Cryptocurrencies are becoming a more and more commonplace phenomenon in today’s society, but it’s hard to tell who actually understands them and how they work. As more and more people begin to invest in their own personal cryptocurrency, it’s important to understand the various types of coins, which we will discuss here.
How Many Cryptocurrencies Are There?
You may be wondering how many cryptocurrencies there are. There are currently over 21, 844 different cryptocurrencies in existence, and the number is growing rapidly. This is because there’s a huge demand for them and they provide people with a way to make money quickly.
There are lots of new cryptocurrencies being created every day, so it’s not surprising to see that this list keeps getting longer and longer. The number of available cryptocurrency coins is expected to grow even more in the future as well, so if you’re thinking about investing in one today (or even starting your own), now is definitely the time.
Why Are There So Many Different Cryptocurrencies?
In order to understand why there are so many different cryptocurrencies, it’s important to first understand what a cryptocurrency is. Cryptocurrencies are digital currencies that are based on blockchain technology.
Blockchains are decentralized ledgers that record transactions in an immutable way, meaning they cannot be changed or altered by any one person or organization. The beauty of this system is that it doesn’t rely on trust between individuals.
Instead, it relies on cryptography and the consensus power of a large group of people (known as miners) who contribute their computing power in exchange for block rewards when blocks get mined.
This means that no single entity, like banks, controls the network because each individual has their own copy of all transactions ever made since bitcoin was created back in 2009.
Two Categories Of Cryptocurrency
Coins
Coins are the most common type of cryptocurrency. They have a fixed supply and can be used to pay for goods and services, as well as transaction fees on the blockchain. Many coins also act as a reward for miners, who use their computing power to process transactions on the blockchain in exchange for newly minted coins.
Crypto coins also differ from currencies (like the US dollar) because they’re not regulated by any central bank or government.
The value of crypto coins is determined by their market price on exchanges where they can be purchased with other cryptocurrencies or fiat money. The price is influenced by supply and demand factors, similar to how the price of gold swings depending on whether more people want to buy it or sell it at that moment in time.
Tokens
Tokens are a representation of a digital asset or utility. These tokens can be used to access a blockchain network, or to pay for goods and services.
Tokens are often created by ICOs, which is short for Initial Coin Offering. This is essentially a fundraising mechanism where the company sells their token as an investment opportunity in exchange for bitcoin or ether.
The price that you pay for tokens is usually based on how much you believe in the product/service/platform being built by the developer who created them. Once an ICO has been completed and tokens distributed, they can then be traded on exchanges like Bitcoin or Ethereum until they reach their full value and aren’t worth as much anymore
Crypto Coins vs Tokens
Crypto coins are the original type of cryptocurrency and are more like traditional currencies. They have their own blockchain and can be used to pay for goods or services. Examples include Bitcoin, Litecoin, Ethereum and many others.
Crypto tokens are a newer type of crypto asset that was developed later as an alternative to ICOs (Initial Coin Offerings). Instead of using their own blockchain or having their own wallet, crypto tokens use the blockchain from another cryptocurrency such as Bitcoin or Ethereum.
What Are Altcoins?
Altcoins are cryptocurrencies that are not Bitcoin. “Altcoin” is a portmanteau of alternative coin or alternate coin, and they’re often used to describe any cryptocurrency other than Bitcoin.
There are thousands of altcoins floating around, but they can be classified into a few major categories:
- Forked coins (e.g., Litecoin) – The code was copied from another cryptocurrency and modified in some way (usually by changing the hashing algorithm).
- Pre-mined coins (e.g., Monero) – These currencies have a fixed supply when they launch, which means that users can buy them from the developers at a set price instead of mining them over time like most cryptocurrencies do.
- Anonymous coins (e.g., Zcash) – These currencies offer increased privacy for users who want to keep their transactions private from prying eyes on both sides of transactions.
As for altcoin trading pairs, it’s pretty much what it sounds like—a currency pair composed of one unit of a given altcoin or bitcoin and one unit of another asset or fiat back currency, for example, BTC ETH, LUNA/USDT, USTC USDT and many more.
Final Thoughts
The idea of a new currency sounds exciting and it’s no wonder that there are so many different cryptocurrencies being created. However, it is important to understand the differences between them so that you can choose which ones best suit your needs.
