The 5 different cryptocurrencies in the crypto world
When we talk about the crypto concepts there are so many things for people to explore and understand. Just the term cryptocurrency itself has so many things to learn. We all think that all cryptocurrencies are the same but there are some differences and there are different types of cryptocurrencies used by people. This article is going to explain some of the types of cryptocurrencies we have in the crypto world.
There is also a difference between coins and tokens in the crypto world. That's definitely a big topic but mostly to understand it in a simple way, coins are native cryptocurrencies and tokens are mostly derived from another blockchain or a sub cryptocurrency of a native blockchain. Sometimes a blockchain can operate in one single coin but with multiple tokens. For example in the Hive Ecosystem, Hive and HBD are primary coins and various tokens we have on Hive Engine are all tokens that are backed by Hive and HBD.
Payment Coins
Payment coins are mostly native coins that are used by a blockchain for transactions. As the name suggests, people use these payment coins for making payments or for transferring funds from one wallet to another wallet. Payment coins are also used in trading in the market mostly on exchanges. Some of the coins that are on blockchains that have very less transaction fees are also used for on chain wallet to wallet trading.
Utility Tokens
Utility tokens are the tokens that are created inside a blockchain on purpose. Mostly the value of these utility tokens is backed by another major coin from the native chain. In order to swap it for another coin, we have to swap the token for the native coin and then trade it on exchanges or markets. People create a token-based ecosystem with the help of Utility tokens. They are also used in games and other places where there is a specific need for token distribution and for the token to carry some value.
Stablecoins
Stable coins can either be native coins or a token created inside a blockchain. The purpose of the stablecoin is to peg it with another cryptocurrency or a real-world FIAT currency and make sure the value is always stable. For example, USDT, BUSD, and HBD are all stablecoins that have their value pegged to USD value. USDT, BUSD is mostly a token inside another blockchain and not a native coin. HBD can be said as a native coin even though the value of HBD is backed by Hive and there is an algorithm to keep the value stable.
Non-Fungible Tokens
This is the most interesting innovation in the crypto world. NFTs or Non-Fungible Tokens are similar to the other tokens but every NFT will have a unique ID and a few data inside it. Unlike other tokens which is recognized only by the type of the token and the count of the token, NFTs can be of multiple types and each NFT will have its own unique properties. This helped a lot in creating several possibilities in the crypto world to create NFTs for many real-world things. For example, the game assets can become an NFT party tickets can become an NFT and unique artwork can also become an NFT and all these can be sold in the appropriate market and the supply of these NFTs can be defined and used. People can monetize their work with the help of NFTs.
Security Tokens
Security tokens are also similar to the normal tokens but the purpose is defined. The equity value or real estate value can be converted to a security token and a fraction of those tokens can be distributed to people who purchase them. This is similar to the stocks we have in the real world. In order to represent the ownership of something, these security tokens are created as investment tokens and distributed to the owners. Later, rewards are distributed with the amount of tokens held by each individual (Similar to shares).
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