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Categorization of Cryptocurrency

The term “cryptocurrency” is merely suggestive of some cryptographically written coins that are used in transactions and stored up some measure of values. It does not capture the varying difference in various coins which include technology, incentive alignment, and structure. Each cryptocurrency solves a fixated issue, and they fall into a certain type of category but in some cases, they do more than solving a single problem which places them in more than one category. Here are a few categories that a cryptocurrency could fall into.

 

Classification of Cryptocurrency

Categories of Cryptocurrencies

Cryptocurrency can be grouped into four main classes which are; transactional cryptocurrency, utility cryptocurrency, platform cryptocurrency and application cryptocurrency.

  1. Transactional Cryptocurrencies 
    This is the category which cryptocurrency is originally intended for. The most popular of them all is without a doubt Bitcoin. The intention of this cryptocurrency is to remove the control of of central authority and cutting out the middleman in our day to day transaction.

  2. Platform Cryptocurrencies
    This category creates a form of bedrock that facilitates the operation of other decentralized application. Examples include Ethereum and NEO. Ethereum & NEO  allow the creation of smart contract, with Ethereum being the most widely used smart contracts platform to date. Platform cryptocurrencies provide the foundation as well as buildings blocks that allows the swift development of other dencentralized apps/cryptocurrencies

  3. Utility Cryptocurrencies: 
    A utility cryptocurrency is a cryptocurrency designed for a specific purpose. Siacoin  is one of the notable examples. Siacoin is designed to facilitate a decentralized storage network which is a fairly unique concept and novel application of blockchain technology.

  4. Application Cryptocurrencies
    Application Cryptocurrencies refers to the class of cryptocurrencies that were based upon the platform cryptocurrencies ( Type II dapps )


  1. 1 Transactional Cryptocurrencies

    Transactional cryptocurrencies

    Bitcoin is one of the most popular cryptocurrencies in this category but recently we have witnessed its limitations in the area of scalability and privacy. A lot of alternative cryptocurrencies has thus been designed to provide a solution for the aforementioned aspects.

    Scalability:

    Transaction scalability is essential to create a robust platform where mass adoption is possible. Alternative cryptocurrencies have been created to salvage this situation, some examples are like litecoin and bitcoin cash.

    • Litecoin: 
      Litecoin, aka silver to bitcoin's gold, is an attempt to improve the scalability, featuring an improved block processing time (2.5 minutes per block ) compared to 10 minutes for that of Bitcoin as well as a larger coin supply of 84million coins compared to the 21million bitcoin offers.

    • Bitcoin Cash: 
      Bitcoin Cash is the result of a hard fork from Bitcoin which took place in August 1, 2017. Bitcoin Cash has increased the block size from 1mb to 8mb to allow for a faster transaction as well as lower transaction fees as its usage expands.

    Privacy : 

    The advent of privacy coin grants investors an addition privacy layer which Bitcoin could not offer while still carry out the usual Bitcoin functions like storage of value, means of exchange and the unit of account. Here's three popular examples namely Monero and Zcash.

    • Monero: 
      It helps to shield the fund stored in a given address from the public. It creates a one-time address that keeps client’s transactions private and secured. RingCT protocol of Monero also ensures the privacy of the transaction amount. Basically, it is not possible to derive the origin, destination as well as a content of a particular Monerotransaction

    • Verge:
      Verge is a privacy and anonymity focused cryptocurrency that started out as Dogecoin Dark back in 2014. The project rebranded itself as Verge in 2016 to differentiate themselves from Dogecoin. By leveraging the I2P and Tor network, transaction via verge as well as the IP from which verge was sent is completely untraceable. To know about the cryptocurrency, have a look at the following article  What is Verge? The Beginner’s Guide to XVG

  2. 2 Platform Cryptocurrencies

    ethereum platform cryptocurrencies

    Platform Cryptocurrencies typically refers to cryptocurrencies that features a smart contracts enabled blockchain. Smart contracts are by definition, automated contractual states that are capable of self-executing, written into codes and stored on the blockchain. Smart contracts also enable the development of others decentralized applications on top of it. Ethereum is by far the most popular one in this category, but there are plenty other cryptocurrencies that offer similar functions such as the ones listed below:

    TYPES OF SMART CONTRACTS PLATFORMPROGRAMMING LANGUAGE
    EthereumSolidity
    Ethereum ClassicSolidity
    Neo
    C#, VB.Net, F#, Java, Kotlin, Python
    EOS
    C++
    LiskJavascript
    ChainlinkGo Language
    WavesTo be confirmed
    StratisC#



  3. 3 Utility Cryptocurrencies

    Utility Cryptocurrency

    Utility Cryptocurrencies, as previously mentioned, refers to cryptocurrencies that are designed for a particular purpose. Siacoin and Storj are two great examples. Both of their tokens power the operation of their respective decentralized cloud storage network.

    Read more: Top 4 Best Decentralized Cloud Storage Networks (DSN)

    Skycoin is another interesting example that falls into this category. The Skywire Protocol of Skycoin aims to power a new decentralized internet via an incentivized mesh network. They place a strong focus on privacy and Skycoin will be serving as the default currency for digital bandwidth as well as incentives within the network. 

  4. 4 Application Cryptocurrencies

    Application Cryptocurrency

    There are plenty of application cryptocurrencies in the market ( more than 600++), each of them based their development and operation on other smart contracts platform. Here's two examples, namely 0x and Augur

    • 0x
      Trades are carried out by using this platform with a system of ethereum smart contracts which are publicly accessible, free to use and any decentralized application (dAPP) can partake of. Dapps created using this protocol can build their own liquidity pool and get paid based on the volume of the liquidity pool. The measure of fair play displayed makes the platform prejudice-free, where no group is benefitting over another or that someone is being subjected to partake of the protocol.

    • Augur
      This is a “not to be trusted” decentralized platform which is used for prediction markets. The reputation token holders are saddled with the responsibility of reporting the outcome. Augur’s incentive ensure that the outcome of the prediction is free of prejudice, honest and accurate. 

Conclusion

It is worth mentioning that not all cryptocurrencies fall exclusively in a single category. Normally their functions and purposes may overlap with multiple categories ( E.g. Ethereum, both transactional and platform ). The categorization and definitions above are not meant to be rigid, they are meant to be served as a reference. Given the rapid and active development of the crypto realm, as time goes by, there is no denying that we might witness more innovative uses of the blockchain technology thus the rise of additional novel categories / subcategories. We will keep improving this article as required to make all the content is up-to-date. 

We also welcome all inputs from our readers to make this article as complete and comprehensive as possible. As always, looking forward to your comments in the section below. Till next time! 



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