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5 types of cryptocurrency explained

The world of crypto is filled with different types of crypto assets that serve different functions.

The world of crypto has exploded since the advent of Bitcoin a decade and a half ago.

Bitcoin (BTC) was the first cryptocurrency, and it came into the world as a purely digital version of money that could be used in peer-to-peer transactions and lives on a decentralized database called a blockchain.

Since Bitcoin, thousands upon thousands of cryptocurrencies and crypto assets have been created and serve purposes other than just being a new version of money, though they’re all underpinned by blockchain technology. There are technically over 1.8 million cryptocurrencies, according to CoinMarketCap, but most just fall into a few categories.

  1. Bitcoin (BTC)
  2. Coins vs Tokens
  3. Altcoins
  4. Stablecoins
  5. Meme coins

1. Bitcoin (BTC)

Bitcoin is in a class of its own in the digital asset space.

In Fidelity’s “Bitcoin First” report, the institution explains that Bitcoin (BTC) is “fundamentally different from any other digital asset.” The authors describe how BTC is in a class by itself because of the asset’s perfect scarcity — there will only ever be 21 million Bitcoins — and the fact that the asset exists on the most secure and decentralized blockchain network in existence.

Because of Bitcoin’s unique properties, it’s best to think of the asset as a monetary good.

While other cryptocurrencies and crypto assets share some of the same characteristics as Bitcoin, none share all of them, which is why BTC is unique.

What was the first coin you bought?

Response% of crypto investors
Oct, 2354%
Oct, 2258%
Jul, 2355%
Jan, 2352%
Apr, 2346%
Source: Finder survey by Qualtrics of 2,023 Americans

bitcoin (BTC) might be losing it’s chokehold on the cryptocurrency market, with the percentage of crypto owners who said BTC was their first coin falling year over year, with 54% saying saying BTC was their first coin in October 2023 compared to 58% in October 2022.

2. Coins vs. Tokens

A crypto coin is the native asset of a blockchain and serves the purpose of transferring value on a blockchain. BTC and ether (ETH) — the native asset of the Ethereum blockchain — are examples of crypto coins. To transact on the Bitcoin and Ethereum networks, you have to use these coins to both transfer value and pay transaction fees.

A crypto token is created and stored on top of a blockchain that already exists, and there are a few main types of tokens.

Types of tokens

  • Utility tokens. Holders of these tokens may get voting rights for a decentralized protocol, or they can be used for payment services with a decentralized application (dapp). On Ethereum, these types of tokens are known as ERC-20 tokens, which are fungible and include assets like Uniswap (UNI) or Compound (COMP).
  • NFTs (Non-fungible tokens). An NFT is a tokenized version of art, music or in-game item that is unique and scarce. The technical names for these types of tokens on Ethereum are ERC-721 tokens.
  • Security tokens. There are also security tokens, which represent fractional ownership of something in the real world. These types of tokens must be approved by the US Securities and Exchange Commission (SEC). An example of a security token is Franklin Templeton’s OnChain US Government Money Fund (FOBXX), which exists on the Stellar and Polygon blockchains.(1)

3. Altcoins

“Altcoin” is short for “alternative coin.” The term was coined in 2011 and refers to all digital currencies or fungible crypto assets other than Bitcoin (BTC).(2)

Technically, the term is a misnomer, because the majority of the crypto assets that exist today aren’t coins but tokens.

Ether (ETH) is the largest altcoin by market capitalization — the total number of ETH coins multiplied by the current price of ETH — while other major altcoins include Solana (SOL) and Polygon (MATIC).

Very few of the numerous altcoins on the market today purport to be money like Bitcoin (BTC). Instead, they are tokens that serve some of the various purposes described in the previous and following sections.

4. Stablecoins

Stablecoins are crypto tokens pegged to the price of real-world assets like fiat (national) currencies or gold.

Collateralized stablecoins are the most popular type of stablecoins. These include Tether (USDT) and USD Coin (USDC) and are both issued by financial institutions and backed with the real version of the asset or something comparable, like US Treasury bills.

Algorithmic stablecoins are another version of this technology, but they aren’t as prevalent as collateralized stablecoins. These use algorithms to maintain their fixed price.

The biggest algorithmic stablecoin on the market today by market cap is DAI. DAI is backed by other cryptocurrencies, including ETH, Wrapped Bitcoin (WBTC) and even other stablecoins like USDC.(3) The crypto assets that back DAI are automatically bought and sold via smart contracts to maintain DAI’s $1 peg.(4)

TerraUSD (UST), the failed algorithmic stablecoin of the now mostly defunct TerraLuna ecosystem, operated with a similar mechanism that involved the burning and minting of its sister coin, LUNA.(5)

5. Meme Coins

Meme coins are little more than gambling chips. They have no intrinsic value. In fact, the largest meme coin on the market today by market cap, Dogecoin (DOGE), was created as a joke.

These types of coins gain popularity through memes that circulate virally through social media, and there are currently more than 300 meme coins on the market today.(6)

There’s Shiba Inu (SHIB), the second-largest meme coin by market cap, and Pepe (PEPE), which is the latest meme coin to gain popularity in the crypto space.

It’s best to approach trading meme coins with caution, as their prices are driven purely by speculation.

Type of cryptocurrency compared

Type of cryptoNative to blockchainPegged to or represents a share of a real-world assetUsed as moneySpeculative asset, as far as the price of the asset
Bitcoin (BTC)YesNoYesYes
CoinYesNoIn some casesYes
TokenNoIn some casesNoIn some cases
StablecoinNoYesYesNo
Meme coinIn some casesNoNoYes

Where to buy cryptocurrency

Purchase cryptocurrency through either a centralized exchange (CEX) like Coinbase or Kraken or a decentralized exchange (DEX) like UniSwap or dYdX. To use most centralized exchanges, you’ll have to go through the Know Your Customer (KYC) process and potentially link your bank account. With a DEX, there is no KYC process, nor is there an option to link a bank account. You can only trade from one crypto to another on a DEX, and you have to know how to use a browser extension wallet like MetaMask to do so.

The native software for certain hardware wallets like Ledger and Trezor also have built-in crypto exchanges. The same is true for software wallets like Atomic Wallet and Exodus.

Bottom line

The number of cryptocurrencies and crypto assets on the market today has expanded dramatically since Bitcoin arrived on the scene in 2009.

In just 14 years, a plethora of crypto assets have been created to serve different functions.

While it can be exciting to witness such growth, it’s very difficult to tell which crypto assets will continue to exist in the long run. Invest in this asset class with caution.

Compare crypto exchanges

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6

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Bank transfer, Credit card, Debit card, Neteller

42

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US residents: Restricted in the following states - NY, CT, NM, WA, HI, AL, VT, FL, AK, NV.
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Uphold - Digital Asset Platform
Bank transfer, Credit card, Debit card, Bank transfer (SEPA), Apple Pay, Google Pay

27

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Refer a friend to earn US$20 — $10 for you and $10 for the person you refer. T&Cs apply.
Terms apply. Cryptoassets are highly volatile. Your capital is at risk.
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Robinhood Crypto
Bank transfer, Cash, Debit card

1

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Gemini Cryptocurrency Exchange
Bank transfer (ACH), Cryptocurrency, Debit card, PayPal, Apple Pay, Google Pay, SWIFT

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Public Cryptocurrency Exchange
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1

7

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Name Product Deposit methods Fiat currencies Cryptocurrencies Offer Disclaimer Link
eToro Cryptocurrency Trading
eToro Cryptocurrency Trading
Bank transfer, Credit card, Debit card, Neteller, Skrill

18

78

Disclaimer: Cryptoasset investing is highly volatile and unregulated in the UK and some EU countries. No consumer protection. Tax on profits may apply.
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Binance Cryptocurrency Exchange (Not available to US users)
Bank transfer, Cryptocurrency

1

369

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KuCoin Cryptocurrency Exchange
KuCoin Cryptocurrency Exchange
Bank transfer, Credit card, Cryptocurrency, Debit card, PayPal, P2P

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Bybit Cryptocurrency Exchange
Bybit Cryptocurrency Exchange
Bank transfer, Credit card, Cryptocurrency, Debit card, P2P

73

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Disclaimer: Highly volatile investment product. Your capital is at risk.
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Gate.io Cryptocurrency Exchange
Bank transfer, Credit card, Cryptocurrency, Debit card

8

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Kraken Cryptocurrency Exchange
Bank transfer, Credit card, Cryptocurrency, Debit card, Apple Pay, Google Pay, SWIFT

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222

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OKX Cryptocurrency Exchange
Bank transfer, Cryptocurrency, iDEAL, PayPal, POLi, SEPA, Faster Payments (FPS)

35

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Uphold
Uphold
Bank transfer (ACH), Credit card, Debit card, Apple Pay, Google Pay

27

237

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EXCLUSIVE
Paybis Cryptocurrency Exchange
Bank transfer, Credit card, Debit card, Neteller

42

373

Finder Exclusive: Get 25% discount on all commission for 1 transaction when using promocode Finder25. There is no time limit on the validity of the promo code.
US residents: Restricted in the following states - NY, CT, NM, WA, HI, AL, VT, FL, AK, NV.
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Finder Award
Bitstamp Cryptocurrency Exchange
Bank transfer, Credit card, Cryptocurrency, Debit card, SEPA, Faster Payments (FPS)

3

90

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Coinmama Cryptocurrency Marketplace
Credit card, Fedwire, SEPA, Google Pay, SWIFT, Bank card

6

15

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OFFER
Gemini Cryptocurrency Exchange
Bank transfer (ACH), Cryptocurrency, Debit card, PayPal, Apple Pay, Google Pay, SWIFT

7

152

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Finder Award
Crypto.com App
Bank transfer, Credit card, Cryptocurrency, Debit card, PayPal, Wire transfer, Apple Pay, Google Pay, SWIFT

31

384

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Bybit Cryptocurrency Exchange

Bybit Cryptocurrency Exchange logo
  • Offers leverage and derivative trading
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Disclaimer: Highly volatile investment product. Your capital is at risk.

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KuCoin Cryptocurrency Exchange

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Binance Cryptocurrency Exchange (Not available to US users)

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  • Supports over 300 crypto assets
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Binance Cryptocurrency Exchange (Not available to US users)

Binance Cryptocurrency Exchange (Not available to US users) logo
  • Supports over 300 crypto assets
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