Bitcoin was invented as a pioneer cryptocurrency in quite a remote now 2008. All the assets created since then are called altcoins (alternative coins), as they try to provide some unique features that differentiate them from Bitcoin. While all altcoins share the same goal of beating (or at least emulating) the success of Bitcoin, they are not equal.
Some cryptocurrencies are designed to have real-world value, while some are designed for fun, and some others are created as a means to make money quickly. Below are unusual types of cryptocurrencies that investors should understand to navigate the intricate world of cryptocurrencies confidently.
Blue-Chip Cryptos
Blue-chip cryptos are like the rock stars of the cryptocurrency world. The term “blue-chip” comes from the world of traditional finance, where it refers to large, stable companies with a proven track record. In the context of cryptocurrencies, blue-chip cryptos are the most established and reputable digital assets.
Key characteristics of blue-chip cryptos include strong brand recognition, high liquidity, and a large market capitalization. Examples of blue-chip cryptos include Bitcoin, Ethereum, and Binance Coin. If you are interested in any blue-chip digital asset, you can buy Bitcoin in Australia on Changelly in a matter of a few seconds.
Pros of investing in blue-chip cryptos include lower risk compared to other cryptocurrencies, as they have already proven themselves in the market. They also tend to be more widely accepted by exchanges and merchants, making them easier to buy, sell, and use for everyday transactions.
However, the main con of blue-chip cryptos is that they may have lower growth potential compared to newer, smaller cryptocurrencies. Additionally, they can still be subject to market volatility and regulatory changes, just like any other digital asset.
Memecoins
Memecoins are a unique category of cryptocurrencies that derive their name and characteristics from popular internet memes. These coins are created for fun, humour, and entertainment in the crypto ecosystem. They often lack a specific use case behind them and are valued based on hype and viral memes.
One of the key characteristics of memecoins is the strong communities that back them. These communities are vital for the success and popularity of meme coins, as they often run the projects and drive engagement. Some popular meme coins include Dogecoin, Shiba Inu, and Bone ShibaSwap.
While meme coins may lack real-world use cases, they have the potential for speculative trading and investment opportunities. Some meme coins, like Dogecoin, have evolved to facilitate peer-to-peer payments, showing the potential for these coins to grow beyond their meme origins.
Shitcoins
A creation radically different from blue-chip assets, shitcoins are a type of cryptocurrencies that have little to no value or real-world use. These coins are usually created hastily, lack a credible development team, and are highly volatile. They are often associated with pump-and-dump schemes, and rug pulls in the DeFi Degen space (DeFi degenerate). Degen space is a poorly regulated and unsupervised part of decentralized finance used for creating crypto projects that exploit pump-and-dump and other malicious schemes.
While investing in shitcoins can be risky because of their unpredictable nature, some investors are drawn to them for the potential of high profits during certain market conditions. Examples of shitcoins include Useless Ethereum Token (UET), Baby DogeCoin (BABYDOGE), Dogelon Mars (ELON), and Rich Quack (QUACK). Just be cautious and do your research before diving into the world of shitcoins.
Wrapped Tokens
Wrapped tokens are a type of cryptocurrency that represents another cryptocurrency or asset on a different blockchain. Essentially, they “wrap” the original token to be compatible with a different blockchain network.
Key characteristics of wrapped tokens include their ability to be traded on various platforms and provide liquidity to users. They allow users to access assets from different blockchains with no need to switch networks.
Pros of wrapped tokens include increased interoperability between different blockchain networks, better access to liquidity, and enhanced security measures. However, cons may include the potential risks of smart contract bugs and increased complexity in managing different assets.
A popular example of wrapped tokens is Wrapped Bitcoin (WBTC), which represents Bitcoin on the Ethereum blockchain.
The wrapping process involves depositing the original cryptocurrency into a smart contract, which then mints an equivalent amount of wrapped tokens on the target blockchain. When users want to convert back, they simply send the wrapped tokens back to the smart contract to receive the original cryptocurrency.
Fan Tokens
Fan tokens are digital assets issued by sports teams that provide holders with voting rights on club decisions and exclusive benefits like VIP experiences and prizes. These tokens allow fans to participate in governing activities, such as voting on kit designs, and connect with other fans who share similar interests and views through a mobile voting platform.
While most fan tokens are available on special fan engagement apps like Socios.com, some, like the Paris Saint-Germain Fan Token (PSG), can also be found on other popular crypto exchanges.
Importantly: the value of fan tokens is tied to the specific sports team they represent, and their prices can fluctuate based on factors like team performance, player transfers, and league results. For example, the PSG token experienced a significant price increase following the transfer of Lionel Messi to the team, showcasing how external events can impact token values.
Privacy Coins
Privacy crypto coins are a type of digital currency that focus on keeping the user’s transactions confidential. They use advanced encryption techniques to ensure that payments are anonymous and cannot be traced back to the sender or receiver.
One popular example of a privacy crypto coin is Monero, which uses ring signatures and stealth addresses to obfuscate transactions. Ring signatures mix the sender’s address with others in a group, making it impossible to determine who the actual sender is. Stealth addresses generate a unique, one-time address for each transaction, adding an extra layer of privacy.
The main advantage of privacy crypto coins is that they provide users with a high level of anonymity, protecting their financial information from prying eyes. However, this same anonymity has also been a target for cybercriminals looking to engage in illegal activities without being traced.
Conclusion
Of course, the list of digital asset types is not limited to what is mentioned above. In fact, categories of cryptocurrencies are as diverse as types of commodities in stock markets. There are also:
- stablecoins that are pegged to the price of an underlying fiat asset such as the US dollar;
- utility tokens that provide access to the products or services of a given crypto platform;
- non-fungible tokens (NFTs) that present unique, unrepeatable creations of digital art;
- governance tokens that allow holders to participate in the decision-making processes of decentralized autonomous organizations (DAOs);
- security tokens that represent ownership of a real-world asset and are regulated according to securities laws;
- payment tokens that are designed specifically for transactions within the blockchain ecosystem, and many more.
The diversity of cryptocurrency types proves that innovation and creativity are limitless in this ever-expanding digital ecosystem. Investors and enthusiasts should stay informed and educated on the wide range of cryptocurrencies available in the market to make informed decisions and capitalize on emerging opportunities.
