As today’s crypto market continues to expand, we see the introduction of new and inventive coins. Sometimes that’s a good thing, sometimes it’s not. Regardless, there are tens of thousands of cryptocurrencies out there. Of course, not all crypto is the same. There are many different types of crypto tokens and coins.
We’re not going to go through all of them, but we do want to provide a basic understanding of the differences between coins and tokens, as well as a high-level overview of the various types of cryptocurrencies on the market today.
News flash: coins and tokens are two different things! Making the distinction is rather straightforward. Coins are currency. That seems simple enough. Bitcoin, altcoins, and other cryptocurrencies that run on their own blockchain are called coins.
Digital assets stored on the blockchain are called tokens. They don’t exist on their own blockchains, they’re created on blockchains that exist already. They represent a particular asset. It could be a real asset, a painting, or access to an application. It’s simply a digital representation of the asset or utility.
We’d be here all day (and you’d certainly get bored) if we detailed every single type of coin out there. But here’s a quick rundown of some of the most popular coins. You’ve probably heard of most of them.
In the early days of cryptocurrency, anything that wasn’t Bitcoin was considered an altcoin. Things have evolved along the way, mostly because there are a lot more coins than there used to be.
Altcoins are cryptocurrencies that go beyond serving as just a medium of exchange. They don’t compete directly with Bitcoin because they have a utility that extends to more than just spending your digital currency.
For instance, the altcoin Ethereum is a huge computing network that allows you to run decentralized applications (dApps) on the blockchain. Users can also host smart contracts using Ethereum, which gives it even more utility and flexibility.
Other altcoins you’re probably familiar with include Solana and Cardano, both of which are direct competitors to Ethereum.
Stablecoins have a value that is tied to the price of another asset. For instance, if there is a stablecoin connected to the U.S. dollar, it will always have a value of $1. However, there are two different types of stablecoins. Collateralized stablecoins are tied to collateral while algorithmic stablecoins use algorithms to maintain their value.
The important thing to remember about stablecoins is that they use external sources to control their supply or maintain value, and that value is always related to something else outside of the coin itself.
These strategies don’t always work. In sheer panic, loads of holders cashed in their TerraUSD, causing it and Luna to plummet to nearly zero. The same happened to Tether as it slipped from $1 to around $0.94.
Memes on social media gave meme coins the credence it currently holds. These types of coins gain popularity and experience traction through portals like Facebook, Twitter, or Discord by being used jokingly.
You’ve surely heard of Dogecoin (DOGE), the original meme coin that used a hilarious image of a Shiba Inu as its brand. It started as a joke, but quickly became a cult asset. Other meme coins followed suit after the popularity of DOGE exploded.
There are now more than 200 meme coins in existence. They’re certainly fun, but can be volatile as their novelty fades. DOGE is only worth one-tenth of what it was worth at its peak just a short while ago.
Just like coins, there are many different types of tokens. We’ll touch on some of the most popular now.
These types of tokens hold value for the object they represent. They can represent digital assets like pictures or songs. NFTs are the most well-known form of value tokens.
Utility tokens provide a service or give users permission to perform actions on the network. They also help host decentralized applications.
These tokens represent ownership of an asset. Many companies raise capital using security tokens because it gives their backers a representation of their ownership in the company. They sell equity tokens, representing the amount of investment. However, because these tokens represent ownership of financial security, they are regulated by the Securities and Exchange Commission.
Even with all these coins and tokens available, there’s only one original - Bitcoin. To quickly and easily add some BTC to your wallet, visit a Bitcoin Depot BTM near you. There are thousands across the United States, and they make buying Bitcoin fast and simple.