Some three years ago, not many people knew about cryptocurrencies. However, nowadays, the mainstream media talks about Bitcoin and others, and at the same time, different states are discussing blockchain technology applications. There was only one cryptocurrency 10 years ago – Bitcoin – and today, the market has 2253 assets, according to CoinMarketCap.
Here are the top 10 cryptocurrencies, as per that source, as of August 6, 2019:
|#||Name||Symbol||Market Cap||Price||Volume (24h)|
How many types of cryptocurrency
In general, there are five core types of cryptocurrencies that need to be taken into account. Distinction is of utmost importance for cryptocurrency investors because the type determines what exactly they are investing in and who can invest in the first place. From coins to tokens, from stablecoins to utility tokens and security tokens, here are the main types of cryptocurrencies you need to know about.
Coins vs Tokens
The biggest distinction in cryptocurrency is between coins and tokens. Every cryptocurrency has to be one or the other. Here’s what differentiates coins from tokens: Coins have their own blockchain. Tokens do not.
Most of the big-name cryptocurrencies – Bitcoin (BTC), Ethereum (ETH), and Ripple (XRP), for example – are coins. The most important thing to remember about coins is that they have their own blockchain, meaning a decentralized, peer-to-peer network that records transactions on a digital ledger.
By contrast, a token does not have its own blockchain. The Ethereum blockchain is the most popular platform for token creation, though you can theoretically create a token on any blockchain. 0x (ZRX), Maker (MKR), and Basic Attention Token (BAT) are examples of ERC-20 tokens, a specific type of Ethereum-based token. In other words, their protocol exists “on top of” the Ethereum blockchain.
Coins function as currency. Tokens represent access to a product or “stock.”
Since coins have their own blockchains, it makes sense that they serve as currency, a means of exchange, within that network. This is why Bitcoin is called digital gold and Ripple is lauded for its fast transactions: Bitcoin is a store of value, like gold, and Ripple facilitates cross-border bank transactions. Furthermore, it’s easier to convert USD to a coin than a token. Investing in a token usually requires exchanging USD for a coin first.
The value of a token is a little more complicated. Tokens are typically released in ICOs (initial coin offerings). ICOs are like IPOs for cryptocurrency, meaning that they give the investor access to tokenized services or products or represent a stake in a cryptocurrency company. This is where tokens get a little confusing: Tokens fall under different SEC regulations depending on what they represent. One can separate tokens into two types based on whether they represent a utility or a security.
Utility Tokens vs Security Tokens
Understanding the distinction between these two types of cryptocurrency is paramount to investors, cryptocurrency companies, and the government. In other words, the SEC has much stricter regulations for security tokens than it does for utility tokens because, as their name suggests, they’re considered digital securities.
Most Tokens are Utility Tokens.
If one can buy or trade a token on a cryptocurrency exchange without being an accredited investor, then it’s a utility token. In broad terms, a utility token gives the investor access to a service or product. This means that a token can represent exclusive access, a discounted rate, or early access.
The Basic Attention Token (BAT) is a utility token that has received a lot of press lately. It’s a means of exchange for digital advertising attention. Integrated with the browser Brave, BAT works in three ways:
- Users receive BAT for agreeing to view ads.
- Content creators receive BAT when users view ads on their site.
- Advertisers buy ad space with BAT.
BAT represents attention, not stock or currency, making it a utility token. This means that anyone can trade utility tokens on a cryptocurrency exchange.
Security tokens are securities that exist on a blockchain
Security tokens are different. Like securities, security tokens represent partial ownership of a tradeable, real-world asset external to the blockchain, and because security tokens are regulated by the SEC like securities, one must be an accredited investor to participate in STOs (security token offerings).
The SEC decides whether a token is a security token using the Howey Test. In simple terms, the Howey Test determines whether a cryptocurrency investment is “speculative,” meaning that the investor makes money based on the labor of a third party.
Investing in security tokens is slightly more difficult. Investors must use a security token issuance platform, like Polymath or Swarm, to buy and trade tokenized securities. Unlike Coinbase or Binance, which are cryptocurrency exchanges that allow anyone to create an account, security token issuance platforms require users to meet specific requirements. This typically means having your accredited investor status confirmed by a KYC provider. The platform will then create a customized profile that specifies how and how much each investor can trade.
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Converging Types of Cryptocurrency
The distinctions between types of cryptocurrency can be obscure. Since companies have access to a much smaller investment pool with security tokens, some try to pass off their security tokens as utility tokens. There is also debate over whether tokens can represent currency, like coins, rather than access to a service. To make matters even more confusing, stablecoins are often technically “stabletokens.”
What is a Stablecoin?
Stablecoins are an increasingly popular type of cryptocurrency, especially in a Bitcoin bear market. This is because stablecoins are “pegged” to traditional assets like fiat (meaning government-backed currency like the US dollar or the euro) or gold.
For example, the theoretical exchange rate between a stablecoin pegged to the USD and the US dollar itself is 1 to 1. In theory, the company behind a stablecoin has the same exact amount in assets, stored in bank accounts, as they do tokens.
The advantage of stablecoins is that in a bear market, crypto investors can move their money from volatile cryptocurrencies to stablecoins, a more “stable” asset class, at least in theory. They do this instead of converting it back to USD, which can be a two-step process that incurs transaction fees. When a bull market returns, investors can convert their stablecoin back into other, more volatile currencies at little to no cost.
Historically, however, stablecoins have “broken their peg” in both directions. For example, controversial stablecoin Tether (USDT) has been worth less than a dollar, and Gemini Coin (GUSD) has exceeded the value of a dollar. This highlights another feature of stablecoins: Most have “USD” in their tickers.
Stablecoins are Generally Tokens.
Despite being called stablecoins, stablecoins are usually tokens, meaning that they don’t have their own blockchain. Maker (MKR) exists on the Ethereum blockchain. Tether (USDT) was built on the Bitcoin blockchain. On the other hand, both these "tokens" function as "currency," which is a characteristic of coins, not tokens. As we develop new applications for digital currencies, the distinctions between the types of cryptocurrency become increasingly blurred, which makes SEC regulation even more uncertain.
Distinctions between types of cryptocurrency matter
Why should one care whether something is a coin or a token, a utility token or a security token? Though the world of digital currency appears new and unclear, every prospective investor should know the value of the crypto they’re considering and, above all, how current and future SEC regulation will affect it.
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Furthermore, the distinction between coins and tokens represents two potential forks in the evolution of cryptocurrency: cryptocurrency as tokenized securities and cryptocurrency as a payment method. Will crypto replace the stock market, the US dollar, or both? As it stands, both revolutionary applications of cryptocurrency are making headway.
The list of mineable cryptocurrencies in 2019
Cryptocurrency mining refers to the process by which new digital cryptocurrency coins are created when a miner successfully verifies a cryptocurrency transaction and adds it to a public ledger within the cryptocurrency network. One needs access to the internet and suitable hardware to perform this process.
Mining cryptocurrencies such as Bitcoin is becoming harder every day as the number of block rewards continues to decline. In the future, small-scale miners will be at a disadvantage, as the costs of mining will be high. Large-scale miners will benefit from the economies of scale. Mining difficulty and the reduction in block rewards will increase the prices of mineable cryptocurrencies.
“The MoneyMongers” has the latest research, dated June 29, 2019, on which cryptocurrencies will be mined “up to the nines” this year:
Mining cryptocurrency is the best thing to do because mining is moderately profitable at any given time point and has a chance to appreciate in the future.
As a miner, one can amass a lot of coins when the hashrate is low and also benefit later from the price appreciation.
But usually, this is the mindset of value miners, and other profit drive miners who keep jumping from one currency to another almost certainly run out of the fuel needed the mining business.