As of now, there are tens of thousands of cryptocurrencies existing in the market, and each of them was developed for different purposes. Back then when there were only a few cryptocurrencies in the market, most of the purpose of cryptocurrencies being developed was to replace traditional payment systems and provide a cheap and fast alternative to cross border payments. The very first cryptocurrency to be developed, which was Bitcoin, was created back in 2009 by the pseudonymous Satoshi Nakamoto to remove the middle man in every transaction. Day by day, developments have been growing with cryptocurrency, and as of now, there are other categories that are being used to classify cryptocurrencies like DeFi, NFT, utility tokens and store of value tokens.
Although cryptocurrencies have been classified based on their utility, they still have a lot of similarities. All of the cryptocurrencies are decentralised and digital, meaning no authority has been controlling it and that you can not buy cryptocurrency on any physical store. You can only get cryptocurrency on cryptocurrency exchange platforms or websites like Bitcoin Era. Also, all of the cryptocurrencies run on a blockchain network; every transaction made will be verified by validators which makes it secured and irreversible. This means you can trade any cryptocurrency that you have into any other existing cryptocurrency in the market.
Here are the categories of cryptocurrency based on their utilisation:
Most of the cryptocurrencies that were launched were developed for this purpose; as mentioned above, the very first cryptocurrency, which is Bitcoin, were also made to be a currency. To be specific, a decentralised digital currency can be an alternative to fiat currencies like U.S. Dollar, Euros or Yen. Evidently, Satoshi Nakamoto, who is the maker of Bitcoin, achieved his goal for Bitcoin. More than that, Bitcoin also brought out other possibilities to the world; when it was launched, it only had a value of $1 for a single Bitcoin and now has a value of $48,000 for a single Bitcoin. With this, experts and investors now look into Bitcoin as a store of value. In fact, nowadays, you can now use cryptocurrencies like Bitcoin to purchase real-life stuff, like food and services. What’s exciting about this is that more and more companies have been opening possibilities for merchants and buyers to have this payment option, in which cryptocurrency may have the fullest of its utility.
Besides Bitcoin, there are also other cryptocurrencies in this classification like Ethereum, Solana, Cardano and more. Like Bitcoin, Ethereum was also made to somehow replace the traditional currency and the payment scene. Ethereum has its own blockchain system, in which its technology is being used for most of the NFT transactions.
Although cryptocurrency is still highly volatile, it can still be considered an asset, thanks to stablecoins. Stablecoins are the kind of cryptocurrency backed by fiat currency like the U.S. dollar, Euros or Yen, unlike the other cryptocurrency that relies upon their value from other factors like supply and demand, popularity, and even their own crypto projects. In these cases, stablecoins are considered by experts and investors as an asset. There are also other types of cryptocurrency which is GLC, in which its value is tied to the value of gold.
Even though most cryptocurrencies can be considered as an asset, stablecoins are more likely to avoid price swings caused by supply and demand and popularity. A lot of cryptocurrencies are also considered to have a store of value which means the value goes up as time goes by; this is a big factor to be categorised as an asset. But since any time these price swings may happen, with stablecoin, they can save their investment whether they like to stick with it or trade it with fiat currency. Cryptocurrencies categorised as an asset would make you think if it is worth trading or not.
Most individuals think of cryptocurrency as a digital object, which is somehow true. Nevertheless, most cryptocurrencies are categorised as an object; it is usually developed for a specific crypto project, just like Siacoin, where it was developed to replace the traditional expensive cloud storage. Siacoin’s target investors are businessmen since they offer a cost-effective cloud storage solution that is actually new to the cryptocurrency market.
Decentraland is another cryptocurrency categorised as an object; this is an Ethereum based cryptocurrency where you can purchase virtual lands through NFT. Nowadays, this can be a good investment since for the past few years, NFT’s have been booming and are associated with a lot of crypto projects.
This is the type of cryptocurrency which was launched without a specific purpose, yet a couple of memecoin has now have millions worth of market capacity. Just like Dogecoin, in which it was developed to mock the current payment system, in the first few years, it did not have much value. But when Elon Musk, a popular CEO and rocket scientist, responded to a tweet about Dogecoin, it moved the cryptocurrency’s value. Elon’s followers hyped the satirical tweets, and as a surprising response, most of his followers also purchased Dogecoin creating a bull market for Dogecoin. Now, Dogecoin has been developing real projects for their cryptocurrency as they are also collaborating with Elon.
Another memecoin, the Shiba Inu, which has almost the same logo as Dogecoin, had a crypto war. As some crypto communities had been hyping up both, they actually tested which coin is better. This created a healthy competition for both as it created a bull market for both cryptocurrencies. This is where memecoins usually get their value and popularity; some memecoins are even endorsed by celebrities.
On whatever cryptocurrency you may choose, you should always consider diversifying your cryptocurrency profile to save your investment from the price swings. Since there are a lot of developments with cryptocurrency right now, there are also other categories or classifications. Whether you should be investing for a cryptocurrency’s real-life uses or you’re investing to gain profit, you should always be ready for the risks.