Categorization of the top cryptocurrencies + key insights. By Martin Thoma
The cryptocurrency ecosystem has expanded rapidly in recent years—so much so that it’s challenging for newcomers to grasp the diverse use cases in this space. This guide simplifies the landscape by breaking down the 7 essential types of cryptocurrencies, helping you compare blockchain projects with confidence.
Coins vs. Tokens: A Technical Breakdown
Coins
- Definition: Native assets on their own blockchain (e.g., Bitcoin on Bitcoin, Ether on Ethereum).
- Key Feature: Operate independently without relying on another blockchain.
Tokens
- Definition: Foreign assets built on existing blockchains (e.g., Tether on Ethereum, Chainlink’s LINK).
- Popular Standard: Most tokens follow Ethereum’s ERC-20 framework.
👉 Discover how ERC-20 tokens work
Note: While "coins" and "tokens" are sometimes used interchangeably, their technical differences matter for developers and investors.
Security Tokens: Financial Assets on the Blockchain
Security tokens represent tradable financial instruments, similar to stocks or bonds. The Howey Test determines if an asset qualifies as a security:
- Was money invested?
- Was it invested in a common enterprise?
- Was profit expected?
- Are profits derived from a third party’s efforts?
Examples:
- SolarStake (SolarCoin)
- L’Osteria (real-world asset tokenization)
Bitcoin does not qualify as a security, as it lacks a "common enterprise."
Equity Tokens
- Grant ownership rights (e.g., shares in a company).
- Challenge: Few public examples exist due to regulatory complexity.
Asset-Backed Tokens
Tokens representing physical or digital assets:
| Asset Type | Example Tokens |
|------------------|------------------------------|
| Precious Metals | PAXG (gold), DGX (gold) |
| Real Estate | IHT Coin (property rights) |
| Commodities | Petro (oil-backed, defunct) |
Issue: Lack of oversight raises trust concerns.
Utility Tokens: Access Over Profit
Utility tokens provide access to a product/service, akin to gift cards or transit passes.
Examples:
- FIL (Filecoin): Pay for decentralized storage.
- CVC (Civic): Identity verification.
- BAT (Basic Attention Token): Rewards in Brave browser.
👉 Learn about decentralized storage tokens
Non-Fungible Tokens (NFTs): Unique Digital Assets
NFTs represent one-of-a-kind digital items, from art to in-game assets.
Key Points:
- Standards: Ethereum’s ERC-721 and ERC-1155.
- Use Cases: CryptoKitties, virtual real estate, digital art.
Stablecoins: Cryptocurrency’s Safe Haven
Stablecoins peg their value to fiat or other assets:
| Type | Examples |
|------------------------|----------------------|
| Fiat-Collateralized | USDT (Tether), GUSD |
| Crypto-Collateralized | DAI (MakerDAO) |
| Algorithmic | TerraUSD (defunct) |
Note: Many stablecoins are tokens (e.g., USDC on Ethereum).
FAQ Section
1. Is Bitcoin a security token?
No—it fails the Howey Test’s "common enterprise" criterion.
2. What’s the difference between coins and tokens?
Coins have their own blockchain; tokens are built on existing chains.
3. Can NFTs be used in gaming?
Yes! NFTs enable rare in-game item ownership and cross-game trading.
4. Are stablecoins truly stable?
Fiat-backed stablecoins are the most reliable; algorithmic ones carry higher risk.
Key Takeaways
- Identify Coin/Token Status: Determines technical and regulatory implications.
- Classify by Purpose: Currency, utility, security, etc.
- Research Use Cases: Understand how projects deliver value.
For deeper dives, explore resources like CoinMarketCap or Ethereum’s Developer Docs.
👉 Explore top cryptocurrencies
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