What are the Differences Between the Types of Cryptocurrencies?

Ever since the rise of Bitcoin, a whole new ecosystem of digital currencies has emerged in their hundreds. There is literally a new token being released every single day. With as much as 1,500 cryptocurrencies, and many more in the pipeline, it can become daunting to keep track as an investor. Which projects should you invest in, when most coins are mere duplications of others?

It is only commonsense to identify the best crypto projects with the potential to do well, and invest in them. But how identifying such gems in a sea of many projects is never easy. However, this seemingly herculean task can become much easier if we categorize these coins and pick out the best in each category. This article is not aimed at hyping or recommending any cryptocurrency project. Instead, at the end of this read, you will be able to easily group crypto projects, select, and rank your investments options. In reality, every cryptocurrency falls in at least one of these groups.

  1. Currency Coins: This is by far the largest category in terms of market cap. It also boasts of being the original cryptocurrency with coins like Bitcoin, Litecoin, and Bitcoin Cash, amongst others. Currency coins have been designed for transactions (i.e. as money in exchange of goods and services), or as a store of value. Bitcoin is the first coin in this category and subsequent coins have been designed to improve some aspect of the Bitcoin Network.

Currency coins have the aim of rivaling and probably eliminating government-issued currency.

  1. Platform Coins: Coins and projects under this category are used to create an infrastructure that developers can leverage on in building decentralized applications. Think of it like an App or Play Store which Blockchain projects are built on. Major platform coins include Ethereum and NEO, which enable building of smart contract-based applications.

As seen with Ethereum, platform coins are designed to eliminate middlemen and are rapidly becoming the backbone for a host of future applications.

  1. Privacy Coins: Recently, Facebook was under attack for leaking of data, and there was remarkable social uproar. This points to the fact that people want to stay anonymous (unless you are a Hollywood star).

Privacy coins which somehow still come under currency coins are used for payments and as a store of value, but with heavy focus on staying secured and anonymous. Some common coins in this category include ZCash, Monero, and Dash.

  1. Application Specific Coins: In this final category, we have app specific coins. There are a number of projects whose primary aim is not to become a store of value, a medium of payment, or a platform for building other apps. These coins are often industry-specific and aim to decentralize a particular industry. For example, Storjcoin is trying to decentralize cloud-storage with zero downtime, Vechain is focusing on supply chain applications, IOTA is pioneering Internet of Things applications, etc.

Although some people may include other categories like Fintech and Payment Processors, on a broad spectrum they all come under application specific coins and in some cases come across as also currency coins. The bottom line in all of this is that the success of these projects is largely dependent on their adoption, usability, team, and overall performance.

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