What types of Cryptocurrencies are there?

Currency – Bitcoin was the pioneer of cryptocurrencies. Bitcoin itself was built to act as a currency. Its uniqueness as a currency stems from its limited supply of 21 million Bitcoin. This promotes it as a great ‘store of value’. Its open source nature makes it decentralised, free from legislation and third parties, being completely secure and trustless. It should be noted that for all the amazing features of Bitcoin, and there are many, its originality also brought with it limitations. Such limitations could be seen in its scalability and privacy limitations, hence the need for further development in the cryptocurrency ecosystem. We have seen over the years, new projects are continually growing on the Bitcoin vision to remedy any of its limitations. GRIN coin is a good example of an alternative that acts as a currency and was built to solve the scalability and privacy limitations that Bitcoin faces.

Smart Contracts – Ethereum was the pioneer of smart contract cryptocurrencies. The purpose of Ethereum is to facilitate a digital negotiation or performance of a contract. Smart contracts are unique in the way they can facilitate guidelines and agreements automatically without the need of a third party. Even for small businesses, automation can make business transactions and negotiations far more efficient. Escrow is a service worth billions of dollars in which a legal arrangement is in place whereby a third party will temporarily hold large sums of money or property until a particular condition has been met. Real estate escrow services, for example, charge as much as 1-2% of the value of a property to hold onto purchase funds until a deal’s conditions have been met. Those services can easily be replaced by smart contracts.

Utility Tokens – Utility tokens are similar to the tokens you receive at a gaming arcade, they have little use as a token themselves however they can be redeemed for a service or product. SIA coin was one of the first utility tokens on the market. SIA is a decentralised peer-to-peer cloud storage system where holders of SIA coin can pay for these services. There are literally thousands of other utility tokens on the market and there will be many more in the future. 

Governance Tokens – these are blockchain tokens that allow users to have both voting and management power. Governance tokens are crucial in DeFi environments where a power balance is required. The benefits of doing so are similar to stocks in a sense that holders will have the power to influence decisions relating to the project, such as new proposals.  A good example of a governance token is Maker (MKR), which allows its investors to vote on any relative DeFi protocols that the decentralised stablecoin DAI runs on. 

All coins, regardless of their category, possess a dynamic range of unique features which distinguish them from other coins. Some coins are inherently designed to provide complete anonymity, others are designed to provide lightning fast transactions.