The ever-evolving cryptocurrency marketplace has focused the populace’s attention on which types of coins are worth investing in.
Today, most people — from walks of life — are jumping into the cryptocurrency bandwagon to take the speculative risks on particular coins they think will provide a high ROI (Return on Investment). Many stories have emerged of some lucky entrepreneurs who bought selected cryptocurrencies for under thousand dollars a few years back, forgot about them, only to be surprised that they are worth millions a few years later.
The majority of these winning entrepreneurs are just lucky — long shot guesswork that paid off handsomely. At the same time, many entrepreneurs have made fortunes by creating knowledge about cryptocurrencies and its underlying technology: Blockchain. As it’s the case with traditional investments, knowledge is crucial for creating consistency — regarding profit maximization — in a new world order of digital assets.
When you understand the nitty-gritty of how cryptocurrencies and Blockchain technology work, it becomes easier to make informed choices about investing.
Types of cryptocurrencies
Each crypto has been designed to solve a specific problem and fits into one of three categories:
· Transactional;
· Platform; and
· Utility
It is important to note that some cryptos may fit in more than one group. Let’s take a keener look at each of these groups and examples in each.
#1: Transactional cryptocurrencies
Transactional cryptocurrencies are the original group of cryptocurrencies. They are created to be used as a currency. In other words, these cryptocurrencies are used as means of exchange. These coins are meant to eliminate the need for government-issued fiat money and democratize how money is generated and controlled.
Cryptocurrency enthusiasts aver that some of the cryptocurrency will one day replace all the fiat money, even if such crypto will emanate from central banks themselves. Here are typical examples of transactional cryptos:
· Bitcoin (BTC): It was first P2P and decentralized ledger coin launched in 2009 by Satoshi Nakamoto. It is the most popular crypto with the highest market cap at nearly $300 billion.
· Bitcoin Cash (BCH): Bitcoin Cash (BCH) was hard-forked from the original Bitcoin in 2017 in an attempt to divide it from Bitcoin. Even though it is similar to Bitcoin, its block size limit is 8 MB compared to 1 MB in Bitcoin.
· Dash: Dash is secretive crypto also hard-forked from Bitcoin that provides more anonymity by using a decentralized master code. As of this writing, Dash has a market cap of nearly $10 billion.
· Monero (XMR): Monero is a private, secure, and untraceable cryptocurrency unveiled in 2014 with a market cap of nearly $8 billion. It has a strong emphasis on decentralization and scalability.
· Litecoin (LTC): It is a P2P cryptocurrency developed and released under the MIT/X11. It was also hard-forked from BTC and requires 2.5 minutes to generate a block as opposed to 10 minutes in BTC.
#2: Platform
Platform cryptos are created to eliminate third-parties, create marketplaces, and even help to launch other cryptocurrencies. These cryptos provide the foundation for a host of future apps. Ethereum is one such example. Ethereum was created in 2015 as a decentralized platform for creating smart contracts and DApps (Decentralized Applications).
Ethereum allows smart contracts to be created and executed without fraud, third-parties, or downtimes. In this sense, Ethereum is different from transactional cryptos because it is not just a method of payment, but it can also be used to execute smart contracts. Ethereum can also be used to develop new cryptocurrencies.
#3: Utility
A utility cryptocurrency is created for a specific task. For instance, the crypto could be used to facilitate cross-border payment and transfer of digital asset such as land. Examples of utility cryptos include:
CoVEX coin: CoVEX crypto is a self-funded incentive that acts as a revenue-generating for token holders on CoVEX platform to receive revenue in the form of transaction fees.
Ripple (XRP): Ripple is a real-time global settlement platform which provides immediate and low-cost international payments. It enables banks to settle the cross-border payments in real time using end-to-end transparency system at minimal costs.
By: CoVEX Team
