The start of the crypto era welcomed Bitcoin, the first-ever cryptocurrency. Over a decade later, thousands of crypto assets followed suit. The uniqueness of each cryptocurrency has continued to remind us that although they may all be very much alike, they still have their distinct functions. Here, we will navigate the top 5 cryptocurrencies that have wowed investors with their unique features and ever-growing market cap.
How many types of crypto assets are there?
Investopedia recorded the number of cryptocurrencies to be about 8,000 in January 2022. This figure shows an obvious growth since the release of the first cryptocurrency in 2009. But wait, there is more information to intrigue you.
Other types of crypto assets have greatly exceeded our expectations. In the discourse of crypto assets, coins are often given the bulk of the attention. Other assets tend to be overlooked despite the wonders they have performed in the digital market.
Tokens are an example of crypto assets that are used in the present time. Since tokens and coins fall in the same category of crypto assets, they are often mistaken for each other. In simple terms, tokens are specific to certain products or services.
We will use a concert ticket as an example. A ticket can serve as a non-virtual token. Although it holds value, you can’t trade a ticket for regular things like books in a bookshop. You can only use the ticket to attend a concert as intended. However, you can only trade your ticket for some books in the bookshop if you convert it to fiat currency.
Of course, tokens are just an umbrella term for a variety of crypto assets. Here are some types of tokens you should know about:
- Utility token: It is designed to serve a particular purpose in a platform. Most times, utility tokens are usually used as a payment option on the platform it was built on. Keep in mind that a utility token should not be mistaken for a security token that is investment-based. Don’t worry, we will get to that soon.
- Security token: It is similar to real-world securities. Once purchased, you can get certain shares in a company along with some rights. Just like conventional securities, the value of security tokens may fluctuate leading to a sporadic change in value.
- Non-fungible token (NFT): NFTs represent unique and irreplaceable tokens. An asset is fungible because it can be easily be exchanged for its kind. The reverse is the case for NFTs. You cannot exchange one NFT for another because of its uniqueness. They are built on the Ethereum Blockchain so you can purchase Ethereum.
Cryptocurrency in a nutshell
Cryptocurrency was released by pseudonymous founder, Satoshi Nakamoto in 2009. A peculiar trait of this virtual asset is that it is decentralized. This means that transactions can occur directly on the platform without a middle-man. This is possible due to blockchain technology.
Blockchain is a system that uses a peer-to-peer network to record transactions making it difficult to manipulate. The creation of blockchain has revolutionized the digital market entirely. This technology enables open transactions and more control to users. A downside to this is that there would be nobody to run to if any issues arise.
Crypto assets employ a technique called cryptography. Cryptography is a technique that uses certain communication methods to secure information. It is applied in public and private keys. These are the contents stored in a crypto wallet. The public keys encrypt data while private keys decrypt data.
Why are there so many cryptocurrencies?
When cryptocurrencies are put side to side with fiat currencies, you will notice that cryptocurrencies outnumber fiat currencies by a ridiculous amount. The reason behind this is the ease in the creation of cryptocurrencies. Another round of applause goes to blockchain for allowing developers to create new cryptocurrencies on the technology.
We can also attribute the large number of cryptocurrencies to the versatility it allows. Different cryptocurrencies can serve different purposes. While one may be known to be highly volatile, another might act as a good store of value.
Cryptocurrency and other types of crypto assets
Bitcoin paved the way for all other cryptocurrencies. Because of the impact of Bitcoin in cryptocurrency, it is often treated differently from other cryptocurrencies. Hence, other coins that are not Bitcoin are referred to as altcoins.
Altcoins are known as alternatives to Bitcoin. Bitcoin is usually set as the yardstick for altcoins. This is why altcoins are very similar to Bitcoin in the sense that they share similar price movements.
A major disparity between Bitcoin and Altcoins is their difference in mining. Mining in cryptocurrency is a process that allows new coins to be in circulation. Bitcoin mining is usually a lot more expensive and time-consuming than the mining of altcoins.
BTC – Bitcoin
Bitcoin (BTC) has paved the way for other cryptocurrencies to flourish since its inception in 2009. The success of Bitcoin can be seen in its impressive market capitalization of $718 billion just in January 2022. Has Bitcoin not wowed you enough? Wait till you find out that Bitcoin accounted for 66% of cryptocurrency’s market cap in 2020.
Bitcoin’s success is not just attributed to how early it was created but also, its amazing features. The revolutionary cryptocurrency is not subject to manipulation or central authority. Bitcoin has also found favor in its advanced blockchain, liquidity, and high trading volumes.
ETH – Ethereum
Ethereum (ETH) is an open-sourced blockchain that was released in 2015. The blockchain platform is known for its renowned cryptocurrency called Ether. The Ethereum blockchain does not just serve as a developer for the Ether cryptocurrency. It also stands as a means to develop smart contracts and decentralized applications (DApps).
BNB – Binance Coin
Binance coin (BNB) is a cryptocurrency released by the Binance exchange platform in 2017. The Binance coin was created on the Ethereum blockchain with the ERC20 token. The coin is primarily used to trade on the Binance exchange platform. The coin supports other functions such as loans, payment, and booking purposes among others.
FTT is an upcoming token that was established by the FTX exchange. FTX is a crypto exchange platform where trading and other financial operations are performed. FTT is operated on the Ethereum Blockchain with ERC20 token as the standard. Since FTT is issued by FTX, FTT users receive discounted perks on the FTX platform. The platform also provides users with the opportunity to win prizes and rewards through fun games.
SOL – Solana
Solana coin (SOL) was released in 2019 by its creator, Anatoly Yakovenko. The coin experienced major growth in 2020 as its value amounted to $200. The coin is operated on the Solana blockchain platform. Solana boasts of a high transaction speed of about 65,000 transactions per second with very little fees. This platform does not only allow transactions but also enables smart contracts, DApps, NFT powering, among others.
From this piece, we have seen the success and versatility of digital currencies. This goes to show that cryptocurrency is more than just for trading. The digital giant branches out to a lot of other functions. Different crypto assets serve their functions and it is important to study them before venturing.
Diana is the CTO of Vestinda.
She’s an engineer with extensive experience in the payments space, passionate about mathematics and artificial intelligence.