Cryptocurrencies: Types and How They Work

When it comes to buying and selling cryptocurrency, the popular and promising Bitcoin immediately comes to mind. However, today there are around 1500 digital coins, and new altcoins emerge constantly – some countries even claim to release their own virtual currency. Traders have long been buying and selling various cryptocurrencies because they are dynamic and less susceptible to volatility than Bitcoin. informs about competitive modern coins: what exists, how they work, and their capitalization figures.   

Cryptocurrency – What is it?

The world of virtual currency is constantly evolving. Every day, new terms emerge, and the essence of previous ones changes dramatically.

Let's start with the definition of «cryptocurrency». In a broad sense, it is a specific platform where the trading and exchange of digital assets take place. The virtual platform is encrypted and decentralized – anonymous and not controlled by a national bank or other financial institution. Transactions conducted on it have the designation «self-regulating».

The main feature of crypto is that it cannot be withdrawn from circulation or restricted. This creates a significant advantage in the market and greatly facilitates financial transactions. You can buy and sell cryptocurrency without worrying about control from the state apparatus. Transactions are completely safe, reliable, and characterized by high speed. The secret to such success? The agreement between the parties to the transaction is confirmed by a smart contract that cannot be bypassed. It allows tracking the history of each digital coin, eliminating problems of forgery, machinations, and unfounded claims to others' assets.

Classification of Coins

In 1989, the idea of creating digital currency was first discussed, and even research was conducted that showed the real possibility of its mining. For 19 years, no one could implement the idea.

Only in 2009 did the world see the first cryptocurrency – Bitcoin. This was not the end of it. Today, there are already more than 1500 digital coins in the world. Some are well-known, while others are highly specific. Many are open to everyone, while others are traded on specific markets.

The diversity of crypto complicates its classification, as each currency has its purpose and characteristics, occupying a clear niche in the digital market. Despite this knowledge, predicting the value fluctuations of each coin is impossible. The market and the currencies themselves are not well-researched, making analysis challenging.

The only thing that can be clearly distinguished is two categories of cryptocurrency: native and non-native.

Native cryptocurrency, in simple terms, is one that can be used in financial operations. That is, it fully corresponds to the definition of virtual coins. Bitcoin, Ethereum, and others are considered native currencies.

Non-native coins refer to those that perform a specific task. They are issued for a specific type of activity. For example, tokens acting as shares of a company or project. Examples include Civic or Ox tokens. The first is used by service providers, and the second participates in trading on the Ethereum platform.

Full-Fledged Cryptocurrencies

This category includes currencies that are very attractive to users. Here is a list of the most well-known on the financial market.

Bitcoin – the most popular and "expensive" cryptocurrency that has held a leadership position for several years. It undoubtedly has a high capitalization. During its time on the market, the value of Bitcoin has grown from $0.003 to $20,000. And this is not the final price.

Experts call Bitcoin digital gold.

The main advantage of Bitcoin is the ability to transfer value. In other words, buying and selling bitcoins is exactly like using cash. In the digital market, it is used to transfer value. An important nuance is that payment cannot be canceled.

A Bitcoin user can divide it into small parts. For example, if the price of 1 bitcoin is $10,000, an investor can purchase its minimum part for only $0.0001. This significantly simplifies financial transactions with the coin and makes it accessible to ordinary people. Transaction fees are significantly low – a great way to save on payments.

Ethereum (ETH/USD) – – a cryptocurrency that competes with Bitcoin in popularity and trading volume. Ether appeared in 2014 and immediately caused a stir among investors. Its specificity lies in the blockchain platform, where smart contracts and decentralized applications are widely used.

Litecoin (LTC/USD) – a popular virtual currency that uses accelerated transaction confirmation through a different encryption method. Its high processing speed attracts investors. Miners also love Litecoin for its ability to be mined without expensive setups.

Litecoin transactions do not require intermediaries. The operation takes place directly between the sender and the receiver. The process is called «micro-swap». However, some investors consider it risky and opt out of Litecoin.

Zcash (ZEC/USD) – a «fully anonymous» and «transparent» cryptocurrency that emerged in 2016. A relatively new coin has gained investor attention due to its decentralization and open-source code. Zcash ensures complete anonymity of transactions and regulated transparency. Note that Bitcoin only offers «privacy» in transactions. So, the advantages are evident.

All information is recorded and stored on the blockchain, accessible to the public. Important data, such as the amount converted to Zcash, and the investor's credentials, are kept confidential.

Dash – a cryptocurrency known as the «alternative to Bitcoin». It appeared in 2014 and was immediately embraced by investors. Tracking the path of a Dash transaction is impossible due to its high level of anonymity. The coin continues to compete for leadership in anonymous blockchain transactions and encryption.