What are the different types of cryptocurrencies?

According to CoinMarketCap, there are now more than 5700 cryptocurrencies in existence. We ca highlight two big categories: altcoins and tokens. Many cryptocurrency users don’t even understand the nuances and mix these terms interchangeably. So, what’s the difference between them? Let’s dig in.

Altcoins

Alternative cryptocurrency coins are separate currencies with their own separate blockchain. Many altcoins claim to be better versions of Bitcoin, but most of them were made with the same basic framework as Bitcoin.

Most altcoins are just a new version of BTC with an improved set of features. Litecoin, Bitcoin Cash, and Dash are all examples of altcoins based on the Bitcoin protocol.

Other altcoins were created without using the open source protocol of Bitcoin. Instead, the developers created brand new blockchain protocols to support cryptocurrency (for example, Ethereum).

Tokens

This type of cryptocurrencies operate on top of a blockchain that facilitates the creation of decentralized applications. Tokens can represent various types of different assets and functionalities: value tokens, security tokens (in order to protect your account), or utility tokens (produced for specific uses). They can be distributed via an Initial Coin Offering (ICO), which is a way of crowdfunding.

Tokens have innate functionality as they represent a tradable and exchangeable asset. This can be anything starting from loyalty points for a particular business (for example, airline miles) up to commodities.

So, now you know the difference between altcoins and tokens. Share this blogpost on social media channels if you like it. Register on Quantum.uk for free, and stay tuned for more great content!

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