Understanding the Different Types of Cryptocurrencies

There are four major types of cryptocurrencies. They are utility, payment, security and stablecoins. There are also DeFi tokens, NFTs, and asset-backed tokens. Of all cryptos, utility and payment are the most common. There are also coins and then there are altcoins. Bitcoin sits at the top of the food chain. All other coins that came after Bitcoin are known as altcoins. Coins are based on their own blockchain. Tokens are the digital representations of s particular asset or utility in a blockchain. All tokens can be termed altcoins, but they are differentiated by residing on top of another blockchain and not being native to the blockchain on which they reside. So let's run through some examples. 1) Utility Tokens Utility tokens, unlike coins, are usually premixed and created at one go by the developer of a cryptocurrency network. They are designed to serve a specific purpose and are typically distributed by way of an initial coin offering. While investors may be able to purchase and use these utility tokens as a form of payment on the network to gain access to a particular service, they do not come attached with a monetary value. Examples are Funfair and Basic Attention Token. 2) Security Tokens As an investment asset, a security token is a digital asset that represents ownership or other rights and transfers value from an asset or bundle of assets to a token. For example, a company that wants to raise funds for an expansionary project can decide to issue fractionalized ownership of their company through a digital token as opposed to issuing stock. An example is Science Blockchain. 3) Payment Tokens These are used for paying for goods and services inside and outside their own platforms. Almost every crypto falls into this category which means the most famous examples are Bitcoin and Ethereum. 4) Exchange Tokens These tokens are native to crypto exchange platforms. The best-known examples of exchange tokens are Binance BNB which is the largest exchange token by market capitalization and FTX's FTT. Crypto exchanges launch tokens for various reasons, such as to cover transaction costs and raise capital and liquidity. The biggest risk of investing in exchange tokens is counterparty risk as was discovered with FTX. 5) Non-Fungible Tokens These are cryptocurrencies with limited issuance that have unique identities and tokens that make them hard to replicate or copy. The most famous was Jack Dorseys First Tweet NFT. Dorset turned a static image of a five-word tweet into a digital file stored on a blockchain and the NF was born. This took place in December 2020. A few months later, it was bought for $2.8 billion. In April 2022, the buyer put the NFT up for auction for 14,969 ether of $50 million. The highest bid was $280! In reality, more than three-quarters of all cryptocurrencies are garbage. This year has been described as crypto winter. This is like the crash of 2000/2001 which saw the emergence of Amazon and the disappearance of You want to spend your time looking for the Amazons in the crypto space and sidestepping the