Why are there so many types of cryptocurrencies? What are the common types of cryptocurrencies?
With the launch of Bitcoin (BTC), the cryptocurrency ecosystem ushered in the dawn, but it is no longer the only digital currency. Although BTC is still the flagship encryption tool, thousands of other digital assets are being traded on cryptocurrency exchanges. So why are there so many cryptocurrencies? What are the common types of cryptocurrencies? Here's the answer for you.
1、 Why are there so many cryptocurrencies?
At present, it is impossible to fully count the number of cryptocurrencies. However, according to most mainstream estimates, the number of cryptocurrencies has exceeded 19,000. Especially after the bull market in 2021, nearly 1000 digital tokens will be listed every day. The best way to measure the number of cryptocurrencies currently available is to view a reputable crypto price aggregator. CoinMarketCap and CoinGecko have been putting thousands of digital currencies and tokens on the central crypto exchanges (CEXs) and decentralized exchanges (dex).
There are several explanations behind the continued rise of cryptocurrencies. For example:
1. It is becoming easier for developers to create different cryptocurrencies.
2. The smart contract blockchains such as Ethereum, Solana and Coinsecurity smart chain allow users to use digital tokens to build dApps (decentralized applications).
3. For people with zero coding experience, it is also easier to create NFT (irreplaceable token) on platforms like OpenSea and Rarible.
The rapid growth of global encryption market value helps stimulate innovation in this field. Unfortunately, the growing prominence of cryptocurrencies has also attracted many fraudsters. Although many cryptocurrencies have legitimate use cases, hundreds of false tokens are related to Ponzi schemes. At present, even if there is a stronger security system, there are still many fraudsters who take advantage of the relatively lack of supervision in the field of encryption.
It is also common for developers to introduce cryptocurrencies that mimic or compete with successful projects. For example, after the dog coin regained its strength in 2021, dozens of developers launched similar dog themed memetics to take advantage of the popularity of dog coin. In the NFT field, derivative projects often imitate popular series, such as BAYC or Cryptopunk.
Although there were hundreds of false encryption and derivative projects in the past, this does not mean that every new cryptocurrency is worthless. Many developers and companies are really interested in using blockchain to achieve unique goals. With the spread of more and more high-quality information about what Web3 is and how to use it, more and more investors and coders are introducing products and services that can enhance the encryption space.
2、 What are the most common types of cryptocurrencies?
Each cryptocurrency has a unique background story. At present, the most popular digital assets are as follows:
1. Digital currency: Digital currency is a cryptocurrency existing in its local blockchain. Bitcoin is a major example of cryptocurrency, but many other currencies such as Lite Coin, Dog Coin and Ether also meet this definition. Most commonly, digital currencies are used as a medium for exchange or hedging investments. Developers can issue cryptocurrencies on the currency's native blockchain, but these new cryptocurrencies will be "tokens"
2. Public tokens: Public tokens are usually released on the smart contract blockchain (such as Ethereum), providing specific functions in their respective Web3 ecosystems. Generally, dApp developers will launch public utility tokens to increase their participation in projects. For example, DeFi (decentralized financing) dApp usually issues public utility tokens with voting rights.
3. Security tokens: These tokens are digital assets regulated by the federal government and have no other purpose except price speculation. Generally, security tokens imitate traditional investment tools, such as stocks, REITs (real estate investment trusts) and bonds, but they use blockchain technology. The Securities and Exchange Commission of the United States regulates securities tokens.
4. NFT: NFT is a non replicable virtual token on the smart contract blockchain. They can represent any form of digital media, but are usually associated with animated avatars, virtual lands, art and sports clips.
The above content describes several main types of cryptocurrencies and the reasons why there are so many cryptocurrencies. In encryption, people's goal is to improve the global encryption awareness and adoption rate. To this end, a revolutionary eye scanning device called Orb has been created. With this technology, people can verify the encrypted wallet without disturbing users' privacy.