There are many different types of cryptocurrencies. In this article we discuss the most popular varieties. Each type has its own unique features and benefits. How do you know which type is right for you? This guide will give you some tips on how to choose the right type of cryptocurrency and how to accept this digital currency as payment.
How many different types of crypto are there?
The number of different types of individual cryptocurrencies varies and they all have price fluctuations. In 2018, there were 1,583 different individual types, according to crypto asset price tracking website coinmarketcap.com.
While you’ve probably heard and seen the most about Dogecoin for a while, courtesy of sociable Tesla CEO Elon Musk, Bitcoin and Ethereum are the most popular form of this digital money. Usually you see these two forms of digital money at the top of the list of the cryptocurrency market in terms of highest market cap
How to choose the right type of digital assets and cryptocurrency?
Acquiring digital assets and cryptocurrency is one of the most important investment decisions you will ever make. With so many different types of digital currencies available, it can be overwhelming to choose the right one. Moreover, when it comes to choosing the right type of cryptocurrency, there are many factors to consider.
First and foremost, do your research. This is probably the most important advice. Don’t take anyone’s word for it when it comes to assets and cryptocurrencies. There are many frauds and scams galore, so research everything thoroughly before making a decision.
Here are a few other factors to consider when choosing the right type of cryptocurrency for your needs:Know the purpose of the currency: Not all cryptocurrencies are created equal. Some are safer than others. Some have faster transaction times. Some are more private than others. Consider your needs before choosing crypto assets. Stick to higher currencies: In general, it is advisable to stick with more expensive currencies. They are likely to stick around in the long run and are less likely to get hacked or otherwise compromised. Know how it compares and converts: Ask yourself questions such as how do the crypto assets compare to others in terms of price and market cap? How easy is it to convert the currency into other types of assets, such as cash or gold? Volatility: Be prepared for the volatility of the market, especially when it comes to crypto. Also know that crypto assets are less liquid than other types of conventional financial assets. That’s why it’s good to know your risk tolerance. Keep in mind market cap: The market cap or market cap of a cryptocurrency is the total value of all the coins in circulation. It is a good indicator of how successful a project is.
Different types of cryptocurrencies
Not to be confused with individual cryptocurrencies, which you saw earlier that there are SO many cryptocurrencies, are the four main types on this list. These four have their own bag of benefits, risks, and purposes. Here we examine the different types so that you can make an informed investment decision.
1. Proof of work
To start this list, we have the first type of cryptocurrency that started with Bitcoin. It processes transactions via blockchain using a process known as proof of work or PoW for short.
When a transaction is made, it is broadcast to the network and miners compete to validate the transaction by solving complex math problems. The first miner to solve the problem gets to add the transaction to the blockchain and is rewarded with a small amount of cryptocurrency.
The main advantage of PoW is that it is very secure as it is very difficult to attack or manipulate the network. However, PoW can be quite energy intensive as miners have to solve complex math problems to validate transactions.
2. Proof of Stake
The second main type of cryptocurrency is proof of stake (PoS), which is designed to address the problem of energy intensity in PoW. With PoS, instead of miners competing to validate transactions, the person who has the most cryptocurrency in their wallet (i.e. has the largest stake) is chosen to validate the transaction.
The main advantage of PoS is that it is much more energy efficient than POW as it is not necessary to solve complex math problems.
However, some people argue that PoS is not as secure as POW as the person validating transactions can be more easily manipulated or attacked. PoS can also be quite centralized as the person validating transactions is often the one with the highest stakes. Notable cryptocurrencies that rely on PoS blockchains include Dash and Tron.
The third main type of cryptocurrency is stablecoins, which are designed to address the issue of volatility in the cryptocurrency market. Stablecoins are pegged to a stable asset, such as gold or the US dollar, and their value does not fluctuate as much as other cryptocurrencies.
The advantage of stablecoins is that they are much less volatile than other cryptocurrencies, making them a more stable investment. However, some people argue that stablecoins are not really decentralized as they are tied to a centralized asset.
4. Auxiliary Tokens
Utility tokens are a type of cryptocurrency that can be used to purchase goods or services on a particular platform. They are often referred to as ‘app coins’ or ‘protocol tokens’.
The advantage of tokens is that they have a use case, which gives them a potential value. However, the biggest risk with tokens is that their value is often highly speculative as it is based on the future success of the platform.
Other types of cryptocurrencies
In addition to the ones on this list above, there are other digital currencies such as:Mining Rewards: With this type of cryptocurrency, miners are rewarded for their efforts in validating transactions with a small portion of the cryptocurrency. Transaction Fees: With this type of cryptocurrency, users are charged a small fee for each transaction they make. Initial Coin Offering (ICOs): With this type of cryptocurrency, companies issue new crypto coins or tokens to raise money for their project.
What types of cryptocurrency use blockchain technology?
Bitcoin was the first cryptocurrency to use blockchain technology to record transactions. Meanwhile, most cryptocurrencies use it. For example, both the bitcoin and the Ethereum network base their structure on blockchain technology.
Smart contracts are often built on top of blockchain networks. For example, the ERC-20 standard for tokens is based on the Ethereum blockchain. In short, many popular altcoins and stablecoins are ERC-20 tokens.
What is the probability that society will adopt a blockchain economy?
A blockchain economy is where assets and cryptocurrencies are widely used and accepted, eventually taking the place of current monetary systems and physical financial institutions. The chances look good to adopt the system globally. In fact, Gartner predicts that 20% of large companies will use blockchain by 2024.
That said, it’s too early for blockchain technology and it’s too early to say if society will adopt 100% anytime soon. However, it has the potential to forever change the way we interact with the digital world. However, it is definitely worth keeping an eye on as some experts predict that blockchain will radically change the global economy in the future.
What is the cheapest digital currency?
The cheapest cryptocurrency is often the one with the lowest market cap and it fluctuates. Of course ‘cheap’ is a relative term. Compared to Bitcoin, almost every other cryptocurrency is relatively affordable. For example, the price of Bitcoin is around $30,371.87 at the time of writing, while the price of Dogecoin is only around $0.087 (USD coin).
If you are a small business owner reading this post, your next question might be how to accept crypto payments. While accepting Bitcoin cash isn’t as simple as accepting credit card payments, there are a few different ways you can do it.
The first option is to use a cryptocurrency payment processor such as BitPay or CoinGate. These companies take over the complexity of processing crypto payments for you.
Another option is to use a cryptocurrency wallet that supports fiat currency conversion. For example, the Edge wallet allows you to seamlessly convert between Bitcoin and US dollars.
Finally, you could also develop your own solution to accept more crypto payments. This option is only recommended for companies with the resources to do this as it can be quite complex and time consuming. However, it can really facilitate payments if you take the idea seriously.
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