The Types of Cryptocurrencies That Every Entrepreneur Should Know About
By Space Coast Daily // May 16, 2021
The popularity of cryptocurrencies among investors has increased after the arrival of Bitcoin in 2009. Cryptocurrency is not managed by any central authority like the banks, it is based on a digital ledger to which the common people have an easy approach.
The cost of the transaction is non-negligible as the money is deposited in electronic wallets which can be fetched through emails. Digital currencies have noted their existence as significant financial devices that can be personalized to hold the actual value.
Every cryptocurrency can be distinguished into either coins or tokens, coins have their respective blockchain but tokens do not.
Some popular cryptocurrencies that are coins are BTC or Bitcoin, Ethereum or ETH, XRP or Ripple. Coins serve as currency because they have their blockchain and they also act as a medium of exchange.
In the year 2014, China initiated the development of their cryptocurrency. The Yuan Pay Group is the official crypto-based currency of China and they have worked diligently with the government of China to develop this currency. The official website of Bitcoin Freedom has a lot of information regarding their currency system.
The five types of cryptocurrencies that are now operating in the business market are:
■ Utility Tokens
■ Security Tokens
■ Stable Coins
1. Coins – coins are the fundamental digital currency that has a blockchain of their own. Some major crypto assets include Bitcoin and Ethereum or ETH. The primary cryptocurrencies were constructed to assist all digital transactions. Due to its ability to operate on its blockchain, coins act like endemic currency within a particular financial system. Additionally, a coin can be a medium of exchange as well as an excellent store of value within a digital profitable network. As a single unit of currency, a coin can be marketed for a value depending on the existing conditions of the market. A coin can be interchanged for a different currency that belongs to a different blockchain, through a cryptocurrency exchange or OTC trades. Several companies in the blockchain business chose to raise an amount of funds before constructing their blockchain and this is mostly done through ICO or Initial Coin offering Crowd sale.
2. Tokens – after coins, tokens are the second most popular type of cryptocurrency. Unlike a coin, tokens do not have their blockchain, they are usually produced on a previously existing blockchain like Ethereum. Crypto Tokens are also known by the name of crypto assets that stand for a specific unit of value. Tokens are produced by cryptocurrency corporations that intend to raise funds.
3. Utility Tokens – a person possessing a utility token can control a specific product or a particular service of the company that is investing. Utility tokens assist in sponsoring projects for the start-ups or the expanding groups. These tokens are used as protection for participation in a mass transaction to raise funds for a project. A utility token is very helpful when a company desires to generate a coupon that can be interchanged in the future for entrance to its services.
4. Security Tokens – these are a transferable device that verifies the identity of a person mechanically by storing some kind of personal data. Security tokens are of various forms, some of which comprise hardware tokens that include hardware tokens containing chips, USB tokens that can be inserted into USB ports and Bluetooth tokens. Security tokens are used to access a vital network system for example the bank account that adds some extra security to it.
5. Stable coins – a new form of cryptocurrency, stable coins aim to offer price stability and are funded by a reserve asset. Stable coins may be secured to a currency foe example the US dollars or product prices like gold. An advantage of stable coins is that in a bear business market the investors can shift their money from eruptive cryptocurrency to stable coins which is quite a stable asset. Stable coins are sometimes technically known as stable tokens.
Cryptocurrencies have become a prominent financial tool and investment opportunity for large companies, investors and entrepreneurs. Before stepping into the world of cryptocurrency it is always better to know the types of cryptocurrencies available in the business market. To be able to distinguish between the different types of cryptocurrency is a crucial step as it will better your understanding of the various types of investment plans.