Caleb & Brown

August 10, 2022  ·  6 Mins

10 Most Popular Types of Crypto & Their Use Cases

10 Most Popular Types of Crypto & Their Use Cases

Key Points

  • Any cryptocurrency other than Bitcoin is referred to as an altcoin. These coins seek to iterate upon the original blockchain concept created by the inventor(s) of Bitcoin.
  • Stablecoins are designed with price stability in mind. They are usually backed by a reserved asset, making them somewhat resistant to market volatility.
  • Infrastructure tokens are used to access and maintain a particular network.
  • The primary function of payment currency is digital cash.

Coin or Token? Bitcoin or altcoin? Meme coins, utility tokens, stablecoins…is it all starting to sound like a foreign language?

If you are new to crypto, we totally get it. There are many different types of crypto out there and over 20,000 coins in the Web3 ecosystem. It can be daunting (to say the very least).

This is why we’re here to simplify things. Drawing on elements from the Messari classification system, we’ll help you learn about the major types of crypto out there, sourcing examples you may already know from the top 10 cryptocurrencies (by market cap). Let’s dive in.

Bitcoin vs. Altcoins

Bitcoin is the first ever crypto. Through integrating digital currency with blockchain technology, it set the foundation upon which every other asset has iterated. These coins are referred to as “alternative coins” or altcoins for short.

Although some altcoin projects share similarities with Bitcoin, many try to differentiate from the original crypto. This differentiation can be an alternative consensus mechanism, a unique use case, or a combination of both.

Types of Crypto (with Examples)

Payment Currencies

The original use case for crypto was digital cash. A borderless, accessible alternative to fiat currency. Payment currencies embody this aspect of crypto.

This type of crypto can be thought of as digital money living on a decentralised network. Its features are usually built to exceed—or be an alternative to—traditional money. Other payment currencies focus on disrupting payments within a particular industry.

1. Bitcoin (BTC)

Bitcoin is a peer-to-peer decentralised digital currency - the first of its kind globally. This means users can transact with one another without the need for an intermediary or a third party like a bank. This is made possible through Bitcoin’s revolutionary blockchain technology. This new form of digital money is censorship-resistant, permissionless and highly resistant to seizure.

People use Bitcoin for a number of reasons. Like fiat currencies, Bitcoin can be used as a medium of exchange to buy anything from coffee to cars, as long as the vendor accepts Bitcoin as payment. It is permissionless - so anyone with an Internet connection can send and receive it.

Bitcoin’s digital nature allows it to be transferred globally with ease. The cost of sending money internationally using Bitcoin is often much lower than bank transfers. In many of the world’s unbanked countries, Bitcoin is the preferred method of sending remittances as it is the cheapest way to do so.

Bitcoin is also commonly used as a store of value. Since its inception, Bitcoin has enjoyed a highly appreciative value growth trajectory. Many refer to Bitcoin as “digital gold”. This comparison comes from Bitcoin’s scarce supply (only 21 million Bitcoin will ever exist) and fixed supply schedule.

Further Reading: Bitcoin Basics: A Beginner's Guide

Infrastructure Tokens

Like the toll you pay whenever you hop on the expressway, infrastructure tokens are cryptocurrencies that are used to front the cost of running a network. These tokens are paid by a user to the nodes responsible for maintaining the network. In return, users can use the network to access applications and services, or to create their own applications within the network.

Some infrastructure tokens may have features that overlap with payment cryptocurrencies. The key difference is that infrastructure tokens are required for a user to make the most use of a blockchain network, whereas payment cryptocurrencies are mostly limited to making transactions. Tokens with a focus on interoperability (i.e. linking multiple blockchains/projects together) are also considered infrastructure tokens.

2. Ethereum (ETH)

Ethereum was founded by programmer Vitalik Buterin in 2015, based on an idea he conceived two years prior. Like Bitcoin, his first crypto interest, Ethereum is an open-source blockchain that validates and records transactions. Beyond this one similarity though, the two networks are quite different.

Ethereum empowers users to take an active role in the growth of Web3. It is a space for developers to create and publish decentralised apps (DApps). It is also a marketplace for users to access decentralised finance (DeFi) services, games, apps, and non-fungible tokens (NFTs).

This is all done through Ethereum’s killer program: smart contracts.

These digital contracts simplify trade between parties, auto-executing the terms of an agreement without the need for an intermediary. The use of smart contracts, especially on the Ethereum network, has opened up a world of possible use cases for crypto.

Ether (ETH) is the native crypto on the Ethereum network.

Further Reading: What is Ethereum? A Beginner's Guide

3. Cardano (ADA)

Founded in 2017 by Ethereum co-founder, Charles Hoskinson, Cardano is an open-source, proof of stake (PoS) blockchain built from the ground up by bright minds in both crypto and academia. Using a first principles approach combined with scientific research methods, Cardano has grown to become one of the most highly valued blockchains.

Cardano differentiates itself from other blockchain projects through forming deep partnerships with leading academics and universities. In contrast to the ‘fail fast, pivot often’ modus operandi of the modern-day tech entrepreneur, Cardano takes a more methodical approach. Code upgrades are held to strict mathematical standards and painstakingly reviewed before implementation. Rather than failing publicly, the network opts to perfect every process first, even if it takes longer than intended.

Outside of this, the Cardano network is home to hundreds of native assets and decentralised applications (DApps), many of which have become live over the past 12 months as the network has attracted more developers. Like Ethereum, these apps and assets are made available through the use of programmable smart contracts.

ADA is the native crypto on the Cardano network, named after the 19th-century mathematician and world’s first computer programmer, Ada Lovelace. The network is also named after another famous mathematician, Geralamo Cardano.

4. Solana (SOL)

Anatoly Yakovenko co-founded the third-generation, open-source blockchain, Solana, in 2017 with a goal to scale transaction speeds without compromising on security and privacy. Officially released to the public in 2020, it uses a unique hybrid consensus model of Proof of Stake (PoS) and Proof of History (PoH) mechanisms.

The PoH protocol works to solve the issue of time agreement among validatory nodes, effectively recording a digital timestamp of all incoming transactions. With this timestamp already pre-recorded, validators have one less factor to consider when confirming transactions, effectively speeding up the PoS process. This hybrid consensus mechanism also uses significantly less computational power than other methods, like Proof of Work (PoW) which is used by Bitcoin.

SOL is the native token on the Solana network, which also has smart contract functionality. SOL is used for making or sending transactions, interacting with smart contracts, or for staking.

Stablecoins

Stablecoins attempt to offer relative price stability. Their market value is usually pegged to the value of a stable asset, like USD or gold.

Stablecoins are designed to be somewhat resistant to volatility, as the name suggests. Their price is intended to remain stable, so you shouldn't see significant price variation.

Stablecoin projects claim to be backed by a reserve asset (e.g. USD), another crypto (e.g DAI), or a commodity (e.g. gold). They are often traded at high volumes; similar to cash in a traditional market.

5. Tether (USDT)

Officially launched in 2014, Tether (USDT) is a stablecoin that streamlines the use of fiat currency on the blockchain. The coin is pegged to the U.S. Dollar with claims to be backed by a variety of reserve assets equivalent to (or possibly greater than) its total supply.

By backing the coin with reserve assets, Tether has been able to avoid the price volatility that often plagues other cryptocurrencies. Through stability, Tether’s founders hope to create digital money that can be used to make everyday transactions within the world of Web3.

6. USD Coin (USDC)

Created by CENTRE with support from Circle and Coinbase, USD Coin (USDC) is another stablecoin pegged 1:1 to the U.S. Dollar. Launched in September 2018, each dollar of USDC is backed by a U.S. Dollar which exists as a mix of cash and Treasury bonds. Its reserves are regularly and publicly reviewed by an external accounting firm with their findings published monthly.

Like other stablecoins, it is mainly used for cashless everyday transactions and as a store of value given its relative stability.

7. Binance USD (BUSD)

Binance USD (BUSD) is a Binance-branded stablecoin created in partnership with the blockchain platform, Paxos. Launched a year after USDC, BUSD is regulated by the centralised New York State Department of Financial Services (NYDFS).

Offering a 1:1 peg to the U.S. Dollar, BUSD claims to be 100% backed by cash or cash-equivalent reserves across various FDIC-insured bank accounts. These accounts are held in custody by Paxos and audited regularly.

BUSD has many of the same use cases as similar stablecoins but is applicable for use within the Binance blockchain. New BUSD can also be created by depositing U.S. Dollars into the Paxos platform.

Utility Tokens

As the name implies, utility tokens are created to serve a particular purpose (or multiple purposes) on a specific platform. In essence, they allow users to interact with features or applications unique to a specific platform.

Sometimes, utility tokens are used to pay for products or services on a network (like Binance’s BNB token). Other times, they can function as a reward to users for contributing to the network (like Theta’s TFUEL). Or they can be the means through which a user can unlock a network’s utility (like XRP for making quick, liquid, global money transfers).

8. Binance (BNB)

BNB is a utility token created by Binance, a crypto exchange that launched in 2017. It has some elements of currency and infrastructure crypto types. BNB can be used to pay for goods and services within and outside of the network. BNB is also used to pay network gas fees on Binance’s smart contract blockchain, BNB Chain.

Outside of this, BNB has a range of useful functions on the BNB Chain. These include:

  • Trading fee discounts when you pay in BNB on Binance’s exchange
  • Access to exclusive token sales
  • Access to BNB Chain ecosystem of DeFi gaming, DApps, and more

9. Ripple (XRP)

When it comes to cross-border transactions, it’s not uncommon for money to get lost along the way. Third parties, such as banks, often administer a fee to facilitate a transaction. This fee, along with constantly changing exchange rates, cuts into the margins of the transacting parties.

What if there was an easier way that didn’t take days, but seconds? A way for parties to transact directly, avoiding the hefty fees often charged by financial institutions. That’s where XRP comes in.

XRP was founded in 2012 as a way to facilitate cross-border banking transactions with high liquidity. Rather than doing a currency conversion before conducting business with a bank in another country, two banks do all transactions in XRP. This saves time and simplifies the process of international transactions. Banks in various countries have also adopted XRP for routine hawala transfers.

Meme Coins

Meme coins are cryptocurrencies inspired by the social currency of the internet: memes. They could be directly inspired by a meme, like the dog-themed Dogecoin (DOGE), or centred around a community interest, like garlic bread (GRLC).

Anyone with an internet connection can make and distribute a meme. And with the right technical knowledge, anyone can create and distribute a meme coin.

Meme coins typically have a massive or unlimited supply, which accounts for their unusually low per-unit price.

10. Dogecoin (DOGE)

Dubbed the original meme coin, DOGE started out as a satirical commentary on the idea of crypto by former Adobe product manager, Jackson Palmer, in 2013. Eventually, the idea grew in popularity, and Palmer teamed up with software developer, Billy Markus, to make DOGE into an actual crypto.

It experienced brief record growth during the 2017/18 crypto bubble before falling in value. After an endorsement by Elon Musk in 2021, the coin rose once again. Its price rose once more after Musk’s takeover offer of Twitter in 2022. The price pumped several times during and after these moments; events that strongly correlated with Musk’s tweets about Dogecoin (or crypto in general). It is currently one of the top cryptocurrencies by market cap.

FAQs

Can you invest in all types of crypto?

One of the core premises of crypto is accessibility for everyone. Knowing this, your portfolio doesn’t have to be limited by one type of asset. At Caleb & Brown, we have hundreds of assets available for you to invest in. If you’re ready to get started, contact a broker today.

Do you have to buy a complete coin or token in order to invest in crypto?

Similar to fractional shares in traditional markets, cryptocurrencies are divisible. You do not need to own a complete coin or token to hold an investment.

Why are there so many different types of crypto?

Most crypto projects are open-source. Any aspiring crypto developer can view the source code of a coin and replicate it to create their own crypto. Because of this accessibility, over 20,000 cryptocurrencies (and counting) have been created since Bitcoin’s inception.

Make Your First Crypto Investment

There are many different crypto projects out there, each with unique and varying use cases. With so many projects on the market, speculative opinions abound. At Caleb & Brown we take an objective, factual approach to crypto, providing resources to assist you to make an informed investment decision.

If you’re ready to invest in any one of these cryptocurrencies, working with a crypto broker is one of the easiest and safest ways to start investing. Caleb & Brown specialises in delivering a personalised experience for every investor, ensuring you can make an informed decision on every trade. Not to mention key features such as:

  • Unlimited pairing with no limits on trading volume
  • Custody on all stored assets
  • No deposit or withdrawal fees

Trusted by over 21,000 clients in over 100 countries, Caleb & Brown has the experience needed to help you execute your first crypto investment.

Sign up for your free consultation and start investing today.

Disclaimer: This assessment does not consider your personal circumstances, and should not be construed as financial, legal or investment advice. These thoughts are ours only and should only be taken as educational by the reader. Under no circumstances do we make recommendation or assurance towards the views expressed in the blog-post. The Company disclaims all duties and liabilities, including liability for negligence, for any loss or damage which is suffered or incurred by any person acting on any information provided.

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