“A cryptocurrency is a digital/virtual currency that is secured by cryptography” (helps secure communication, which only allows the sender and receiver of the message to view its content), making it next to impossible to duplicate or fake it. Cryptocurrencies operate on a decentralized basis, meaning that there is no central authority in control of it. Cryptocurrencies function on blockchain, a “distributed ledger that works on a network of computers”. Bitcoin was the first cryptocurrency ever invented and today, there exist hundreds of thousands of different cryptocurrencies. It is important that individuals understand that not all cryptocurrencies are similar to Bitcoin.
There are hundreds of different cryptocurrency categories and investors need to understand which category a particular cryptocurrency falls under before investing in it. Despite there being hundreds of categories, most cryptocurrencies fall under fifteen prominent categories. They include:
- Non-Fungible Tokens (NFTs) — XCC-NFT
- Decentralized Autonomous Organisations (DAO) — XCC-DAO
- Decentralized Exchanges & Marketplaces — XCC-DXM
- Decentralized Finance (DeFi) — XCC-DFI
- Fan Tokens, Gaming & Sports — XCC-FGS
- Infrastructure & Internet of Things (IoT) — XCC-IOT
- Media, Memecoins & Mobile — XCC-MMM
- Medium of Exchange & Store of Value — XCC-MEV
- Network, Staking, & Scaling — XCC-NSS
- Platforms — XCC-PTF
- Privacy & Protocol — XCC-PRP
- Smart Contracts — XCC-SMC
- Stablecoins — XCC-STC
- Wallets — XCC-WAL
- Web3 & Metaverse — XCC-W3M
Non-Fungible Tokens (NFTs)
“Non-fungible tokens (NFTs) are cryptographically distinct tokens that are tied to digital and sometimes physical content, serving as a proof of ownership. NFTs can be used for a variety of things, including artwork, digital collectibles, music, and items in video games”. NFTs are one of the fastest-growing sectors in the crypto industry. A few of the largest tokens in the NFT sector include Theta Network, ApeCoin, Axie Infinity, and Flow.
Decentralized Autonomous Organizations (DAO)
Decentralized Autonomous Organizations (DAO) are member-owned communities without central leadership. It is an “organization represented by rules encoded as a computer program that is transparent”, governed by its members, and unaffected by a central government. A few examples of tokens in the DAO sector include Decred, Ethereum Name Service, Aragon, and Badger DAO.
Decentralized Exchanges and Marketplaces
A “Decentralized exchange (or DEX) is a peer-to-peer marketplace” where crypto traders can directly transact with one another. DEXs provides one of crypto’s most fundamental capabilities: they help facilitate financial transactions that aren’t mediated by banks, brokers, or other third parties. A few of the well-known tokens in the DEX sector include Binance Coin (BNB), Uniswap, Stellar, and THORChain.
Decentralized Finance (DeFi)
“Decentralized finance (DeFi) is a new financial technology based on secure distributed ledgers, similar to those used by cryptocurrencies”. DeFi does not have any central authority over “money, financial products, and financial services from banks and institutions”. A couple of known tokens in the DeFi sector include Terra, Avalanche, Wrapped Bitcoin, and FTX Token.
Fan Tokens, Gaming and Sports
A “Fan Token is a digital asset created on a blockchain that grants its owner access to a service that sports organizations provide to their fans” through a website called Socios. In order to interact with their favourite teams, fans can participate in polls on Socios. A couple of the largest tokens in the Fan Tokens, Gaming, and Sports sector include Operon Origins, Gala, and Chiliz.
Infrastructure and Internet of Things (IoT)
Internet of Things (IoT) refers to a vast ecosystem of networked devices and services that collect, exchange, and process data in order to adapt dynamically to their surroundings. IoT is inextricably linked to cyber-physical systems, becoming a key enabler of smart infrastructure by improving the quality of service that they provide. A few notable tokens in the Infrastructure and IoT sector include Helium, IoTeX, and Powerledger.
Media, Memecoins and Mobile
A “Meme coin is a cryptocurrency that originated from an Internet meme” or has other amusing features. A couple of the most well-known meme coins are Dogecoin and Shiba Inu. Media coins are tokens that are connected to the media industry. A few of the largest tokens in the media sector include Hive and MovieBloc.
Medium of Exchange and Store of Value
“A medium of exchange is a system that facilitates the sale, purchase, or trade of goods between parties”. For something to function as a medium of exchange, it must represent a standard of value that must be accepted by all parties. “A store of value is any commodity or item that would normally retain purchasing power in the future and is the function of the asset that can be saved, retrieved and exchanged at a later time, and be predictably useful when retrieved”. The largest and most well-known tokens in this category include Bitcoin, Ripple, Litecoin, and Monero.
Network, Staking, and Scaling
Moving ahead, staking is defined as “holding funds in a cryptocurrency wallet to support the security and operations of a blockchain network”. In simpler terms, it is the “act of locking cryptocurrencies” to obtain incentives. “Scaling in blockchain refers to modifying the way a blockchain network works to accommodate the increasing number of nodes and transactions in the blockchain”. The faster and smoother the transactions are on a blockchain, the better is the experience for the user”. A few notable tokens in this category include Convex Finance, Kusama, Mina, and Amp.
“Blockchain platforms allow the development of blockchain-based applications. They can either be permissioned or permissionless”. Lending and borrowing platforms “allow users to borrow and lend cryptocurrencies for a fee or interest”, which “could be through a DeFi lending app or a cryptocurrency exchange”. A few of the largest tokens in the platforms category include Cardano, Tron, Ethereum Classic, and Internet Computer.
Privacy and Protocol
A “privacy coins are digital currencies that protect users’ privacy by obscuring the flow of money across their networks”. They make it nearly impossible to figure out who sent what to whom — a key feature, especially if you don’t want anyone prying into your finances. A few popular tokens in the privacy and protocol sector include Algorand, Elrond, Zcash, and The Graph.
“A smart contract is a self-executing contract in which the conditions of the buyer-seller agreement are directly written into lines of code”. The code, as well as the agreements contained, are “distributed through a decentralized blockchain network”. The code controls the execution, and transactions are traceable and impossible to reverse. A couple of the largest and well-known tokens in the smart contracts category include Ethereum and Polkadot.
Further, a stablecoin is a type of cryptocurrency that, as its name suggests, aims to provide price stability and is backed by a reserve asset. Stablecoins tend to be “pegged to a currency such as the U.S. dollar or to the price of a commodity such as gold”. A few prominent tokens in the stablecoin category include Tether, USD Coin, Binance USD, and TerraUSD.
“Crypto wallets keep your private keys safe and accessible by storing them. They allow you to send, receive, and spend cryptocurrencies”. They come in a variety of forms, ranging from hardware wallets that are physical to mobile apps that are digital. A few of the largest cryptocurrency wallets include Voyager token, Coin98, and SafePal.
Web3 and Metaverse
“Web3 is a notion for a new version of the world wide web based on blockchain technology, incorporating concepts such as decentralization and token-based economics.” “A metaverse is a network of 3D virtual worlds focused on social connection, defined as a possible iteration of the Internet as a single, universal virtual world that is assisted by the use of virtual and augmented reality headsets”. The most notable tokens in the Web3 and Metaverse category include Decentraland and Sandbox.
It is essential to realize that there are hundreds of different cryptocurrency categories but these are fifteen prominent ones where most of the known tokens fall under. As indicated earlier, it is important that investors realize what category a cryptocurrency falls under and what role it fulfils, so that they can better understand the use of that particular cryptocurrency and the benefits of investing in it, just like how they would before buying a stock, ETF, or mutual fund for instance.
Written by Arhan Parikh (email@example.com)
— — — — — — — — — — — — — — — — — — — — — — — — — — — — — -
Frankenfield, J. (2022, March 2). What is cryptocurrency? Investopedia. Retrieved April 13, 2022, from https://www.investopedia.com/terms/c/cryptocurrency.asp
Melanie Kramer, S. G. (2022, January 18). Beginner’s Guide to nfts: What are non-fungible tokens? Decrypt. Retrieved April 13, 2022, from https://decrypt.co/resources/non-fungible-tokens-nfts-explained-guide-learn-blockchain
Decentralized Autonomous Organizations (daos). ethereum.org. (n.d.). Retrieved April 13, 2022, from https://ethereum.org/en/dao/
Wikimedia Foundation. (2022, March 31). Decentralized Autonomous Organization. Wikipedia. Retrieved April 13, 2022, from https://en.wikipedia.org/wiki/Decentralized_autonomous_organization
Coinbase. (n.d.). What is a Dex? Coinbase. Retrieved April 13, 2022, from https://www.coinbase.com/learn/crypto-basics/what-is-a-dex#:~:text=A%20decentralized%20exchange%20(or%20DEX,brokers%2C%20or%20any%20other%20intermediary.
Sharma, R. (2022, March 24). Decentralized finance (DEFI). Investopedia. Retrieved April 13, 2022, from https://www.investopedia.com/decentralized-finance-defi-5113835#:~:text=Decentralized%20finance%20(DeFi)%20is%20an,financial%20products%2C%20and%20financial%20services.
Marca. (2022, February 22). Fan tokens in sport: More than just football. MARCA. Retrieved April 13, 2022, from https://www.marca.com/en/technology/fan-tokens/2022/02/22/6214ef34ca47416d558b45a3.html
IOT and Smart Infrastructures. ENISA. (2021, August 26). Retrieved April 13, 2022, from https://www.enisa.europa.eu/topics/iot-and-smart-infrastructures
Wikimedia Foundation. (2022, April 5). Meme coin. Wikipedia. Retrieved April 13, 2022, from https://en.wikipedia.org/wiki/Meme_coin
·, L. “A. W., ·, S. W., ·, O. A., ·, L. D., & ·, A. R. (n.d.). Media coins. CryptoSlate. Retrieved April 13, 2022, from https://cryptoslate.com/cryptos/media/
Chen, J. (2021, October 23). Medium of exchange definition. Investopedia. Retrieved April 13, 2022, from https://www.investopedia.com/terms/m/mediumofexchange.asp
Wikimedia Foundation. (2022, March 28). Store of value. Wikipedia. Retrieved April 13, 2022, from https://en.wikipedia.org/wiki/Store_of_value#:~:text=Cryptocurrency's%20role%20as%20a%20store,compared%20by%20advocates%20to%20gold
Binance Academy. (2022, March 16). What is staking? Binance Academy. Retrieved April 13, 2022, from https://academy.binance.com/en/articles/what-is-staking
Explained: Why a blockchain’s size and scalability matter. cnbctv18.com. (2022, January 20). Retrieved April 13, 2022, from https://www.cnbctv18.com/cryptocurrency/explained-why-a-blockchains-size-and-scalability-matter-12174272.htm
Binance Academy. (2022, March 2). What is crypto lending and how does it work? Binance Academy. Retrieved April 13, 2022, from https://academy.binance.com/en/articles/what-is-crypto-lending-and-how-does-it-work
Top blockchain platforms of 2022 for Blockchain Application. LeewayHertz. (2022, March 8). Retrieved April 13, 2022, from https://www.leewayhertz.com/blockchain-platforms-for-top-blockchain-companies/#:~:text=Blockchain%20platforms%20allow%20the%20development,host%20applications%20on%20the%20blockchain.
Stevens, R. (2022, January 10). What are privacy coins and are they legal? CoinDesk Latest Headlines RSS. Retrieved April 13, 2022, from https://www.coindesk.com/learn/what-are-privacy-coins-and-are-they-legal/
Frankenfield, J. (2022, March 24). Smart contracts: What you need to know. Investopedia. Retrieved April 13, 2022, from https://www.investopedia.com/terms/s/smart-contracts.asp
Hayes, A. (2022, March 18). What is Stablecoin? Investopedia. Retrieved April 13, 2022, from https://www.investopedia.com/terms/s/stablecoin.asp
Coinbase. (n.d.). Crypto basics — what is a crypto wallet? Coinbase. Retrieved April 13, 2022, from https://www.coinbase.com/learn/crypto-basics/what-is-a-crypto-wallet
Wikimedia Foundation. (2022, April 8). WEB3. Wikipedia. Retrieved April 13, 2022, from https://en.wikipedia.org/wiki/Web3#:~:text=Web3%20(also%20known%20as%20Web,decentralization%20and%20token%2Dbased%20economics.
Wikimedia Foundation. (2022, April 8). Metaverse. Wikipedia. Retrieved April 13, 2022, from https://en.wikipedia.org/wiki/Metaverse
- 3Commas Review | Pionex Review | Coinrule review
- Ledger vs Ngrave | Ledger nano s vs x | Binance Review
- Bybit Exchange Review | Bityard Review | Jet-Bot Review
- 3Commas vs Cryptohopper | Earn crypto interest
- The Best Bitcoin Hardware wallet | BitBox02 Review
- BlockFi vs Celsius | Hodlnaut Review | KuCoin Review
- Bitsgap review | Quadency Review | Bitbns Review