What Are Altcoins? Understanding the Different Types of Cryptocurrency

In 2007, the global financial system started to collapse. Governments around the world had to step in, buying toxic assets and bailing out banks. A secretive entity, by the name of Satoshi Nakamoto started working on what is known today at Bitcoin. Bitcoin was released in 2009 and was an attempt at making a more free and fair financial system – one that benefited the people. 

Bitcoin would become the world’s first cryptocurrency. It is an open source project, this means anyone is free to help develop it. As time went on, Bitcoin steadily gained popularity and momentum. With the influx of new developers, new ideas flowed at a fast pace.

But not all ideas would end up making it into Bitcoin. These new ideas would often turn into new cryptocurrencies, and the pace of innovation was so fast that new coins were being created daily. Today, a few thousand different cryptocurrencies exist. A name had to be given to describe all of these other coins – Altcoins. Altcoins are cryptocurrencies that are not Bitcoin. 

What are the different types of cryptocurrencies today?

There are thousands of different cryptocurrencies on the market today. The market has matured greatly over the past decade and continues to innovate at every level. Today, no industry standard classification exists to describe the different types of cryptocurrency. Below, we will break down the different categories as they exist today:

  • Types of Cryptocurrencies by Use Case
    • Payment Coins – Designed to be digital money, with a value determined by the market
    • Stablecoins – Designed to be digital representation of a real life asset, like USD, EUR, Gold
    • Infrastructure Coins – Designed to build digital infrastructure, like like app store or play store
    • Financial Coins – Designed to build complex financial applications, like the stock market
    • Service Coins – Designed to provide a service, like the DMV issuing drivers licenses
    • Media/Entertainment Coins – Designed to be used by media/entertainment businesses, like player points in video games
  • Types of Cryptocurrencies by how consensus is formed (mining)
    • Proof-of-Work – When computing power is required to validate transactions on the blockchain
    • Proof-of-Stake – When stakeholders, or delegates, are required to validate transactions on the blockchain
  • Types of Cryptocurrency used in discussion
    • Bitcoin – The original cryptocurrency.
    • Altcoin – All cryptocurrency that is not Bitcoin
    • Token – A type of cryptocurrency that is created within an infrastructure blockchain.

Final Thoughts

These classifications of cryptocurrencies often have overlapping criteria. For example, Tokens are cryptocurrencies that are built upon infrastructure blockchains, like Ethereum. However, the token built on Ethereum could serve a purpose of Media/Entertainment, like the BAT token, which creates a new advertising model. 

Cryptocurrency is constantly evolving and improving. Eventually, everything will be on the blockchain.

Views and opinions expressed are solely those of the author and not of The DeChained or any affiliated party. Views or opinions expressed in this article (or any article on the website) are not financial advice. Articles are for informational purposes only. The author and The DeChained may hold positions in assets discussed in this or other articles.
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