Before talking about the types, let’s take a closer look at what cryptocurrency is. Cryptocurrency is a decentralized virtual currency owned solely by the owner with no involvement of central banks or intermediaries to impose their limitations. This certain currency gives full autonomy to the owner while maintaining the security of the user’s assets through its cryptographic methods and encryption algorithms.
With the further advancement in the system, different types of cryptocurrencies have been introduced, which are discussed below:
As the name suggests, transactional cryptocurrency is the currency used to buy goods and services online via the exchange of assets. This is the original type of cryptocurrency that slowly puts an end to fiat currency, established by government regulations that lack intrinsic value. In layman’s terms, transactional cryptocurrency is trying to replace the government-issued currency with digital money.
One leading example of transactional currency is Bitcoin, a digital currency that facilitates digital payments and transactions. It uses blockchain technology and decentralization to make peer-to-peer exchange possible without any third-party verification.
This coin holds and significant place in the history of cryptocurrency, for it is one of the earliest and most popular coins that rose the value of this system in no time. Currently, there are over 18.5 million Bitcoin tokens in the crypto market, each having a value of more than fifty thousand US dollars as of today (September 2021).
Platform currency in the form of cryptocurrency promotes new crypto markets by launching more and more crypto tokens. This currency is decentralized, meaning a central bank does not back it up, and the user himself is the sole owner of his assets.
The most related example of platform cryptocurrency is Ethereum, a decentralized software that aims to run smart contracts and decentralized applications and make them globally accessible to everyone. The token, Ether, is based on Ethereum technology that acts as an app store giving control to the owner himself.
Ethereum is both a cryptocurrency and a software developing tool giving rise to the digital economy. It is the second most popular cryptocurrency after Bitcoin, which also uses open-source Blockchain technology to leave no room for hacks or frauds.
The word Utility holds the exclusive insight of this type of cryptocurrency. Utility Cryptocurrency is a digital currency built on a specific blockchain for a particular purpose. It is designed for the different functions of cryptocurrency.
XRP is one prime example of a utility cryptocurrency used by various banks and economic institutions to scale digital proceedings globally. Based on RippleNet, it is much feasible for big-scale corporations rather than individuals as it facilitates a large number of payments in a highly efficient manner. This highly useful currency provides a better international payments experience through its speedy real-time gross settlement system.
XRP (Ripple) is famous for its online payment protocol as it facilitates swift and cost-efficient transactions. It can perform 1500 transactions smoothly despite the money, be it fiat currency or digital currency like Bitcoin.
Cryptocurrency is a high-risk investment, and amidst the progressive economic changes, one can either become a millionaire or lose all his money overnight. So before investing all your money in this, you must do your due research and only invest the amount you can afford to lose.