Learn Academy Introduction to cryptocurrenciesLesson 6: Different Types of Cryptocurrencies

Lesson 6: Different Types of Cryptocurrencies

After completing this lesson, you will be able to:

Name different types of cryptocurrencies

Describe the difference between coins and tokens.

Know what meme-coins and stablecoins are.

Name a variety of meme coins.

Understand how cryptos are transferred from person to person.

Welcome to lesson number six in Kriptomat’s Introduction to Cryptocurrencies. You have made it to the final lesson in the course! This lesson is “Different Types of Cryptocurrencies.”

There are many kinds of cryptocurrency, each with its characteristic uses

There is no official way to categorize cryptocurrencies, but most currencies can be considered examples of a particular type.
Cryptocurrency types include payment tokens, utility tokens, governance tokens, exchange tokens, asset-based tokens, privacy tokens, and non-fungible tokens (NFTs).
This list isn’t perfect. Some tokens fall into several categories, while others seem to be nearly impossible to classify.

As we discussed in Lesson 4, cryptocurrencies that have their own blockchain can be called coins, while those that run on another blockchain are tokens.

This formal distinction grows less important every day as the cryptocurrency market broadens to include people who rightly conclude that there is no important difference between the ways coins and tokens are used.

Wildcards on the blockchain

In addition to the kinds of tokens listed above, the crypto world includes meme-coins and stablecoins.

Memecoins often start as jokes, but once investors get involved, the money gets real.

Elon Musk and his Shiba Inu dogs are the inspiration for many meme-coins, including Floki Inu, HUH, Dogelon Mars, and Woof. Others include Samoyedcoin, Dogecoin, Baby Doge, Floof, Gaming Doge, Mona, Hoge Finance, Safe Moon, Tamadoge, and Kishu Inu.
Stablecoins weren’t launched as a joke. They are cryptocurrencies whose coin value is tied to a fiat currency or some other commodity. For example, USDT is pegged to the U.S. dollar. Investors put their savings in USDT instead of euros in a bank’s saving account because USDT can earn them an annual yield of 7.5% or more, while they would be lucky to get 1% APY from a bank.

NFTs have their own use cases, marketplaces, applications, and prospects, so they have little in common with other kinds of cryptocurrencies. For more on NFTs, see Lesson 5.

How crypto is bought and sold

The Bitcoin blockchain doesn’t hold any Bitcoins. It is a secure ledger that records transactions – that is, the transfer of a quantity of Bitcoins from one address to another.

People say that crypto wallets hold cryptocurrency, but that’s not true either. A crypto wallet is a program that provides access to the blockchain. Wallets often provide simplified ways to perform transactions, check balances, and so on. But the wallet doesn’t actually hold any crypto.

Custodial crypto exchanges are commonly thought to be storehouses of crypto, but in fact, what they really stockpile is public keys, private keys, and user addresses. There’s no crypto there.

The truth is, cryptocurrency doesn’t exist anywhere. The only thing that exists is the ledger of transactions that records how many coins and tokens you own.

Change that record, and you change the ownership of your crypto

That’s one reason it’s so important not to lose your private key, which serves as the password for decoding messages sent to your address on the blockchain. One of the major benefits of centralized crypto platforms like Kriptomat is that they manage and protect your blockchain keys.

No one needs face masks or a getaway car to steal your crypto. They just need your password.
One of the major benefits of centralized crypto platforms like Kriptomat is that they manage and protect your blockchain keys.

So – what have we learned?

Cryptocurrencies with their own blockchains are coins, while those that run on another blockchain are tokens.
Bitcoin was created to serve as a replacement for government-issued currencies.
Most other cryptocurrencies were launched for other purposes.

You have come to the end of this lesson. Test your understanding by taking the following test.

Which of these is NOT a type of cryptocurrency?

Utility token

Payment token

Interest token

Governance token

The answer you selected is not correct. Please try again.