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A complete guide on the different types of cryptocurrencies and their uses explained

Bitcoin (BTC 0.89%) has become a revolutionary digital currency since its inception in 2009. Because it allows peer-to-peer payments without the use of a third party (such as a bank), it has triggered a flood of other cryptocurrencies and digital assets that use blockchain technology.

Blockchain is a digital public ledger in which each transaction is assigned a unique "hash" (or identity) and is added to the ledger's end. The success of Bitcoin has put blockchain on the map, putting its potential to decentralise and improve the digital economy on a collision course with the status quo.

Crypto coins vs. Tokens

First and foremost: Understand the distinction between a coin and a token. When discussing cryptocurrency, the terms "coin" and "token" are frequently used. There is a distinction although they may appear to be synonymous. It's critical to keep them straight.

A digital coin is created on its blockchain and functions similarly to traditional money. It can be used to store value and as a medium of exchange between two parties conducting business. Bitcoin and Litecoin (LTC -2.32%) are two examples of coins.

On the other hand tokens, can be used for much more than just digital money. Tokens are created on top of an existing blockchain and can be used in conjunction with a software application (like to grant access to an app, verify identity, or track products moving through a supply chain). They can be used to represent digital art (like with NFTs, or "non-fungible tokens" that certify something as unique). There has even been some experimentation with NFTs and physical assets such as art and real estate. Tokens, such as Ether, are used to conduct transactions on the Ethereum (ETH -0.32%) network.

Different Types of Cryptocurrencies

Bitcoin is regarded as the first cryptocurrency, and other individual cryptocurrencies are referred to as "altcoins" (a combo word derived from "alternative coin"). It's hard to pinpoint the greatest cryptocurrency, but due to their scalability, privacy, and range of features, Bitcoin and other of the biggest altcoins are among the finest choices.

The "best" cryptocurrency does not exist because each has unique features depending on the purpose for which it was created. Here's a rundown of some of the most popular digital coins and how they're used.

1. Bitcoin

The first decentralised cryptocurrency to employ blockchain technology to enable payments and digital transactions is widely recognised as Bitcoin. Instead of relying on a central bank to control an economy's money supply. Bitcoin's blockchain serves as a public ledger of all transactions in Bitcoin's history.

2. Ether

Ether is a cryptocurrency that is used to facilitate transactions on the Ethereum network. Blockchain technology is used by the Ethereum platform to enable the development of smart contracts and other decentralised applications (software that does not have to be distributed on app exchanges like Apple's (AAPL 1.98%) App Store or Alphabet's (GOOGL 0.36%)(GOOG 0.53%) Google Play Store, where they may have to give the tech giants a 30% cut of any revenue). Ethereum is both a cryptocurrency (the coins themselves are measured in Ether units) and a software development sandpit.

3. Tether

Tether is a stablecoin or cryptocurrency that is linked to a fiat currency, in this case, the US dollar. The idea of Tether is to combine the benefits of a cryptocurrency.

4. Binance Coin

Binance Coin is available for trading on the Binance cryptocurrency exchange platform, along with other digital coins. Binance Coin can be used as currency, but it can also be used to pay fees on the Binance exchange and to power Binance's DEX (decentralised exchange) for app development.

5. USD Coin

USD Coin is a stable coin that, like Tether, is linked to the US dollar. USD Coin, like Tether, is hosted on the Ethereum blockchain. The objective of the USD Coin was to develop a "totally digital" dollar with the same level of stability as US fiat money but without the need for a bank account or the bearer to reside in a certain nation. Rather than being an investment, USD Coin is envisioned as everyday money that can be spent with online merchants.