Blockchain is the underlying technology that allows cryptocurrencies to exist. These digital assets use cryptography to verify and validate transactions.
Cryptocurrencies can be divided and subdivided into numerous categories. To best understand the cryptocurrency ecosystem, let’s start by looking at a top-down visual.
Cryptocurrencies fall into numerous categories, including native coins, tokens, and stablecoins. The current market cap of all cryptocurrencies is currently over 1 trillion dollars.
So how many cryptocurrencies are there?
There are currently more than 10,000 cryptocurrencies in existence. Of these 10,000, only about 2,700 have any measurable market cap. Of these 2,700 coins/tokens, only about half have a market cap of over one million.
It is important to note that most cryptocurrencies have no value at all. Before investing, it is therefore vital to understand what utility your coin has if any.
The majority of cryptocurrencies fall into the “token” category. So, what are cryptocurrency tokens, and how do they differ from coins? Let’s find out next!
Learn how to trade cryptocurrency in our guide for beginners!
The ongoing rise of cryptocurrency has been marked by high volatility, which makes it ideal for trading. As a tastytrader, you can get exposure to these cryptocurrencies:*
* You can trade the CME Bitcoin and Micro Bitcoin futures contract with tastyworks – the other cryptocurrencies listed here are the actual coin.
The nomenclature in the crypto community can often be confusing. It is not uncommon for all cryptocurrencies to be referred to as “coins”. Technically, this is not true. There are fundamental differences that separate coins from tokens:
The most popular protocol for creating tokens is the Ethereum network. Tokens created on the Ethereum network are called “ERC-20” tokens.
The ERC-20 token is the standard because these types of tokens allow interoperability within the Ethereum ecosystem - all ERC-20 tokens can easily be exchanged for one another, which greatly improves liquidity.
ERC-20 tokens are fungible. This means that they are not unique and can be interchanged freely, sort of like how one US dollar is as good as the next. This contrasts with an ERC-721 token (NFT), which is not interchangeable.
The two most popular types of ERC-20 tokens include utility and governance tokens.
In decentralized finance (DeFi), utility tokens are issued to finance a new protocol. The issuance of a new utility token is called an "ICO", or an initial coin offering. Perhaps a less confusing term for this would be “ITO”, initial token offering.
A governance token is a special kind of utility token. These tokens allow their owners to vote on proposed changes to a network, sort of like how a proxy allows shareholders to vote on corporate changes.
In 2022, there are hundreds of different blockchain networks. Blockchain networks generally fall into one of four categories:
Most of the blockchains you have heard of (Bitcoin and Ethereum) fall into the public category. Public means decentralized, and decentralized means transparent.
Let’s now explore five popular public cryptocurrency coins. We will look at 5 popular tokens after this.
Bitcoin was the world’s first cryptocurrency. It is also currently the world’s largest cryptocurrency by market cap. Because of bitcoin’s high fees and low transaction throughout, this proof-of-work digital asset is viewed by many as a store of value akin to digital gold.
Ethereum is currently the world’s second-largest cryptocurrency. In addition to storing transactions (like Bitcoin), Ethereum can store code, aka “smart contracts”, which power Web3. Ethereum is currently shifting from a proof-of-work coin to proof-of-stake via an upgrade called the Merge. This shift will open the door to sharding, which will lower fees and increase transaction throughput on the network.
Ripple is a decentralized public blockchain. This network is known for its low transaction fees, almost instantaneous settlement speed, and incredible energy efficiency. Because of these attributes, XRP is mostly used for financial transactions. Transactions in this network are validated by bank-owned servers.
Cardano is a proof-of-stake blockchain network that operates with very high efficiency. Cardano’s native coin, ADA, is a viable alternative to Ethereum, but it currently lacks Ethereum’s vast network.
Solana is a peer-to-peer driven blockchain that is helping to build Web3 and DeFi. Because of its proof-of-stake consensus mechanism, Solana runs with much greater efficiency than Ethereum. However, like Carado, SOL currently lacks Ethereum's network breadth.
The MATIC token is the utility token behind the Polygon network. This Network helps to scale Ethereum by introducing Layer 2 proof-of-stake side chains which parallel the main Ethereum network. Polygon helps to increase Ethereum’s efficiency by reducing costs and increasing transaction throughput.
Uniswap is a decentralized cryptocurrency exchange. This exchange provides liquidity via automated market makers. Uniswap helps to democratize the market-making business by allowing anyone with certain cryptocurrencies to become market makers simply by allocating 2 digital assets to a pool. UNI is a governance token that gives its owners the right to vote on changes in the Uniswap protocol.
ChainLink serves as an oracle in the crypto space. Oracles help to connect blockchains to the outside world. An example of this would be a token that represents a share of stock - in order to make sure the tokens accurately track the stock, an oracle would track its price via multiple real-world sources. LINK is the token used within ChainLink to pay for services.
Ape is the governance/utility token of the ApeCoin network. In addition to giving its owners the right to vote on changes in the ApeCoin ecosystem, APE will allow its owners access to games and services offered by the network.
The Sandbox is a gaming ecosystem that is powered by the Ethereum network. SAND is a utility token that allows users to both interact and transact within the Sandbox community.
Stablecoins are a rather unique type of cryptocurrency. Though they are called stable “coins”, they are in reality tokens. A stablecoin pegs its price to a referenced asset. There are four predominant types of stablecoins:
Fiat-backed stablecoins peg their price to the value of a fiat currency. The most popular fiat-backed stablecoins are pegged to the US dollar. Issuers of stablecoins generally hold an equivalent amount of US reserves in a vault. If $1 million worth of US dollars is held in a vault, that issuer can mint $1 million worth of stablecoins. These tokens are growing in popularity because of their high-yield nature when compared to traditional savings accounts.
Crypto-backed stablecoins are backed by - you guessed it - cryptocurrency. Instead of relying on a central issuer (like fiat-backed stablecoins), crypto-backed stablecoins secure their reserves via smart contracts. Crypto-backed stablecoins are generally overcollateralized to make up for the volatility in cryptocurrencies.
Commodity-backed stablecoins are collateralized with actual commodities. Gold, oil, and real estate are three popular varieties of commodity-backed stablecoins. These types of stablecoins help to democratize commodity investing.
Algorithmic (algo) stablecoins are backed by algorithms or simple math. Not holding 1:1 actual reserves introduces many risks to algo coins. The collapse of the Terra blockchain showed the inherent risks in these types of coins.
Let’s next look at five of the most popular stablecoins. All of these coins are fiat-backed US dollar stablecoins.
A meme coin is a cryptocurrency that has its origin in a meme. A meme is basically a humorous video or image shared on the internet. Meme coins started as a joke with Dogecoin, but they have since exploded in popularity. Meme coins have little to no value.
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