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The term "cryptocurrency" includes several subdivisions. Understanding these differences can improve your trading and open up new opportunities in the crypto world.
1.𝐂𝐫𝐲𝐩𝐭𝐨 𝐂𝐮𝐫𝐫𝐞𝐧𝐜𝐲:
- Cryptocurrencies are the best-known Blockchain technology.
- They share similar characteristics to fiat currency however, provide the distinct advantage of decentralization.
- Typically, the main purpose of a cryptocurrency is to act as a global currency, while often also acting as a store of value, similar to gold.
2.𝐏𝐥𝐚𝐭𝐟𝐨𝐫𝐦 𝐓𝐨𝐤𝐞𝐧:
- The world's biggest smart-contract platform is Ethereum.
- Designed to facilitate the creation of other decentralized apps (dApps), a smart-contract platform uses the Blockchain to construct a distributed database that all computers on the network have access to.
- Because the database is present on every computer, you alleviate the main issue of traditional servers; a database getting shut down or destroyed.
3.𝐔𝐭𝐢𝐥𝐢𝐭𝐲 𝐓𝐨𝐤𝐞𝐧
- A utility token, also referred to as a protocol token, is a type of cryptocurrency used to solve a specific problem.
- They can be purchased from an exchange, traded, and even earned.
- Every utility token is created to solve a real-world issue, with the use cases ranging from in-game items to digital advertising.
- A utility token functions in a similar way to an API key, granting the holder access to a certain service.
4. 𝐓𝐫𝐚𝐧𝐬𝐚𝐜𝐭𝐢𝐨𝐧𝐚𝐥 𝐓𝐨𝐤𝐞𝐧:
- Transactional tokens were created with the primary focus of facilitating cheap and efficient cross-border payments.
- Say you wanted to send money back home to your family, traditionally, you would have to use a service like MoneyGram which charges steep fees up to 20%, not ideal right?
- This is where transactional tokens come into the picture, instead of sacrificing a large amount of money to transaction fees, you can send any amount of money, near-instantly, for pennies.
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