Cryptoсurrency (also known as “crypto”) is a full-fledged alternative to fiat money, so you can buy goods, services, trade, invest and make private transactions online.
Crypto assets are entirely digital assets used as a medium of exchange on exchanges and trading platforms. They are based on blockchain technology to allow businesses and people to make transactions without middlemen like banks or central authorities. It means your e-money is under your total control, and you manage the whole process almost by yourself.
Have you ever heard about Bitcoin? We bet you have but are you sure that’s the only one cryptocurrency out there? Maybe it’s the first, the most popular and famous, but 100 % it isn’t the last.
Bitcoin isn’t the one, there are many assets in the crypto reality, and we are tempted to tell you more about that. But first, let’s make it clear - there is a definite difference between a coin, a token, and an altcoin.
Coin vs. Token vs. Altcoin
A digital coin is designed on its own blockchain and acts in much the same way as traditional money. It can be used to store value and as an opportunity to have business issues between two parties. Examples: Bitcoin (BTC) and Litecoin (LTC).
Token’s usage is more than being just digital money. Tokens can be used for investing, making purchases, or they can represent digital art like NFTs. There were even experiments when people used NFTs with physical assets, such as real-life art and real estate.
An altcoin is an alternative cryptocurrency, and it’s the opposite of a Bitcoin (BTC) in some way, as you don’t need expensive hardware to mine it, and it’s supposed to be faster and more energy-efficient. There are thousands of altcoins out there, but the most influential are Ethereum (ETC), Cardano (ADA), and Tether (USDT).
As for the types of assets, we’ve tried to sort them out in groups to make it easier for you to observe all possibilities you’ve got.
Digital Gold (or DGC)
It stands for cryptocurrencies that could be comparable to the real gold in terms of being stored and its growing value. A good example of DGC is Bitcoin, as it’s the world’s oldest and biggest crypto, and it acts like gold, an asset that was traditional for centuries. People always have an intention to invest their money in something - gold, property, stock to prevent loss of their funds and savings; new-age offers a new type of investment — Bitcoin.
Its primary purpose is to use crypto for buying and selling things online instead of using cash. It’s entirely digital, blockchain-based, and decentralized. E-money is converted into a code, and since then, you can keep them in a crypto-wallet, a pocket card, or online bank accounts.
There are also such cryptos that represent and operate a whole network that could be used by developers to create decentralized applications, so-called “dApps”. For instance, NFTs, which literary exploded the crypto market, were made on the Ethereum network. Thanks to such platforms, it is possible to create a new cryptocurrency. Some examples of those cryptos are Ethereum, Cardano, and Polkadot.
Here’s another type of coin pegged to a real currency — euro, U.S. dollar, some precious metal — gold, silver, oil, or real estate. It is also called a digital fiat, and it means a cash-like currency that the primary purpose is providing stability. It is believed that it is safer than other cryptos as a stable coin is tied to a good old centralized authority and a well-known flat currency.
The best example of such stable coins is Tether Gold (XAUT) that holds its gold reserves in Swiss vaults, and its investors can exchange their crypto for physical gold or cash. Paxos Gold (PAXG) is another alternative for those who like the idea of dealing with stable coins. It operates on the Ethereum blockchain, so the transactions happen with the help of smart contracts rules.
It’s a particular category because those coins mainly were created for fun and were inspired by popular internet memes, that’s why their designs and names are pretty weird (just have a look at BabyUni, Memecoin, Shiba, etc.), and a few people tend to invest their money into those coins. However, Dogecoin (DOGE) is getting more serious thus still volatile, in other words, changes rapidly.
Anyway, you can have some in your cryptocurrency portfolio to make it diverse if you don’t feel like placing all your money on them.
Blockchain Forks: Hard vs. Soft
Their names could be a bit similar, but their nature is entirely different and unique, so we’re going to explore the exact difference between them right now!
- Hard fork creates two blockchains, and they appear once nodes add new rules that conflict with the rules of old nodes, which means it is backward incompatible. As a result, the blockchain divides into different networks — one with the old rules and another one with the new rules. Thus, networks go simultaneously but continue to run transactions and generate, although on different blockchains.
So, in the end, you’ll get coins from two networks. Let’s have a look at an example: to put it simply, a well-known case with split Bitcoin and Bitcoin Cash, Ethereum and Ethereum 2.0. creating two different blockchains is a typical hard fork that happened in November 2018.
- Soft fork is supposed to end up as one blockchain; although new and old protocol rules run into each other, they don’t conflict, which means it’s a backward compatible fork. All nodes can continue to generate blocks and join the same blockchain. There is an excellent example of that process: SegWit, a software update that changed a bitcoin’s transaction structure on 23 August 2017.
The variety of cryptocurrencies is broad, so it’s both easy and complicated at the same time to find the exact thing you want to have in your cryptocurrency portfolio. There are options for those who are quite serious about investing in crypto, for developers and collectors, for newcomers and experienced crypto sharks — let’s face it, for anyone who wants to sample crypto and decide whether it’s their cup of tea or not. We’ve tried to guide you through and show the difference between various types of crypto for you to purchase, so now we hope you’ll make the best choice that meets your needs and expectations!