What are the different types of Cryptocurrencies?
Cryptocurrency is an umbrella term that includes different types of tokens and coins. They are classified into multiple categories and the popular ones are:
Utility Token: Utility tokens are intended to offer access to the platform services where they are residing. The token can be used to avail of all the benefits the issuer provides. The token holder can get the service provided by the brand at a comparable cost.
EX: Golem, Timicoin
Payment Token: Almost all cryptocurrencies fit under the payment token category. Payment tokens are used inside and outside their platforms to pay for products and services.
They are not regulated by any financial authorities. These tokens can be utilized in buying and selling or peer-to-peer transactions without third-party intervention.
Example : Ethereum and Bitcoin.
Exchange Tokens: Platforms for crypto exchanges come with native exchange coins. They are primarily used for buying, selling, and swapping tokens in their parent exchange where the token represents.
Some other use cases are gas fee payment, voting rights, and exchange services. Some of the tokens can also be used outside the exchanges.
Security Token: Security tokens are issued through a security token offering (STO). Financial regulation governs both the issuance and use of security tokens. They obtain value from an external asset.
Security tokens can be sold as security under financial regulations. As a result, they are utilized to secure the tokenization of real estate, bonds, stocks, and other currencies.
Due to the use cases and nature of the token, their dealings, value, and tokenization are controlled by the financial regulatory authority to protect investors.
Sia Funds, Bcap (Blockchain Capital), and Science Blockchain.
Stable Coin: Stablecoins are coins or tokens pegged or tied to another asset like fiat currency or commodity. As the name indicates, they are not volatile enough like other crypto tokens.
Stablecoin value is predictable to some extent. Mainly they are tied to US Dollar and gold value. They are considered a better option for crypto investment since the value is less volatile than other cryptocurrencies.
They can be further classified into three.
Fiat collateralized: value pegged to fiat currency such as Tether USD ( USDT)
Crypto-Collateralized: Backed by other cryptocurrencies, MakerDAO’s Dai (DAI) stablecoin is tied to the U.S. dollar and backed by Ethereum (ETH)
Algorithmic stablecoin: It is controlled by the algorithm to make the value stable, such as Terra USD( UST)