guide to Understanding the World of Digital Currency

You now know that Bitcoin is a digital currencythat is decentralized and works on the blockchain technology and that it uses a peer-to-peer network to perform transactions. Ether is another popular digital currency, and it’s accepted in the Ethereum network. The Ethereum network uses blockchain technology to create an open-source platform for building and deploying decentralized applications. The Binance Coin was created as a utility token for use as a medium of exchange on Binance. It was initially built on the Ethereum blockchain, but now lives on Binance’s own blockchain platform. Originally, BNB allowed traders to get discounts on trading fees on Binance, but now it also can be used for payments, to book travel, for entertainment, online services, and financial services.

different types of crypto currency

That’s quite a crowd considering that Bitcoin only launched in 2009. Dubbed a “third-generation” cryptocurrency, Cardano splits its blockchain into two layers to increase transaction speeds and implements native tokens to ensure a better experience for ADA holders. SOL is the native coin of the Solana platform, which functions on a blockchain system, just like Ethereum and Bitcoin. Solana’s network can perform a whopping 50,000 transactions per second, making this platform especially attractive to investors looking to trade quickly. There are thousands of cryptocurrencies—but they’re not all the same. However, the meme-inspired cryptocurrency gained a radical growth in value throughout early summer 2021.

Digital asset storage

A digital currency that pegs its value to an external reference, typically the U.S. dollar. These virtual worlds provide users with an immersive experience by utilizing virtual or augmented reality technologies. An NFT certifies that the holder owns the underlying digital asset and can sell, trade or redeem it.

different types of crypto currency

Several other factors, such as technology, team, tokenomics, and use cases, should also be considered when researching cryptocurrencies. BNB has various use cases, some of which include paying transaction fees on BNB Chain and trading fees on Binance, participating in token sales, and staking for network validation on the BNB Chain. Binance also uses a periodic token burn mechanism, which limits the overall supply of BNB. BNB was introduced in 2017 by the cryptocurrency exchange Binance as an ERC-20 token on the Ethereum blockchain. In 2019, it migrated to its own blockchain, BNB Chain, as a BEP-2 token. Fiat currencies are often inflationary because central banks can print more money.

Some other Popular Cryptocurrencies Are

Today’s crypto world encompasses a dazzling array of digital assets with different technical profiles and intended uses. Shiba Inu cryptocurrency is what’s known as a “meme coin,” or a cryptocurrency based on a meme. A meme coin is a cryptocurrency or crypto token based on a viral joke or cultural reference. Projects built around meme coins rely heavily on social media hype to attract new users/investors.

  • The loss of access to data and passwords can also lead to a complete loss.
  • Some believe bitcoin will replace gold and disrupt the existing financial system, while others argue that cryptocurrency will always be a secondary system and niche market.
  • So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information.
  • Some blockchain economies you may have heard of include Ethereum , Ethereum Classic , EOS , NEO and Tron .
  • BNB offers some of the best utility tokens on the cryptocurrency market, with fast transactions at low fees and a relatively large ecosystem of applications.
  • Cryptocurrency can be stored in several ways, but the most common is through a digital wallet.

However, the use cases for cryptocurrencies have expanded significantly over the years to include smart contracts, decentralized finance , stores of value, governance, and non-fungible tokens . 4 popular types of cryptocurrency include bitcoin, ether, solana, and polygon. All of these cryptocurrencies are the native coins of a blockchain network. Introduced via the Ethereum network via the COMP ERC-20 token, Compound is a decentralized, blockchain-based protocol running on the Ethereum network. A digital currency, or cryptocurrency, is an alternative payment method developed utilizing encryption methods.

Do You Have to Pay Taxes on Bitcoin?

A digital wallet can be software-based, web-based, or hardware-based. These platforms allow you to create your own digital assets , decentralized applications , etc. on their platform. Therefore, blockchain platforms become their own “blockchain economies” with different assets, applications, and more. On the contrary, it plays an essential role in Ethereum-based blockchain applications, which are becoming more numerous and handling a greater volume of transactions every day. As applications on the Ethereum platform become more important to more users, Ether tends to grow in value.

different types of crypto currency

On the other side are people such as Warren Buffet, Paul Krugman, and Robert Shiller, who are against it. Krugman and Shiller, who are both Nobel Prize winners in the field of economics, call it a Ponzi scheme and a means for criminal activities. Software-based wallets are installed on a computer or mobile device, while web-based wallets are accessed through a web browser.

Crypto Coins vs Tokens

Polkadot is a PoS cryptocurrency aimed at delivering interoperability among other blockchains. Its protocol is designed to connect permissioned and permissionless blockchains and oracles to allow systems to work together under one roof. Polkadot’s core component is its relay chain, which enables the interoperability types of crypto exchanges of varying networks. It also provides for parachains—parallel blockchains with their own native tokens for specific-use cases. Ether, launched in 2015, is currently the second-largest digital currency by market capitalization after Bitcoin, although it lags behind the dominant cryptocurrency by a significant margin.

Both of them use blockchain technology, in which transactions are added to a container called a block, and a chain of blocks is created in which data cannot be altered. For both, the currency is mined using a method called proof of work, involving a mathematical puzzle that needs to be solved before a block can be added to the blockchain. Finally, both bitcoin and ether are widely used around the world. A cryptocurrency is a coded string of data representing a currency unit. Peer-to-peer networks called blockchains monitor and organize cryptocurrency transactions, such as buying, selling, and transferring, and also serve as secure ledgers of transactions. By utilizing encryption technology, cryptocurrencies can serve as both a currency and an accounting system.


Bitcoin is considered the first cryptocurrency created, and other individual cryptocurrencies are known as “altcoins” (a combo word derived from “alternative coin”). Blockchain network has its own native crypto, used to reward miners and to pay for things, including fees. Founded in 2017, Solana is ablockchainplatform designed to support decentralized applications . Also referred to as an ‘Ethereum killer,’ Solana performs many more transactions per second than Ethereum.

Are cryptocurrencies a safe investment?

A cold wallet is any wallet that is not connected to the internet. A hot wallet is any wallet that is always connected to the internet, and therefore always at risk of being hacked. 2-factor authentication is recommended for both mobile and desktop wallets.

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