By now, most of us have heard of cryptocurrency in some capacity, even if we don't directly invest in the asset class. Maybe we've seen something about it on the news. Maybe someone in our lives is very passionate about these digital assets and has recommended them to us. But whether we're complete newbies or have engaged with the crypto space for a while, it is important to know about the types of crypto. Many are looking for the newest crypto to invest in making this important to know. The truth is that the term 'crypto' is very broad and includes many different types of tokens, some of which are as follows:
Traditional Crypto Coins
When it comes to cryptos, there is the 'standard' type of token that is perhaps the best-known in the industry. This refers to tokens like Bitcoin that are tied to a dedicated blockchain project, released by a non-government entity, and whose value is based on the forces of demand and supply. While these tokens can go on to serve different needs, they are based on a public blockchain and are accessible to all.
Examples of these tokens include the big names in the industry like Bitcoin, Ether, Solana, Cardano, and many more. These tokens can be easily acquired on exchanges and anywhere else cryptos are sold.
Stablecoins
Unlike traditional cryptos, stablecoins refer to tokens whose value is tied to a more mainstream asset or fiat currency. Take Tether, the most famous stablecoin, whose value is pegged 1:1 to the US Dollar. This means that 1 Tether token is always equal to the value of $1. Stablecoins can be pegged to other currencies and even to assets like gold, silver, and other asset classes. The purpose of stablecoins is to escape the volatility associated with traditional cryptos as a result of the demand and supply forces. As such, they are much more 'stable' to use since their value is relatively constant.
Gaming Coins
Over the years, crypto has been used extensively in the gaming industry, and this has seen a new crop of tokens called gaming coins become popular. Gaming coins are tokens developed by gaming projects to act as either in-game currency or a rewards system for players. An example of this would be the MANA token which is used in the Decentraland universe. There are also crypto gambling projects that have launched their own tokens which make it easier for players to access their services. And while not every project has an associated coin, they remain popular.
Utility Coins
Utility coins are similar to gambling coins except they are not tied necessarily to a gaming project. Platforms like Telegram, Binance, and others launch tokens to allow users to interact with each other and access services, whether this is trading, completing non-monetary transactions, and so on. Utility coins have been fairly controversial as some regulators have accused them of being securities. But, despite the legal issues, they also continued to be widely used.
Central Bank Digital Currencies
While crypto is primarily the domain of the private sector, several countries have gotten in on the action and released their own cryptos. Dubbed Central Bank Digital Currencies (CBDCs), they are essentially the crypto version of the existing fiat currency of the nation. Some of the countries that have issued CBDCs include China and the British Virgin Islands. Other countries like Canada and several European nations are in the process of developing their own CBDCs and it has become a marker of crypto acceptance. These tokens are obtained from the central bank and activities completed with them can be monitored by the government
Meme Coins
The crypto sector is known just as much for its humour as it is for its innovation. This has led to the creation of meme coins, which are cryptos based on memes, pop culture, and other 'non-serious' topics. Other than that, they are like any other token; they are based on a blockchain and see their value rise and fall based on market demand. Meme coins might have a practical use or might be made purely to capitalize on hype. Some of the biggest meme coins include Dogecoin and Pepe and while they have been controversial, they are still popular.
Shitcoins
Not every crypto in the industry is worthwhile and profitable. In fact, some are completely worthless and have nothing to offer. These are the tokens we call shitcoins and they are a form of scam token. Shitcoins are essentially created to convince unwitting investors of their value and trick them into purchasing. Once the customer has bought it, they are left with tokens that have no current or future value and their money is gone. As you invest in crypto, you'll want to get adept at spotting and avoiding shitcoins as much as possible.
Altcoins
Bitcoin is undoubtedly the biggest cryptocurrency in the industry, both in terms of market cap and popularity. In fact, it is so big that every other token is called an altcoin. So, whether it is a meme coin, utility coin, or even shitcoin, every non-Bitcoin token is referred to as an altcoin.
Low Cap Coin
This refers to a crypto token that has a market cap of under $1 billion. These tokens tend to be newer entrants into the market and sometimes have massive growth potential.
Conclusion
Knowledge is power and if you're going to invest in a market as dynamic as the crypto space, you want to have as much knowledge as possible. One of the most basic things to know is the different types of crypto and how they operate. This will help to guide your decision-making moving forward and even let you know which to avoid. From meme coins to low-cap coins and everything in between, the crypto sector has no shortage of options. And as you make the decision to invest, this understanding of the tokens will come in handy.