Cryptocurrencies have turn out to be a well-liked class of digital asset that may be saved, used, and exchanged. These digital property aren’t the identical as conventional monetary devices resembling gold or shares owned by firms. As a substitute, cryptocurrencies are digital currencies that use encryption to safe their worth and make them tough to counterfeit.
Cryptocurrencies are additionally unstable, which makes them an attention-grabbing funding choice. This raises the query: what are cryptocurrencies good for? The reply relies on the kind of utility you need out of your cryptocurrency.
1. Retailer of Worth Cryptocurrencies
A retailer of worth is any merchandise/asset that retains buying energy into the longer term and may be readily exchanged for one thing else. Within the crypto house, a few cryptocurrencies have been designed with the principle function of being cash. Over time, they’ve developed and can be utilized as a retailer of worth, identical to gold or actual property. The 2 main cryptocurrencies that fall into this class are Bitcoin and Litecoin.
Bitcoin is at the moment the most well-liked cryptocurrency. It has been round for the longest time, and other people have turn out to be used to purchasing it with the objective of Bitcoin rising in value.
Bitcoin has proven that it may be leveraged over time to earn higher returns. With an annualized return of 230% during the last decade, it has carried out ten occasions higher than the NASDAQ 100. Bitcoin additionally has a restricted provide of 21 million tokens which implies there’ll all the time be a requirement for it due to its restricted provide.
Litecoin was created to enhance Bitcoin by offering customers with a sooner technique of transacting cash over the web. Consequently, Litecoin is also known as “digital silver” in comparison with Bitcoin, which is considered “digital gold.”
Litecoin was created as a tough fork of Bitcoin’s blockchain, and it holds many similarities in the way it capabilities, together with appearing as a retailer of worth. Litecoin is a deflationary currency and has witnessed worth beneficial properties over time resulting from its world liquidity and finite provide.
2. Protocol/Alternate Cryptocurrencies
Protocol-level cash are cryptocurrencies which have a customized blockchain. These protocols enable the functioning of functions and supply safety and entry to the blockchain.
Some cryptocurrencies are simply protocols, making the blockchain their solely function, and others are exchanges that present their tokens. Exchanges are platforms that enable customers to purchase or promote cryptocurrencies for fiat currencies resembling USD or EUR. These protocol networks present methods to earn returns by staking with proof-of-stake (POS) algorithms.
A key instance of a protocol/alternate cryptocurrency is Construct and Construct (BNB), previously known as Binance Coin (and nonetheless also known as such). BNB is a cryptocurrency constructed on a customized blockchain known as BNB Chain. BNB is the blockchain token that powers transactions on the BNB Chain. All actions on the blockchain require BNB tokens to be processed, making BNB an important a part of every part that occurs on the BNB Chain.
One other kind of protocol/alternate cryptocurrency is Cronos (CRO) which has its personal customized blockchain and native cryptocurrency. Different examples on this class embrace Polkadot (DOT), Reef Chain (REEF), and Okex (OKB).
3. Gaming/NFT Cryptocurrencies
Gaming and non-fungible tokens (NFTs) are among the many hottest cryptocurrencies in the present day. They’re designed for use in video games and on-line functions. For instance, a gaming NFT token can symbolize possession of digital objects or digital property inside gaming functions.
These digital property have distinctive traits and can’t be replicated or cloned. NFTs are sometimes minted on Ethereum, though different blockchains have additionally been used for this function—we have checked out the best sites for minting NFTs.
A preferred living proof of a gaming/NFT token is Axie Infinity (AXS). Axie Infinity is an NFT-based sport identified for its in-play digital financial system. Gamers acquire and commerce digital pets generally known as Axies. Axie Infinity (AXS) can also be tradeable on main exchanges, which makes it distinctive.
Different sorts of Gaming/NFT tokens embrace Enjin (ENJ), Chiliz (CHZ), Gala (GALA), The Sandbox (SAND), and Dencentraland (MANA).
4. Sensible Contract Cryptocurrencies
Smart contracts are self-executing contracts that can be utilized to make transactions. They’re a sort of program code that runs instantly on the blockchain, eradicating the necessity for any third social gathering to course of the contract. On this approach, good contracts enable for the automated execution of agreements between two or extra events in a clear and verifiable approach.
MakerDAO is a decentralized software program platform, and its Maker (MKR) token is an ideal instance of a sensible contract cryptocurrency. Maker (MKR) is the governance token of MakerDAO that permits customers to subject and handle the DAI stablecoin. MKR tokens are wanted for voting rights within the improvement of the Maker Protocol.
Polymath (POLY) is one other cryptocurrency making waves within the good contract class. Polymath (POLY) presents a platform that permits verified traders to take part in securities token choices (STOs) utilizing the Polymath ST-20 normal.
Extra cryptocurrencies on this class embrace Miota (IOTA) and Stellar (XLM). These tokens can be utilized for governance protocols, automated escrow techniques, and marketplaces that use good contracts to facilitate the alternate of products or providers.
5. Privateness Cryptocurrencies
Cryptocurrencies which are privacy-focused are available varied varieties and shapes. Privacy cryptocurrencies allow nameless and personal transactions. These cash/tokens do not require private info to make use of or commerce with.
Monero (XMR) is a decentralized cryptocurrency with privacy-enhancing applied sciences that masks transactions to attain anonymity and fungibility. This makes Monero consumer transactions, pockets balances, and buying and selling exercise extraordinarily onerous to decipher. Consequently, this cryptocurrency presents next-level privateness.
Zcash (ZEC) is one other privacy-focused cryptocurrency. It makes use of advanced-level cryptography to offer enhanced privateness for its customers. Zcash relies on Bitcoin’s codebase and shares some similarities, resembling a set provide of 21 million tokens.
Extra privacy-based cryptocurrencies embrace Secret (SCRT), Sprint (DASH), Decred (DCR), Nightfall Community (DUSK), and Verge (XVG).
6. FinTech Cryptocurrencies
This ultimate categorization focuses on cryptocurrencies that use blockchain expertise to create new functions and monetary merchandise.
Ethereum, the second largest cryptocurrency by market capitalization, heads the checklist of cryptocurrencies in Fintech. Its blockchain has been used to create foreign money (Ether) and in addition serves as a constructing platform for a plethora of decentralized applications.
Solana is one other blockchain with monetary and technological attributes. It’s a high-performance blockchain with a local foreign money known as SOL. It helps builders around the globe in creating crypto apps with its scalable blockchain infrastructure.
Extra cryptocurrencies within the FinTech class: Polygon (MATIC), Algorand (ALGO), Fantom (FTM), Avalanche (AVAX), Cosmos (ATOM)
Cryptocurrency Categorization Is Nonetheless Evolving
There are quite a few methods to categorize cryptocurrencies, and it is essential to notice that some cryptocurrencies included in these classes can match into multiple class kind. Nonetheless, as blockchain expertise and cryptocurrencies evolve, and new use instances are found, extra cryptocurrency classifications will come up.
