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
Cryptocurrency can be grouped into four main classes which are; transactional cryptocurrency, utility cryptocurrency, platform cryptocurrency and application cryptocurrency.
- 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.
- 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
- 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.
- Application Cryptocurrencies
Application Cryptocurrencies refers to the class of cryptocurrencies that were based upon the platform cryptocurrencies ( Type II dapps )
1 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.
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.
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.
2 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:
3 Utility Cryptocurrencies
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.
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 Application Cryptocurrencies
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
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.
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