Different Types of Cryptocurrency in 2023
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Cryptocurrencies such as Bitcoin, Ethereum, and Tether offer decentralized, secure, and diverse financial options, with each serving distinct roles in the digital economy.
Bitcoin's enduring significance and the existence of over 23,000 cryptocurrencies reflect both innovation and challenges in the dynamic crypto landscape. Investors should take caution when investing in cryptocurrency and understand the various types of cryptocurrency and the risks involved.
What are cryptocurrencies?
Cryptocurrencies are digital or virtual currencies secured by cryptographic techniques, making them highly resistant to counterfeiting and double-spending. They operate on decentralized networks using blockchain technology, a distributed ledger maintained by a network of computers.
A notable characteristic of cryptocurrencies is that they are not issued or controlled by any central authority, making them less susceptible to government interference.
Main types of cryptocurrency
The three leading cryptocurrencies by market cap as of October 2023 are Bitcoin (BTC), Ethereum (ETH), and Tether (USDT). We take a deeper look at these and their role in the broader crypto ecosystem in the section below.
What are the 3 major cryptocurrencies right now?
The three major cryptocurrencies that dominate the market at time of writing are:
Bitcoin (BTC): Bitcoin is the pioneer of cryptocurrencies and remains the most recognized and valuable digital currency. It operates on a decentralized blockchain, serving as a digital store of value and facilitating peer-to-peer transactions. Its transparency and security make it a trusted option for both investors and users.
Ethereum (ETH): Ethereum is a versatile blockchain platform that introduced the concept of smart contracts. Ether (ETH) is the native cryptocurrency used within the Ethereum network. It enables developers to create decentralized applications (DApps) and execute smart contracts, revolutionizing various industries beyond digital currency.
Tether (USDT): Tether is a stablecoin designed to provide stability in the volatile world of cryptocurrencies. Each Tether is backed by one U.S. dollar, ensuring a 1:1 peg. It offers the benefits of cryptocurrency, such as fast and borderless transactions, while maintaining a consistent value tied to the U.S. dollar. This stability makes it a preferred choice for traders and investors looking to mitigate risk.
These cryptocurrency types play distinct roles in the crypto ecosystem, with Bitcoin as a digital gold store of value, Ethereum as a platform for decentralized applications, and Tether as a stable medium of exchange.
Crypto coins vs. tokens
Crypto coins and tokens form the foundation of the cryptocurrency ecosystem, but they serve distinct purposes and have unique characteristics. Coins are cryptocurrencies that have their own standalone blockchains, such as Bitcoin. They play a vital role in a blockchain network's security and incentive structure, often used to reward miners or validators for securing the network.
Alternatively, tokens are currencies or assets supported by a specific blockchain but are not the native coin of that network. They are typically based on standards like the ERC-20 on Ethereum, allowing users to create, issue, and manage digital assets. Tokens offer versatility and can represent a wide range of assets, including in-game currencies, loyalty points, voting instruments in DAOs (Decentralized Autonomous Organizations), and more.
Types of crypto tokens
Various cryptocurrency types are defined by a range of characteristics, each serving specific purposes.
Fungible Tokens: These are tokens that are interchangeable with one another and have equal value. ERC-20 tokens, like SAND, are examples of fungible tokens often used for payments and trading.
Non-Fungible Tokens (NFTs): NFTs are unique digital assets that represent ownership of a specific item, artwork, or collectible. ERC-721 and ERC-1155 tokens are standards commonly used for NFTs.
Utility Tokens: Utility tokens serve a singular purpose within a specific project or ecosystem. They can be used as in-game currencies, loyalty rewards, or for participating in decentralized governance through voting in DAOs.
Security Tokens: These tokens represent ownership of real-world assets, such as stocks or real estate, which are tokenized on a blockchain. Security tokens comply with regulatory frameworks.
DeFi Tokens: DeFi (Decentralized Finance) tokens are integral to the DeFi ecosystem, supporting decentralized exchanges, lending platforms, and other financial services. Examples include UNI on Uniswap.
Stablecoins: Stablecoins are designed to maintain a stable value and are often pegged to a fiat currency like the US dollar. USDT is a prominent stablecoin used for trading and hedging against volatility.
Types of crypto coins
In terms of coins, there are various cryptocurrency types, each designed with specific use cases and functionalities.
Bitcoin (BTC): BTC, the pioneering cryptocurrency, serves as a censorship-resistant store of value and medium of exchange, often likened to "digital gold" due to its secure, fixed monetary policy.
Ether (ETH): ETH fuels the Ethereum blockchain, supporting smart contracts and decentralized applications (dApps) within its ecosystem.
Binance Coin (BNB): BNB operates within the Binance platform, offering reduced trading fees and other benefits.
Understanding these distinct coins and their respective purposes will help you navigate the cryptocurrency landscape. See our list of the top cryptocurrencies below for more about these and other crypto coins.
Best cryptocurrency in 2023
In 2023, the best cryptocurrency largely depends on your investment goals and risk tolerance. It's essential to research and consider factors like market trends, technology, and adoption and understand how various cryptocurrency types work within the broader market. Here’s a list of a dozen popular cryptocurrencies you may consider looking into.
Bitcoin is the world’s first decentralized digital currency. It operates on a transparent blockchain, serving as a store of value and enabling peer-to-peer transactions. Bitcoin's widespread recognition and security make it a cornerstone of the crypto world.
Ethereum is a versatile blockchain platform that introduced smart contracts. Ether (ETH) is the native cryptocurrency within the Ethereum network. It empowers developers to create decentralized applications (DApps), revolutionizing industries beyond digital currency.
Binance Coin (BNB)
Binance Coin is the native cryptocurrency of the Binance exchange, one of the largest crypto platforms globally. BNB offers reduced fees on the Binance platform and serves various purposes, including trading, payments, and participating in the Binance Smart Chain (BSC) ecosystem.
Solana is a high-performance blockchain known for its rapid transaction speeds and low costs. SOL is its native token, fueling the network and enabling decentralized applications to operate efficiently. Solana's scalability and developer-friendly environment make it a rising star in the crypto space.
Cardano is a blockchain platform designed for sustainability, security, and scalability. ADA is its native cryptocurrency, facilitating transactions and participation in the Cardano ecosystem. Cardano stands out for its focus on research-driven development and peer-reviewed technology.
Ripple is a digital payment protocol that facilitates cross-border transactions with speed and efficiency. XRP is the native cryptocurrency used within the Ripple network. It aims to bridge traditional financial systems and enable faster, cost-effective international payments.
Polkadot is a multi-chain network that connects various blockchains to enable interoperability and scalability. DOT is the native token of the Polkadot ecosystem, allowing users to participate in network governance and security. Polkadot's innovative approach addresses blockchain fragmentation.
Litecoin is often seen as "digital silver" to Bitcoin's "digital gold." It offers fast transaction confirmation times and low fees. LTC is used for peer-to-peer transactions and as a store of value. Litecoin's simplicity and robust security make it a reliable cryptocurrency.
Chainlink is a decentralized oracle network that connects smart contracts with real-world data. LINK is the native token used to incentivize node operators who provide data and services to smart contracts. Chainlink plays a pivotal role in the DeFi and blockchain ecosystem.
Stellar is a blockchain platform designed for fast, low-cost cross-border payments and asset tokenization. XLM is its native cryptocurrency, facilitating these transactions and network operations. Stellar's mission is to promote financial inclusion and accessibility.
Dogecoin began as a lighthearted meme coin but has gained popularity for its active community and fast transaction speeds. DOGE is used for tipping, donations, and small-value transactions. Its approachable and fun-loving nature sets it apart in the crypto world.
Tezos is a blockchain platform known for its on-chain governance and ability to upgrade without hard forks. XTZ is its native cryptocurrency, used for staking, governance, and smart contracts. Tezos emphasizes community-driven decision-making and security.
What are some other important cryptocurrencies?
Other important cryptocurrencies include:
Shiba Inu (SHIB)
Shib is a meme-inspired cryptocurrency that has gained notoriety in the crypto space. It operates on the Ethereum blockchain and boasts a massive supply measured in quadrillions, making it highly divisible. SHIB's popularity is driven by its community-driven approach and playful nature, with projects like ShibaSwap, a decentralized exchange, being part of the Shiba ecosystem. While SHIB is often used for speculative trading and investment, its extreme volatility and meme-based origins make it essential for investors to exercise caution and conduct thorough research.
USD Coin (USDC)
USD Coin (USDC) is a stablecoin that offers a dependable 1:1 peg to the U.S. dollar. USDC is backed by a reserve of real-world U.S. dollars, providing stability in the crypto market. It serves as a reliable medium of exchange and store of value within the crypto ecosystem, commonly used for trading and transactions. USDC facilitates seamless movement of funds for traders and investors and plays a crucial role in the DeFi (Decentralized Finance) space, where stability is vital for various financial applications and lending protocols.
Why is Bitcoin still the most important cryptocurrency?
Bitcoin retains its significance due to being the first and most recognized cryptocurrency. It serves as a store of value and digital gold, attracting institutional interest and widespread adoption. The broader crypto market tends to move based on Bitcoin’s price action, and Bitcoin has by far the largest share of total crypto market cap.
Why are cryptocurrencies important?
Cryptocurrencies offer several advantages over other financial instruments, including faster and cheaper cross-border transactions, decentralization, and the potential to disrupt traditional financial systems. They empower individuals by providing financial access and control.
Why are there so many cryptocurrencies?
The proliferation of over 23,000 cryptocurrencies and numerous blockchain platforms can be attributed to a combination of both positive and negative factors.
Innovation and Problem Solving: One of the positive drivers behind the multitude of cryptocurrencies is the genuine interest and enthusiasm within the crypto industry. Entrepreneurs and developers believe in the potential of blockchain technology to address specific problems or introduce groundbreaking solutions. As a result, many cryptocurrencies aim to tackle particular challenges or offer innovative projects.
Diverse Purposes: Cryptocurrencies are created with diverse purposes in mind. Some focus on enhancing privacy, while others prioritize faster transaction times. Each cryptocurrency aims to cater to unique needs and preferences within the crypto community. Some are even slight modifications or variations of existing cryptocurrencies, providing users with alternatives.
Variety of Types: Cryptocurrencies can be broadly categorized into various types, such as stablecoins, utility tokens, security tokens, DeFi tokens, and gaming coins. These categories serve different functions and cater to distinct use cases within the crypto ecosystem.
Accessibility: Unlike traditional SEC-registered securities, there isn't a central regulatory body that determines which "initial coin offerings" (ICOs) can be listed. This accessibility allows virtually anyone with the requisite knowledge to create a cryptocurrency. While this openness fosters innovation, it also opens the door to potential misuse.
Get-Rich-Quick Schemes and Scams: Unfortunately, not everyone entering the cryptocurrency space has honorable intentions. Some individuals create cryptocurrencies as part of get-rich-quick schemes or "rug-pull" scams that exploit unsuspecting investors. Decentralized crypto exchanges (DEXes) are more susceptible to hosting such scam tokens, as centralized exchanges typically require a longer period of legitimacy verification.
The diverse landscape of cryptocurrencies stems from a blend of genuine innovation, the pursuit of unique solutions, accessibility for creators, and, unfortunately, the presence of unscrupulous actors. As the crypto industry continues to evolve, investors and enthusiasts must remain vigilant, emphasizing due diligence and responsible decision-making when exploring the vast world of cryptocurrencies.
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Types of cryptocurrency FAQs
Here are answers to frequently asked questions about the different types of cryptocurrency and the best crypto to invest in.
What is the most useful crypto?
The most useful cryptocurrency depends on your specific needs. For everyday transactions, low-cost options like Litecoin or Bitcoin Cash may be suitable, whereas Ethereum is essential for numerous DeFi crypto applications and smart contracts.
What is the best crypto to invest in?
The best crypto to invest in varies based on your investment strategy. Established coins like Bitcoin and Ethereum are relatively safer, while newer projects with smaller market caps may offer higher growth potential.
When considering an investment in a newer crypto token, it's crucial to exercise caution and conduct thorough research. Reading through a given project's whitepaper is a recommended step. Moreover, the absence of a published whitepaper can be a significant red flag, signaling potential risks associated with the cryptocurrency.
Which cryptocurrency has the best future?
It is impossible to predict the future of cryptocurrencies, and we strongly recommend you do your own research and understand the risks involved in crypto investment before making any decisions.
What are the 4 types of cryptocurrency?
Cryptocurrencies come in various types, each distinguished by its unique characteristics and functions. One primary category is coins, representing digital currencies that operate on standalone blockchains. Bitcoin (BTC), the pioneer in the crypto realm, exemplifies this type, functioning as a medium of exchange and a store of value. Tokens, another category, are digital assets built on existing blockchain platforms like Ethereum. They serve diverse purposes, including utility tokens, security tokens, and non-fungible tokens (NFTs), showcasing the versatility within the cryptocurrency ecosystem.
What are the 3 major Cryptocurrencies?
As of October 2023, the three major cryptocurrencies shaping the market are Bitcoin (BTC), Ethereum (ETH), and Tether (USDT). Bitcoin, often referred to as digital gold, stands as the foremost and most recognized cryptocurrency. Ethereum, with its native cryptocurrency Ether (ETH), introduced the concept of smart contracts, expanding its use beyond digital currency. Tether (USDT), a stablecoin designed to maintain a 1:1 peg to the U.S. dollar, offers stability in the volatile crypto market, serving as a reliable medium of exchange. These three cryptocurrencies play distinct roles, collectively contributing to the dynamic landscape of digital assets.
Which cryptocurrency will reach $10,000?
Predicting the specific cryptocurrency that will reach $10,000 is challenging if not impossible, as it depends on market dynamics, investor sentiment, and various other factors. The value of a given cryptocurrency is influenced by its adoption, technological developments, and overall market conditions. It's essential to conduct thorough research and consider the potential risks before making investment decisions.
What is the most common type of cryptocurrency?
The most common type of cryptocurrency is "coins." Coins have their own standalone blockchains and serve as digital currencies. Bitcoin (BTC) is the most common and widely recognized coin, often regarded as a digital store of value. Other examples of coins include Litecoin (LTC) and Ripple (XRP). Coins are essential for facilitating transactions and acting as a medium of exchange in the cryptocurrency space.
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