Table of Contents
How many types of cryptocurrency are there?
8 of the most common cryptocurrencies
Different types of crypto assets
Aug 25, 2022
7 min read
How many cryptocurrencies are there? Answers vary but in short: a lot. As many as 70,000, by one estimate.
The rapid rise of Bitcoin has sent interest in cryptocurrencies to unimaginable heights. “Crypto” is an umbrella shorthand term used to describe types of digital currency that use blockchain technology: a digital public ledger that uses complex cryptography to record every transaction. It’s a decentralized system spread across thousands of computers around the world, and users are identified not by name but simply by the ID number of their digital wallet.
Unlike so-called fiat currencies, such as the dollar and yen, cryptocurrencies aren’t backed by a government. Nor do they involve any banks or other intermediaries.
Those who are bullish on cryptocurrency believe the currencies and the blockchain are the future of money—where power is in the hands of users rather than intermediaries or governments, and transactions are completely transparent. Others merely view the crypto opportunity as they would any other investment: an asset that they can buy and sell to try to make money.
Answers vary but in short: a lot. As many as 70,000, by one estimate. Because blockchain technology is open-source, anyone can access and use it. So it’s relatively easy to take that source code and create brand new cryptocurrencies.
Not all cryptocurrencies have big followings, and the circulation and use of most aren’t anywhere near the most popular crypto, Bitcoin, whose market capitalization is by far the largest, exceeding $1 trillion for a time in early 2021. But popularity and size are not necessarily always the goals for the creators of these so-called altcoins (alternative coins, meaning any cryptocurrency other than Bitcoin). Many are instead designed for certain scenarios, companies, and industries.
There are many different cryptocurrencies, and among the most widely used based on market value are:
Created in 2009 by an unidentified person (or people) using the alias Satoshi Nakamoto, Bitcoin is the mother of all cryptocurrencies. It’s considered the first “real” crypto, built around the blockchain and paving the way for the thousands of others after it.
Bitcoin burst into broader awareness in about 2017 and has surged in value during the past few years. At the same time it has also been gaining mainstream appeal: electronic-payments company PayPal lets customers buy the crypto via Venmo, electric-carmaker Tesla has bought Bitcoin, and big banks such as Morgan Stanley are giving some of their customers access to bitcoin investment funds.
Currently the second-most valuable crypto after bitcoin, Ether was created largely to give app developers freedom, aiming to return control to the creators and allow them to avoid intermediaries such as Apple and Google—who take a large cut for purchases made on their app stores.
Ethereum uses smart contracts, or programs on the blockchain that execute automatically when predetermined conditions are met. Smart contracts make transactions fast and accurate: Because they’re automated, there’s no time spent processing paperwork and there’s no need to pay an intermediary to help make the deal happen. And in business applications like supply chain, smart contracts can also automate workflow by signaling the next action to begin when the previous step’s conditions are met.
Ether has been on a tear lately, thanks in part to its status as the currency of choice to buy NFTs, or non-fungible tokens: digital art and other collectibles that have become a major trend in the art, sports, and media worlds. In March 2021, a piece created by digital artist Beeple sold for a record-setting equivalent of $69.3 million, paid for in ether.
A crypto developed by Ethereum co-founder Charles Hoskinson, Cardano was built on a “scientific philosophy” and dozens of peer-reviewed research papers. Cardano uses its own internal crypto, called ADA, to let users send and receive funds. It’s also a different type of blockchain technology, with the goal of being “greener” and more scalable than other platforms.
As Cardano evolves, its researchers use evidence-based approaches and continue to solicit peer insights before implementing each new phase of development—including a recent update to allow smart contracts, like Ethereum. It’s currently the third-largest crypto.
This cryptocurrency is issued by Binance, one of the major crypto exchange platforms. The company created Binance Coin as a token that can be used to pay fees on crypto trades and app-building on its platforms. But it’s grown significantly and can now also be used to pay for goods and services.
Tether is different in that it’s a so-called stablecoin: Its value is tied to that of the U.S. dollar, a traditional fiat currency. That may sound antithetical to the entire premise of cryptocurrency, but the concept of Tether is to include both the intermediary-free benefit of cryptos and the stability of a government-backed currency. Some users like to use Tether as a go-between when moving funds from one crypto to another, rather than converting to dollars and back to crypto again.
Unlike Bitcoin and many others, Ripple doesn’t use the blockchain. Instead Ripple, whose cryptocurrency is called XRP, designed its system to help larger institutions move money all over the world—in any form—while reducing the costly overseas-transfer fees usually incurred in converting foreign currencies.
True to its name, this crypto is a sort of Bitcoin-lite—though much smaller in circulation than the original. Former Googler Charlie Lee created Litecoin in reaction to what he perceived as flaws in Bitcoin’s setup. Though many of the basic ideas are the same, Litecoin uses different cryptographic algorithms and offers benefits like shorter times for transactions to settle compared to Bitcoin. It also uses less electricity.
What began as a joke has become a notable entrant in the cryptocurrency world. A pair of software engineers created Dogecoin in 2013, jumping on the Shiba-Inu-and-Comic-Sans “doge” memes to attract buzz and bring broader appeal to the then-niche crypto world. Recently, meme-loving Tesla CEO Elon Musk has helped push Dogecoin higher with Twitter chatter about the crypto.
As the cryptocurrency list above indicates, there are many different cryptocurrencies designed for specific purposes. Here are a few of the main types of crypto assets:
Think of this category as the classic or original crypto: Payment cryptocurrencies are digital money created to pay for goods and services. Most are decentralized, powered by blockchain technology, and enable anonymous transactions. Some, like Bitcoin, are generalized and offer an alternative to traditional money. Others are designed to facilitate payments for specific companies or industries. And then there are alternatives such as Litecoin, which set out to improve on existing payment cryptos with benefits like faster transaction times.
Most of those payment cryptocurrencies are powered by the blockchain—and infrastructure cryptocurrencies are what help make the blockchain possible. Many infrastructure cryptos were created to pay the people who own the computers that run blockchain programs, and these machines and the energy they use can cost a great deal. Without those thousands of computers sharing the work, the blockchain wouldn’t be decentralized, and couldn’t exist.
Financial cryptocurrencies allow users to manage or trade other types of crypto assets. For example, a user can buy a certain type of cryptocurrency to get access to one of the exchanges, where they can then purchase other cryptos. Some financial cryptocurrencies are more complex, created to facilitate traditional services, such as lending.
These cryptos focus more on leveraging the underlying blockchain technology, rather than acting as digital money. Service cryptocurrencies can help specialized industries store information on the blockchain, especially potentially sensitive data like healthcare records, financial transactions, or business files. These “real-world” uses are in their early days, but several cryptos are experimenting with what’s possible.
This is the “fun” category in the batch: Entertainment cryptos are used as payments or rewards for media and entertainment offerings like games, original content, and some gambling applications.
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