Cryptocurrencies is one of the hottest investments over the last year. Yet, most people seem to confuse the subcategories of cryptos and in many cases refer to Bitcoin as the “cryptocurrency”. Well, guess what? Bitcoin is surely the biggest crypto out there, but not the only one. So, let us guide you through the 3, or more precisely 2 and a half, cryptocurrency categories out there.
Cryptocurrencies are digital or virtual currencies that are encrypted (secured) using cryptography and is used for the sole purpose of making or receiving payments on the blockchain. Needless to say that there are based on a decentralized system.
So now comes the hard part. Is a coin, token and altcoin the same thing? Absolutely not. In fact, there are completely different.
Coin & Altcoin
Coin is a form of cryptocurrency that operates solely on its own blockchain platform. The biggest of them all is no other than Bitcoin. Actually, you will be surprised by this but Bitcoin is the only coin! Then how about Litecoin, Peercoin, Dogecoin etc.? All these are Altcoins, or in other words, alternatives to Bitcoin (Alt-ernative coin). All of them were created after Bitcoin’s huge success, with the hope to get a share of the pie. Altcoins have the same underlying concept as Bitcoin and are based on the same open-sourced technology but with small variations, therefore they have different features.
A Token is the second major subcategory of cryptocurrencies. Tokens represent an asset or utility and reside on their own blockchains. Actually, they can represent any asset, such as commodities and even other cryptocurrencies! Needless to say that they compete against Bitcoin and Altcoins. The biggest crypto tokens are Ethereum with a market cap of around $48 bln. Some other tokens include Ripple, Omni and NXT.
It is very important to distinguish between those categories as they represent something different. Note that all of the cryptocurrencies are based on Blockchain technology.