Day 2: Types of Cryptocurrencies
The world of cryptocurrency is like a giant box of chocolates - you never know what you're going to get. There are so many different types of cryptocurrencies out there, and it can be hard to keep track of them all or know where to begin. But don't worry, we're here to guide you through the jungle of crypto! In this article, we'll explore some of the most popular cryptocurrencies, like Bitcoin and Ethereum, as well as some of the lesser-known coins that are making waves in the crypto world. Whether you're a crypto newbie or an experienced investor, there's always something new to learn in the ever-changing world of crypto. So, strap in and get ready to learn!
Currently, the crypto market capitalization is over a trillion dollars and do you know why this is so? It is because there are thousands of cryptocurrencies circulating the market. According to CoinMarketCap, a well-known website for looking up information about any crypto in the market, there are approximately 22,932 cryptocurrencies. Just look at the number of various cryptocurrencies today, there are so many, and as a crypto newbie knowing where to start can be overwhelming.
Don't worry, you don't have to be a crypto guru to understand them! We're here to break it all down for you in a friendly, easy-to-understand way. Every crypto guru you know and/or have heard of today all started like you, I did too and I am still learning while guiding others to learn as well.
If you're just starting to learn about cryptocurrencies, it's important to understand that there are different types. There are thousands of different cryptocurrencies out there, but we'll focus on the main ones. The two most well-known cryptocurrencies are Bitcoin and Ethereum. But there are many more types of cryptocurrencies, like Litecoin, Monero, Ripple, Cardano, Tron, Solana, Dogecoin, Polygon, Shiba Inu, and more. Each with its own unique features and use case.
You don’t have to go through the stress of learning each of their names, features, and use cases. There are over 20,000 of them, it will take you years to learn about all of them, besides, it is nearly impossible to do that. I think the main thing you need to understand is that there are different cryptocurrencies each with its unique use so whenever you want to invest some funds in any crypto you will know the right kind of information to source for.
The use case of every cryptocurrency is what sets them apart from each other. A simple Google search like “What is the use case of Solana” will provide you with the answer you are seeking on Solana, you can conduct the same research on any other coin that you are interested in. Another important part of crypto is research, I can not stress just how important research is in the crypto space but it is extremely important. Always Do Your Research (DYOR), you must have seen this abbreviation around and that is what it means.
If you see a coin trending on X (Twitter), don’t blindly rush in and invest. Take your time, DYOR, and from there you will make the better-informed decision to either proceed or not.
Now, as I mentioned earlier the use case of every crypto is what sets them apart from each other, this is also what makes some coins more important than others and it is what attracts investors. The top two cryptocurrencies Bitcoin and Ethereum have some of the best use cases which is why they are always at the top because many people are investing and trading them. Both cryptocurrencies revolutionized digital currencies and that is why they will forever remain the top two cryptos.
Bitcoin (BTC)
Will you agree with me that whenever or wherever you hear or see the word “crypto” you automatically think of Bitcoin? Well, I do and it is no wonder if you do too. It is, after all, the first cryptocurrency and the King of Crypto. Bitcoin alone dominates nearly half of the entire crypto market.
Bitcoin was the first cryptocurrency I ever bought and maybe it was your first too. This cryptocurrency – Bitcoin – has a huge influence both in creation and in price on all the 22,000+ cryptocurrencies out there. It is usually the first coin that any crypto exchange will list on their platform and it is usually paired with all trading pairs which is why its price has a direct effect on all other coins in the market.
As for the creation or design aspect, Bitcoin was the first cryptocurrency to be ever created in 2009 by Satoshi Nakamoto therefore every other crypto is created with the idea of Bitcoin.
PS: Don’t let “use case” and “use” confuse you. They mean the same thing. It simply means what that crypto is used for or the problem it solves for us.
And now for the use case of BTC…
The main use case for Bitcoin is as a digital currency or "cryptocurrency". Bitcoin can be used to pay for goods and services, and it can also be traded for other currencies like the US dollar or the Euro. It's also sometimes called "digital gold" because it's seen as a store of value, like gold. And like gold, Bitcoin has a limited supply, which is part of what makes it valuable. So, the main use case for Bitcoin is as a digital currency that can be used for transactions and as an investment.
If that is too hard for you to grasp, here is another way you can understand it better…
Imagine if you could use an online currency to buy things from anywhere in the world, without having to deal with banks or exchange rates. That's what Bitcoin does! You can use Bitcoin to buy things online, just like you'd use a credit card. But instead of going through a bank, you use the Bitcoin network to process the transaction. You can also send Bitcoin to other people, just like you'd send an email or a text message. Do you understand it better now?
As I mentioned earlier, Bitcoin was created in 2009 and unlike fiat currencies, BTC has a capped amount. This means that the creator, Satoshi Nakamoto, set a limit of 21 million Bitcoins that can ever be created. That means that there's a finite supply of Bitcoin, and that makes it a scarce asset, like gold. As of right now, about 18.5 million Bitcoins have been created, but not all of them have been put into circulation yet. As time goes on, the rate of Bitcoin creation slows down, so it will take a long time to reach the 21 million limit.
The price of Bitcoin can fluctuate quite a bit, but right now, 1 BTC is worth around $20,000. But that price is constantly changing, and it can go up or down at any time. One of the main factors that affects the price of Bitcoin is supply and demand. When more people want to buy Bitcoin, the price goes up. When fewer people want to buy it, the price goes down. But other factors can affect the price as well, like regulations, news, and economic conditions.
PPS: BTC is the ticker for Bitcoin just like USD is for US Dollars and NGN is the Nigerian Naira.
Ethereum (ETH)
Ethereum is the second top coin on the crypto market capitalization with a dominance of about 19% and a current market cap of over $200 Billion. Ethereum is similar to Bitcoin but with some key differences. The main difference is that Ethereum has smart contracts, which are like computer programs that run on the Ethereum network. These smart contracts can be used to create all kinds of things, like decentralized apps (dApps), tokens, and even new cryptocurrencies.
You, yes you, can create a cryptocurrency on the Ethereum network if you choose to. Most cryptocurrencies were created on Ethereum and remain there or created their Mainnet – this is a term used to describe when a blockchain protocol is fully developed and deployed, meaning that cryptocurrency transactions are being broadcasted, verified, and recorded on a distributed ledger technology.
So, Ethereum is more than just a cryptocurrency - it's a whole platform for building programs and decentralized apps. DApps are computer programs that run on a network of computers instead of a single server. They're similar to regular apps, but they're not controlled by anyone, company, or organization. With Ethereum, anyone can create their dApp and put it on the Ethereum network. This makes Ethereum a powerful platform for innovation and creativity. This is the use case of Ethereum and how it works but there’s more.
Read slowly, don’t go too fast and get confused, okay?
Well, unlike Bitcoin, there's no fixed limit on the number of Ethereum that can be created. Ethereum uses a different system called "proof of work" to create new Ethereum. With proof of work, miners compete to solve complex math problems to earn Ethereum. As more miners join the network, the math problems get harder, and the amount of Ethereum created gets smaller. This keeps the supply of Ethereum under control and makes sure that the network stays secure.
All of these cannot be complete without the history of Ethereum, would it? let’s delve into that.
History of Ethereum
In 2013, Vitalik Buterin, a young programmer, published a white paper describing his vision for a new kind of decentralized platform. He called it Ethereum, and it combined elements of Bitcoin with features that would allow for the creation of dApps. In 2014, the Ethereum project was officially launched, and the first Ethereum coins were distributed to early contributors. Since then, Ethereum has grown into a powerful platform with a thriving developer community and a wide range of applications. It's now the second-largest cryptocurrency by market capitalization, after Bitcoin
Vitalik and the other developers of Ethereum saw the potential of Bitcoin, but they wanted to create something that was more flexible and could be used for more than just payments. So, they created Ethereum, which was launched with an initial coin offering (ICO) that raised over $18 million. Since then, Ethereum has grown rapidly, and it's now used by companies like Microsoft, JPMorgan Chase, and Samsung. Today, Ethereum is one of the most popular cryptocurrencies, and it's constantly evolving with new features and improvements.
You can see further details like current price, circulating supply, and other updated information about Ethereum here.
Altcoins and Tokens
Altcoins and tokens are often confused within the crypto community, especially for crypto newbies. I will explain them step by step here so read carefully.
Altcoins
Alternative coins or Altcoins are any cryptocurrency that's not Bitcoin. There are thousands of them, and they all have different features and uses. Some are meant to be used as digital cash, while others are meant for specific applications like gaming or identity management. Most altcoins are based on the same underlying technology as Bitcoin, but they often have different rules and protocols. Some are even built on top of Ethereum, using its smart contract capabilities.
Some of the most popular altcoins are Litecoin (LTC), which was created in 2011 as a lighter and faster version of Bitcoin. Another popular altcoin is Ripple (XRP), which is used by banks and financial institutions for fast and cheap international payments. There's also Monero, which is known for its privacy features. And of course, there's Dogecoin, which started as a joke but has become a legitimate cryptocurrency with a passionate community.
Tokens
Tokens are a type of cryptocurrency that's built on top of another blockchain, like Ethereum. They're often used for specific purposes, like raising funds for a project or rewarding users for participating in a network. Tokens are different from coins because they usually don't have their blockchain - they run on top of an existing blockchain. Some of the most popular tokens are ERC-20 tokens, which are built on Ethereum. They're used for everything from crowdfunding to gaming to loyalty programs.
To break this down further…
Imagine that you're using an app that lets you earn rewards for doing things like watching ads or playing games. Those rewards are tokens! They're like points or credits that you can earn and then use to buy things in the app. But they're more than just points - they're digital assets that have a real value. And you can even trade them on exchanges just like you would with any other cryptocurrency. Some tokens can even be traded for other tokens or traditional currencies, like dollars. So, tokens are a way to earn and use rewards in the digital world.
Utility Tokens vs. Security Tokens
As a crypto newbie, you must learn the difference between utility tokens and security tokens. This knowledge will help you make better-informed decisions when it comes to trading or investing in cryptocurrencies.
What is a Utility Token?
A utility token is a type of token that has a specific use within a particular ecosystem. It's like a special kind of token that you can only use for a specific purpose. For example, some apps use utility tokens to reward users for watching ads or completing tasks. Those tokens can then be used to buy things within the app, like premium features or in-game items. So, a utility token is a token that has a specific purpose within a particular ecosystem.
In other words, a utility token is like a gift card that can only be used in a specific store. It has a specific purpose - to buy things in the store. Just like a gift card can't be used anywhere else, a utility token can only be used for its intended purpose. So, a utility token is a type of token that can be used for a specific purpose within a particular ecosystem. It's a bit like having a special currency that can only be used in a certain place.
What is a Security Token?
A security token is a token that has a monetary value and is regulated by financial authorities, just like stocks or bonds. This means that it can be bought, sold, and traded in the same way as stocks or bonds.
They're also called "security tokens" because they're designed to be compliant with securities laws. This makes them different from utility tokens, which aren't regulated in the same way. Security tokens can be used for a wide range of purposes, including investment, fundraising, and trading. So, a security token is a type of token that's regulated and can be used for financial purposes.
In a nutshell, utility tokens are designed for a specific purpose within a particular ecosystem. They don't have any monetary value and aren't regulated. Security tokens, on the other hand, are designed to be used for financial purposes. They have a monetary value and are regulated by financial authorities. So, the main difference is that utility tokens are used for specific purposes within a specific ecosystem, while security tokens are used for financial purposes.
Conclusion
Types of cryptocurrencies are like flavors of ice cream – there's something for everyone! From Bitcoin to Ethereum to Litecoin, there's a cryptocurrency out there for every taste. And the best part is that this is just the beginning. It may seem complicated, but they're just different ways to use digital assets. Some are designed for specific uses, like buying things or trading, while others are more general. As the world of crypto evolves, we'll see even more types of tokens emerge. So, whether you're looking to invest, trade, or just explore, there's a type of cryptocurrency out there for you.
The important thing to remember is that cryptocurrencies are constantly evolving, and there's no "one size fits all" solution. So, whether you're just getting started or you're already a pro, it's important to stay up to date on the latest developments. The world of crypto is ever-changing, and there's always something new to explore.