With the increasing popularity of decentralized finance and non-fungible tokens (NFTs), different types of cryptocurrencies have moved into the spotlight. According to reports by on-chain analysts, it has been stated that only 2% of the world is in crypto—which goes to show how relatively niche and small the crypto market still is.
Having said that, market capitalization is not necessarily a reflection of how many cryptocurrencies there are. In fact, there are thousands of them, depending on which crypto market data site you use. CoinMarketCap states 5,130, while data site Statista lists just over 4,500. Either way, if you look in the right place and have full knowledge of the different types of cryptocurrency, their pros, and cons, you might even spot the best cryptocurrency to buy.
In this article, we'll walk you through the positives and negatives of the top 10 types of cryptocurrency in 2022.
Brushing Up On The Basics: What Is Cryptocurrency?
Before we take a closer look at the 10 most important types of cryptocurrencies, let's take a step back and understand what cryptocurrency is. Cryptocurrency can be defined as virtual or digital money that takes the form of "tokens'' or "coins." It must be noted that even though some cryptocurrencies have ventured into the physical world with credit cards or other projects, the large majority of cryptocurrencies remain entirely intangible.
How Many Types Of Cryptocurrency Are There?
There are more than 4,000 cryptocurrencies in existence as of January 2021, and choosing the best one to invest in can be a tedious task, especially if you're new to the crypto world.
Bitcoin is the first cryptocurrency created and everything else, other than Bitcoin, is collectively known as an "altcoin", which essentially means "alternative to Bitcoin." While it cannot be predicted which cryptos are the best ones, Bitcoin and some of the largest altcoins out there are top-tier options because of their scalability, privacy, and the scope of functionality they support.
Although there are many ways to earn with Bitcoin, the most popular cryptocurrency, let's learn about all of the different types of cryptocurrency that you can invest in.
Top 10 Different Types Of Cryptocurrency To Choose From In 2022
To help you find the answer to - “How many types of cryptocurrencies are there,” lets dive into the ultimate list of the different types of cryptocurrency to choose from in 2022:
1. Bitcoin (BTC)
Bitcoin was the pioneer of a new, innovative alternative for money, which is known as a digital currency. It was initially released in 2009 and was founded by Satoshi Nakamoto. Bitcoin is based on a distributed ledger known as blockchain technology. About 18.5 million Bitcoin tokens are currently in circulation, against a present market cap limit of 21 million.
Pros
- The biggest community of developers and investors
- Easy for newbies
- Supported by top exchanges and wallets
- Adopted in many mainstream companies including Microsoft, Overstock.com, Bloomberg, Expedia.com, and others
Cons
- Low transaction speed (One transaction takes about 10 minutes and the Bitcoin network can process 7 transactions per second)
- Bitcoin mining requires expensive, super powerful, and electricity consuming hardware
- High transaction fees
2. Ethereum (Ether)
Created in 2015 by Vitalik Buterin Bloomberg, Ethereum is much more than just being a digital currency, making it, the second-best currency for people to invest in. It is a blockchain technology-based platform for developing decentralized apps and smart contracts. Smart contracts are the agreements coded on the blockchain that execute themselves when certain pre-set conditions are fulfilled. What sets Ethereum apart from the other types of cryptocurrency is that you can start building directly on the Ethereum network blockchain.
Pros
- Building smart contracts which are often considered the next big thing in the cryptocurrency universe
- Launching Initial Coin Offerings (ICOs) for other blockchain projects
- High transaction speed (few seconds)
Cons
- Scalability issues
- Uses obsolete mechanism (Proof-of-Work) to verify the transactions
- Network congestion
- Demands a lot of electricity
- Supports one coding language — Solidity
3. Ripple (XRP)
Founded in 2012, Ripple focuses on solving problems related to just one industry — International Payment Transfers. It aims to make international transactions both fast and cheap. It is more well-known for its digital payment protocol than for its XRP crypto.
Pros
- International money transfer takes a few seconds
- Considerably low fees
- Being tested in the real world
- Used by American Express and Santander
Cons
- Centralized
- Banks and financial institutions (Ripple’s biggest users) have started developing their own cryptocurrencies
4. Litecoin (LTC)
Charlie Lee, a former Google employee, created Litecoin in 2011 to improve on the existing Bitcoin technology- shorter transaction time, lower fees, and more concentrated miners. Similar to Bitcoin, Litecoin is just a digital currency that doesn't provide a platform for smart contracts. Litecoin has stood the test of time for its efficiency and is now among the most popular types of cryptocurrency.
Pros
- Transactions take around 2.5 minutes
- Average Litecoin transaction fees $0.179
Cons
- Apart from transaction speed, it is facing tough competition from coins that offer privacy, smart contracts, and international payments, etc.
- Mining is expensive and requires specialized powerful hardware
5. Bitcoin Cash (BCH)
Bitcoin Cash, introduced in 2017 has one main difference from the original Bitcoin, and that is its block size: 8MB. Bitcoin has a block size of 1 MB, which means that Bitcoin Cash offers faster processing speeds
Pros
- Faster processing speed
- The average Bitcoin Cash transaction fee - $0.067
Cons
- Not completely decentralized
- As expensive as Bitcoin mining
- Lesser returns
- Not easily available
6. Cardano (ADA)
Cardano, co-founded by Charles Hoskinson, is an “Ouroboros stake-of-proof” cryptocurrency which was created with a research-based approach by mathematicians, engineers and cryptography experts. Due to the rigorous process of extensive experimentation, peer-reviewed research, and writing 90 papers on blockchain technology, Cardano seems to stand out among its proof-of-stake peers as well as other large cryptocurrencies.
Pros
- Supported by an academic community of global researchers and scientists contributing to its blockchain development
- Much more scalable with a current capability of 257 transactions per second
- Intends to bring about data interoperability which enables interaction with other cryptocurrencies and their infrastructures in a seamless manner
Cons
- Hasn’t fully achieved all proposed ideas
- Huge competition from Ethereum to EOS and NEO to Fusion
7. Stellar (XLM)
Stellar is an open blockchain network that is focused on money transfers. Its network is designed to make money transfers faster and more efficient, even across national borders. Time-consuming transactions between banks and investment firms can now be done almost instantly with no mediators and low transaction fees.
Pros
- More decentralized
- Strategic partnerships with over 30 banks and with organizations like Deloitte and IBM
Cons
- Tough competition with Ripple
8. NEO
NEO, formerly called Antshares and developed in China, is aggressively looking to become a major global crypto player. Its focus is smart contracts (digital contracts) that allow users to create and execute agreements without the use of an intermediary. The main feature that investors find appealing is the similarities between Ethereum and NEO.
Pros
- Can complete 10,000 transactions per second
- Supports multiple languages like C++, C#, Go, and Java
- Huge market base in China and Asia
Cons
- Supported by government
- Target competition- Ethereum, Cardano, EOS
9. IOTA
IOTA, or Internet of Things Application, doesn’t actually work with a block and chain; it works with smart devices on the Internet of Things (IoT). This enables the communication between various objects with sensors, via the internet. IOTA focuses on making this technology more secure, seamless, and scalable. Its protocol is known as Tangle.
Pros
- Zero transaction fees
- Infinite scalability
Cons
- The success of IOTA depends on the success of Internet-of-Things (IoT), which makes its future more unpredictable
- Recently discovered a security problem with Tangle
- Stiff competition with probable big IoT players
10. EOS
EOS, created by Dan Larimer, is building a platform for developers to build decentralized applications and smart contracts, but with a vast improvement in technology.
Pros
- More scalable than Ethereum
- Uses an advanced mechanism (Delegated Proof-of-Stake + Byzantine Fault Tolerance)
- 10,000-100,000 transactions per second
- Supports multiple languages including C++
- Highly experienced team with a proven track record
Cons
- Not predictable as it hasn't been launched yet
Final Words
Well, now you have an answer to how many types of cryptocurrency there are, and how all of them have something unique to contribute to the broader crypto ecosystem.
These coins are included in a top-10 cryptocurrency list because of their technology, transaction speed and fees, and scalability. Doing your own research about each of these coins is important to understand how the crypto world functions.
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