Over 7,800 as of now

In 2009, Bitcoin, the first decentralized cryptocurrency, was published. It took many years for the rest of the world to find out about it. However, it didn't take long for the rest of the world to understand its worth – and for its price to skyrocket to more than $20,000 a piece.

The promise of cryptocurrencies was illustrated by Bitcoin. Thousands of other digital assets were created as a result of it, some of which were almost as popular. So, what are the different types of cryptocurrencies and how do they work? Here's a quick rundown of what you should read.

How Many Cryptocurrencies are There?

According to Currency.com, there are currently over 7,800 cryptocurrencies in circulation. They differ in terms of form, application, and price. Many of them are not widely used, and the most widely used cryptocurrencies account for more than 80% of the market.

Many of these cryptocurrencies are brand new. It's also worth remembering that nearly 2,000 cryptocurrencies have become redundant, and several of the ones that remain are struggling to gain traction. As a result, some existing cryptocurrencies could fail or become stagnant over time.

Types of Cryptocurrencies

Cryptocurrencies come in a variety of shapes and sizes, and they serve a variety of purposes. As a result, various forms of cryptos emerge. There are four types of cryptocurrencies currently in use:

1. Proof of Work (PoW) Cryptocurrency

PoW cryptocurrencies are based on the idea that in order for a unit of cryptocurrency to exist, it must first show evidence of completing a predefined mission. This idea is based on Blockchain technology, which is a distributed ledger framework that is incorruptible. Bitcoin and Ethereum, which have a combined market capitalization of about $150 billion, are two famous examples of PoW cryptocurrencies.

2. Proof of Stake (PoS) Cryptocurrency

Proof-of-Stake (PoS) cryptocurrencies are often focused on the principle of providing proof that a cryptocurrency unit is legitimate. The PoS method, on the other hand, is fundamentally different from the PoW. Its aim is to solve PoW's scalability problem. Dash, Eos, and Tron are examples of common Proof-of-Stake cryptocurrencies.

3. Tokens

Tokens are digital assets with unique, restricted purposes and applications. Some tokens, for example, are designed to be used to purchase digital gaming properties such as weapons and extra lives. Tokens are also created on top of existing Blockchains, such as Ethereum.

4. Stablecoins

Stablecoins are digital assets that can be used to store value. Unlike common cryptocurrencies such as Bitcoin, their value does not fluctuate. Tether is the most common Stablecoin, accounting for more than 90% of the market. Gemini, Paxos, and TrueUSD are some other common Stablecoins.

5. Others

• CBDC - Digital currencies issued by central banks are basically digital versions of fiat currencies such as the Euro and the US Dollar.

• Governance tokens - Users will be able to vote on governance and decision-making issues using this tokens.

• Privacy coins - The aim of privacy coins is to ensure anonymity during transactions.

How are Cryptocurrencies Created?

Mining is the main method of obtaining cryptocurrencies. Mining involves using powerful computers and mining tools to solve complex mathematical and cryptographic equations. The equations are then translated to data and added to the Blockchain of the cryptocurrency. This effort is then rewarded with a certain amount of units of the cryptocurrency that is being mined.

Which Cryptocurrencies Will Survive?

As previously said, thousands of cryptocurrencies vanished into oblivion. Thousands more, sadly, are at risk of suffering the same fate. This is a source of concern for all stakeholders, especially investors. As a result, the market can't help but wonder which cryptocurrencies would be able to withstand the impending crashes.

It's hard to predict which cryptocurrencies would succeed and which would fail. Indeed, Bitcoin, the world's largest cryptocurrency, has suffered a number of blows, with its value plummeting by more than 1,000 percent. Other cryptocurrencies, interestingly, lose any value if Bitcoin has a large downward trend.

However, certain cryptocurrencies (such as Bitcoin) have a strong market position and are more likely to survive violent crashes. Bitcoin, for example, has amassed enormous wealth worth billions of dollars (not to mention millions of users around the world), and it would take several crashes to wipe out this money. Since their prices do not fluctuate, stablecoins have a high probability of surviving crashes.

Final Thoughts

Cryptocurrencies have been dubbed the "future money" due to their adaptability. There are thousands of cryptocurrencies, and the next time you think, "How many cryptocurrencies are there?" there will be thousands more. While many of these cryptocurrencies may fail or stagnate, some, such as Bitcoin, have proven to be long-term investments.

Cryptocurrencies are worthwhile investments, but their volatility is higher than that of any other financial assets. As a result, keep in mind the best cryptocurrencies and trading sites, as recommended.