Types of Cryptocurrencies in the World

Cryptocurrencies, unlike fiat currencies, are not monolithic. The reason behind the diversity is the fact that cryptocurrencies often have features that are or can be unique to the project. The projects accordingly vary based on technologies and functionalities. The crypto industry that relies on cryptocurrencies is different from central banks and financial institutions because they offer many unique decentralized services. Therefore, in the interest of new ordinary crypto users and platforms, it is important to highlight the standards on which cryptos are classified.

Various Types of Cryptocurrencies Available

The classification of cryptocurrencies is useful for those who are newly interested in buying cryptos and using exchanges. It is helpful to know the distinctive characteristics of cryptocurrencies such that users do not feel confused about their objectives.

• Payment cryptocurrencies

These cryptocurrencies are primarily suitable for storing and transferring value quickly and securely. Cryptocurrencies help in offering faster, and cheaper transactions than traditional methods. Recording, remitting, and securing financial transactions between individuals around the world is the prime function of these cryptos. The prominent examples are Bitcoin and Litecoin.

The major advantages of these cryptocurrencies sometimes outweigh the benefits associated with traditional assets.

• Finite supply

Bitcoin for instance has a finite supply of up to 21 million coins. 

• Portability and Accessibility

The transferability of cryptocurrencies is high and fast, thereby having a greater degree of convenience to holders.

• Storage costs are lower.

The storage of cryptocurrencies is now becoming economical by the day, because of growing popularity.

Memecoins

Memecoins rely on internet trends and patterns. Most have pop culture references and serve as digital payment tokens. There are common examples of meme coins such as Pepe, Dogecoin, and many more. The US President Donald Trump also launched his meme coin $Trump, while his wife Melania did the same a few days ago by launching $Melania. 

Stablecoins

Stablecoins also fall under the category of payment cryptocurrencies, despite the fact that these are fundamentally different from regular cryptos. The stablecoins combine the efficiency and portability of blockchain technology but have better price stability because they are pegged to the value of fiat currencies. Stablecoins are of three types, fiat backed stablecoins, crypto-collateralized stablecoins, and algorithmic stablecoins. 

• Fiat-backed stablecoins

The aim of stablecoins is a 1:1 value peg with the main currency. The issuers mandatorily need to hold equal cash or cash equivalents in reserve. Tether (USDT), USD Coin (USDC), and Tether Euro (EURT) are the common fiat-backed stablecoins.

• Crypto-collateralized stablecoins

Stablecoins often need smart contracts and need over-collateralization. People deposit more cryptos than the value of stablecoins they receive. The common examples are LUSD and DAI.

• Infrastructure Cryptocurrencies

Infrastructure cryptocurrencies are tokens that improve the existing technology supporting other cryptocurrencies. Several blockchain networks offer smart contract functionality. It encourages developers to form agreements with several applications. 

• Application Development

The introduction of smart contracts on the Ethereum blockchain allowed people to create decentralized applications (dApps). Many use DePIN (decentralized physical infrastructure networks). The most common examples of such cryptocurrencies are Ethereum and Solana. 

• Scaling

Ethereum and similar blockchains depend upon the central network for processing all transactions and facilitating data storage. The approach is safer but the fees can progressively increase. Moreover, the different solutions to the scaling problem include optimistic rollup, Zk-rollup, and data availability indications. 

• Communication

Robust communication infrastructure is important for the development of Web 3. The move will include linking blockchains with real-world data and enable better communication between Layer 1 and Layer 2 networks. These are called blockchain oracles. The main examples of blockchain oracles include Chainlink, Pyth etc. Web3’s rapid growth is also leading to the growth of customized blockchains called appchains. Hence, the complications may require the need for cross-chain infrastructure. The main examples of cross-chain infrastructure include Axelar (AXL), Celer (CELR) and LayerZero (ZRO). 

Uncommon Categories of Classifying Cryptocurrencies

The expansion of decentralized finance has led to the emergence of many uncommon ways of categorizing cryptocurrencies. These include the following categories.

• Structured/exotic products

Decentralized finance (DeFi) can be classified into liquid staking and Real-world assets (RWAs). Liquid staking addresses the limitation of locked funds in traditional staking and allows users to earn staking rewards. 

• Service cryptocurrencies

Some categories concentrate on the servicing aspects of cryptocurrencies, though cryptos are products. Moreover, these categories include decentralized physical infrastructure (DePIN), file storage, and digital resource markets.

Conclusion

There are several ways of categorizing cryptocurrencies. The most common classifications include payment cryptocurrencies and infrastructure cryptocurrencies. Despite significant differences between cryptocurrencies, PayBitoPro supports over 1500 different digital assets worldwide and serves well over 100 countries. Hence, an ordinary user does not need to think twice about the different categories, and by choosing PayBitoPro payment services, he can avail all the benefits that the products provide. Moreover, the degree of variation across cryptocurrencies is a good sign because it reflects the growing adaptability of an expanding industry.