Cryptocurrency Type Guide: The Differences, Benefits, and More
When you hear about cryptocurrencies, the first word that pops into your mind is Bitcoin. That’s because Bitcoin was the first digital currency to hit the market in January 2009. However, thousands of new cryptocurrencies were invented after Bitcoin.
If you’re new to the digital currency world, it can be challenging to make sense of how everything works. With so many crypto assets, it’s hard to differentiate one currency from another.
Fortunately, our cryptocurrency type guide below will help you. Read on to learn.
What Are Cryptocurrencies?
It’s essential to understand what cryptocurrencies and altcoins are before diving into the types of digital currencies available in the market today. Cryptocurrency is defined as a digital or virtual currency that takes the form of digitized tokens or coins.
Some digital currencies like Bitcoin have already ventured into the world and even taken a physical form. However, most of them remain digitized and intangible.
The word “Crypto” defines the complex cryptography that helps create and process cryptocurrencies. It also defines how people use digitized currencies to transact across decentralized systems.
These currencies were created to avoid control and manipulation by governmental bodies. But as cryptocurrencies grow more popular, this aspect has come under scrutiny.
Altcoins are cryptocurrencies designed and modeled after Bitcoin. Most altcoins creators say their currencies are an improved version of Bitcoin.
Some of the altcoins have better and improved features than Bitcoin. However, none of them can match the level of security achieved by the Bitcoin network.
Types of Cryptocurrency
Bitcoin is one of the most popular digital currencies. However, there are also other well-known cryptocurrencies in the market today.
When Bitcoin was first launched, it had little to no competition. That’s because it existed alone in the newly invented world of cryptocurrencies.
However, by early 2011, new cryptocurrencies started emerging as Bitcoin’s competitors. Today, we have thousands of cryptocurrencies online.
Most of these new currencies offer consumers new functions that bitcoin misses. However, they are often designed using the same fundamental principles as Bitcoin.
Below are some of the most popular digital currencies today.
Bitcoin was the first digital currency to be created. It was launched in 2009 by an unknown person or group of people known as Satoshi Nakamoto.
By September 2021, over 18.8 million Bitcoin tokens were circulating the market. This is over 80% of the pre-set limit of 21 million bitcoin tokens available.
Satoshi Nakamoto designed Bitcoin to be independent and avoid regulations and manipulation by the central bank or government. Instead, Bitcoin is backed by blockchain technology that tracks and records every transaction. Blockchain technology is a decentralized public ledger that records each transaction.
Satoshi Nakamoto created the principle system of consensus, cryptography, and peer-to-peer verification. Today, most cryptocurrencies use this principle whenever someone initiates a transaction.
To get Bitcoin, you will need to use a powerful computer to mine new tokens. Bitcoin miners use these gadgets to verify the vast blocks of transactions online. They also use them to generate more tokens.
This is a time-consuming and complicated process known as proof-of-work (PoW). After mining every token, the blockchain technology permanently logs the transaction. This helps secure and validate each mined Bitcoin as well as the entire network.
However, the Bitcoin mining process has come under fire due to the large amounts of energy used. That’s because of the potential environmental pollution caused by the mining process.
Benefits of Bitcoin
When Satoshi Nakamoto first launched Bitcoin, they envisioned it as a medium of daily financial transactions. And thanks to its fundamental principles, Bitcoin offers users many unique benefits.
Below are the benefits of Bitcoin.
It Offers User Autonomy
Conventional physical currencies are prone to risks and governmental restrictions. For instance, a bank is defenseless against the boom-and-bust cycles of the economy. In severe cases, most banks often crash and close down, as seen many times in the past.
However, Bitcoin promises user autonomy. That’s because its value isn’t associated with government or central bank regulations. This means that the people who own digital currency tokens are 100% in control of their own Bitcoin.
You Can Do a Bitcoin Transaction Using a Pseudonym
All online financial transactions need a wide range of information. This data helps identify the individual behind the transaction.
For instance, when sending money to your friend, you will need crucial identifying information from both you and your friend to complete the transaction. This process verifies the sender and the recipient to avoid crimes. But, it also opens a door for governmental bodies and banks to be an intermediary of the transactions.
When sending Bitcoin, your transaction will be pseudonymous. This doesn’t mean that the transaction is entirely anonymous. But you will need your blockchain address for identification.
A person could have numerous usernames and passwords for one single transaction account. Additionally, you will not need other identifying information and IP address to verify the transaction. Hence, making it pseudonymous.
The transaction system used by Bitcoin is peer-to-peer. Therefore, each user can receive and send payments to anyone using the network anywhere in the world.
You will not need approval from third-party authorities when making a transaction. But, you may need approval when transacting with a regulated institution or exchanger.
There Are No Banking Fees
Conventional currencies are subject to additional charges. These may include withdrawal and deposit fees.
But, Bitcoin isn’t subject to these fees associated with traditional currency transactions. This means that you will not incur minimum balance or returned deposit charges.
It’s Easily Accessible
Another great benefit of using Bitcoin is that it’s easily accessible. This is especially true for people who have limited access to traditional banks.
That’s because you will only need a computer or smartphone and internet access for a Bitcoin transaction. It’s more accessible compared to the hustle of going to a bank.
Transactions Are Very Secure
A major advantage of Bitcoin is that it’s not a physical currency. Hence, thieves can’t steal it from you. A hacker could steal your Bitcoin balance if they have access to the private key of your cryptocurrency wallet.
However, this is almost impossible if you have proper security measures. While there have been several current reports of security breaches at cryptocurrency exchanges, Bitcoin’s exchange facilities stood firm and remained impervious to such violations. Hence, any transactions conducted between two or more addresses remain secure.
Bitcoin Transactions Are Mobile
Because Bitcoin is a digital currency, users can transact anywhere as long as they have internet access. This means that you will not have to travel to a physical bank to make a transaction.
However, in contrast to other online payment systems such as credit cards and U.S. bank accounts, you will not need your personal information to complete any transactions.
How To Use Bitcoin
Bitcoin allows individuals to send and receive money without the traditional banking system or a third-party institution. Additionally, Bitcoin isn’t reliant on any real currency such as the Euro or U.S. dollar. Today, numerous online retailers allow their customers to pay using Bitcoin.
Additionally, small businesses and individuals are also jumping into the trend and allowing the use of cryptocurrencies blockchain for international payments. It’s easy to use Bitcoin for online transactions using the below four steps:
- Create an online Bitcoin wallet
- Get your first Bitcoin
- Secure the Bitcoin
- Start transacting using Bitcoin
Getting started with Bitcoin is relatively easy, especially if you follow the above four steps. Buying your first Bitcoin isn’t a complicated process, especially if you follow the step-by-step guide of your Bitcoin wallet.
Additionally, there are hundreds of Bitcoin ATM machines across the U.S. revolutionizing the way we buy, sell and use Bitcoin.
If you’re looking for a Bitcoin ATM, check out bytefederal.com. They have over 900 Bitcoin ATM machines spread across the United States.
You can use the Bitcoin ATM machines to buy and sell Bitcoin with cash. And regular customers can now purchase popular cryptocurrencies such as Dogecoin, Bitcoin, and Ethereum using a credit or debit card.
The registration process is also simple, convenient, and secure, and you will have your account up and running in a few minutes.
Ethereum is similar to Bitcoin in that both are blockchain network currencies. However, Ethereum was created as a programmable blockchain and not to support a currency. This means that it’s designed to enable a network’s user to publish, create, use and monetize applications known as dApps.
Ether (ETH) is the native Ethereum currency, and it was developed as a primary form of payment on the Ethereum digital platform. Today, Ethereum is the second most popular cryptocurrency after Bitcoin.
It’s also created using the proof-of-work system. However, unlike Bitcoin, there is no limit to how many Ethereum tokens one can mine.
ETH has helped fuel most initial coin offerings. That’s because the ICOs are using the Ethereum Blockchain to back them up.
Additionally, Ethereum is also the digital currency behind the thriving of non-fungible tokens (NFTs). NFTs are a digital version of one-of-a-kind collectibles and art and are openly linked to blockchain technology.
3. Cardano (ADA)
Cardano is another famous cryptocurrency. It advertises itself as the third-generation blockchain platform, casting itself as a progressive player in the market. Cardano is mined using proof-of-stake (PoS).
This means that you will not need the high energy and complex PoW calculations required for mining Bitcoin to generate Cardano. This makes its network potentially more sustainable and efficient. Cardano’s currency is known as ADA, and it’s named after a 19th-century mathematician called Ada Lovelace.
The main application of this currency is traceability and identity management. The initial application is used to audit and review an item’s manufacturing path
On the other hand, the latter can be used to smoothen the process of collecting data and information from different sources.
Cardano’s creators are building it in five different phrases towards filing its objective of growing into a decentralized application dApp platform featuring variable smart contracts and multi-asset ledgers.
Its peer-review insights and research-based framework bind every phase in its development roadmap. Hence, these phrases have helped establish Cardano’s scholarly status.
4. Binance Coin (BNB)
Initially created on Ethereum’s blockchain, Binance has grown to be the largest cryptocurrency exchange in the world. The creators of Binance launched the Binance Coin (BNB) as the digital currency medium on the Binance network.
While the Ethereum blockchain initially held Binance, today, the currency has its own platform. BNB was launched in 2017 as a utility token used by traders to get specific discounts when trading on Binance. But today, BNB has developed into its own cryptocurrency, and it can be used as a payment medium when transacting online.
You can use it to book your ticket, pay for online services, financial services, and even entertainment.
Only 200 million BNB tokens were created initially. During the currency’s ICO, half of these tokens were made available to the investors. But each quarter, Binance repurchases some of their coins from investors and permanently burns and destroys them to increase demand.
As of July 2021, the company completed its 16th burn and permanently destroyed around 1.29 million coins. This was equivalent to approximately $394 million at the time.
Read the Above Cryptocurrency Type Guide
After going through the above cryptocurrency type guide, you should now understand the different types of cryptocurrencies and how they work. Most people don’t know much about digital currencies and the potential they have. However, it’s essential to educate yourself more about these currencies of the future to be more prepared.
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