Types of Cryptocurrencies
Image: Cointelegraph
As there are various ways of what cryptocurrencies can be used for, this is an article to generalize and categorize the numerous different cryptocurrencies according to their properties.
1. Currency
Currency coins has only one purpose; to become a means of payment and exchange. Just like the current fiat money like the USD/EUR, currency coins are meant for transactional purposes for the purchase of goods or other transactions.
In order for currency cryptos to succeed, it should have characteristics such as:
¤Ease of Use (mobile wallets/easy to exchange means)
¤Adoption (Providers accepting the crypto as payment options both online and in real world)
¤Advantage over current payment (Transaction speed/Cost/Anonymity)
The current well-known currency type cryptocurrencies are Bitcoin, Bitcoin Cash, Litecoin, Nano, Dash and Monero. From these, Nano seems to be primed for growth and real-world adoption in retail payments. Nano is feeless, instantaneous and highly scalable. More information about Nano can be found here. Monero is the leading privacy currency that ensures anonymity of both the receiver and the sender. Some businesses or government entities may have trade secrets or lists of suppliers and clients that they would like to keep private.
2. Platform
Platform tokens are cryptocurrencies that are expended for use in the underlying platform. A decentralized database is built into the platform that is distributed among numerous computers around the world, with all the information public.
Platform-based cryptocurrencies provides the backbone for future applications, such as Ethereum being a decentralized platform used to run smart contracts. Platforms are also able to host ICOs and decentralized applications (DApps). Examples of platform cryptocurrencies include: Ethereum, Neo, Icon, Eos and Lisk.
3. Utility
Utility tokens are cryptocurrencies designed with a specific use-case. In layman's terms, utility tokens are like fuels to cars. The characteristics of utility tokens includes:
¤having clearly defined purposes
¤Usually resides on top of another blockchain
Ripple (XRP), is a utility token used for instantaneous cross-border transactions between banks in different countries, although it can also be used for payment methods such as in retail shops. The token of Waltonchain (WTC) will be used with its creation of child chains, such as smart cities, which will consume WTC whenever the child chain communicates with the parent chain. The value of a utility token is driven from demand, or usage. As the network usage increases, the supply of the utility token will deplete or be burned.
4. Exchanges
These are tokens distributed by cryptocurrencies exchanges such as Binance Coin, Kucoin Shares, Huobi Token and Coss.
The pros of holding these tokens are that if the exchange gains more volume, the value of these tokens will rise as they are used as a trading pair. Exchanges tokens also offers trade discounts, so that traders will have incentives to trade using these tokens. Further incentives such as quarterly 'burns' of the tokens derived from a certain percentage of the profits for the exchange will mean lower supply and hence, more value for the tokens held. Lastly, tokens can also be used for voting to add new cryptocurrencies to the exchange. As such, holding exchanges tokens will be akin to investing into the exchange and gaining 'dividends' in the form of appreciating value of the tokens.
Conclusion
In conclusion, not all cryptocurrencies fit into these categories, and some of the projects may fit into multiple categories. With blockchain technology revolutionizing industries worldwide, and numerous projects being developed for real-world uses, it remains to be seen which types of cryptocurrencies may see the biggest growth.
References
https://www.reddit.com/r/CryptoCurrency/comments/7xy9rx/different_types_of_cryptocurrencies/
https://www.nasdaq.com/article/3-types-of-cryptocurrencies-you-need-to-know-cm905488