It’s crucial to have a good understanding before investing in any asset, company, or anything. It does not matter who suggests to you or how great the opportunity looks; the first step is to understand its risks and other essential factors.
As the great value investor Warren Buffet says, “Never invest in a company that you don’t understand.” So you need to analyze an opportunity before putting your wealth into it.
Suppose you are planning to invest in cryptocurrencies, as you need to understand a few important things. In this article, we will focus on different kinds of cryptocurrencies that will help you to decide which type of digital coins you want to invest in.
Five Kinds of Cryptocurrencies
From crypto coins to Stablecoins, here are the five major kinds of cryptocurrencies you need to know.
- Crypto Coins
- Crypto Tokens
- Utility Tokens
- Security Tokens
No matter which type of cryptocurrencies you want to invest in, you can use invest through the de.bitqt-app. Now let us understand what these different types of cryptocurrencies are.
Crypto coins are the type of cryptocurrencies that have their own blockchain network. We all know that the blockchain network is a decentralized peer-to-peer network that is run by a group of computers connected by the internet.
So crypto coins have their parent network through which they operate. Most of the popular crypto coins are:
- Bitcoin (BTC)
- Ethereum (ETH)
- LiteCoin (LTC)
There are many other crypto coins like these which record their transaction on their own blockchain network.
Crypto tokens are a little different from crypto coins. The difference between crypto coins and tokens is, crypto tokens do not have their own blockchain network like crypto coins. You can create these tokens in any of the blockchain networks mentioned above.
However, the most popular blockchain network that creates crypto tokens is the Ethereum network. Here are some examples of crypto tokens created by the Ethereum platform.
- Maker (MKR)
- Basic Attention Token (BAT)
These are some of the top crypto tokens of the Ethereum blockchain network.
Well, the major differentiation between a coin and tokens is crypto coins can be treated as a substitute to currencies. At the same time, crypto tokens refer to a product or share of a company that is issued by ICOs. Again, crypto tokens are of two types, utility tokens and security tokens.
Utility tokens are those tokens that can give you the ability to buy a product or service. You can trade these tokens in a crypto exchange. Utility tokens are generally involved in smart contracts, DApps, etc.
One of the most popular utility tokens is the Basic Attention Token developed in the Ethereum network. It is used for rewarding users for digital advertising.
The other types of crypto tokens are the security tokens, which can be used as partial tradable assets other than blockchain technology. Unlike crypto coins and utility tokens, you can’t buy tokenized securities from the normal crypto exchanges such as Coinbase or Binance.
There are other platforms like Polymath which require KYC verification for each investor, and the limit is also fixed by these platforms on how much you can trade.
The last type of crypto tokens is the Stablecoins, which are becoming very popular among different cryptocurrencies. Investors generally rely upon these Stablecoins during a Bitcoin bear market. As Stablecoins are secure like traditional fiat currencies.
One of the primary benefits of Stablecoins is investors can invest in it during a bear market as it is a little safer than volatile cryptocurrencies during a bear market. Investors can exchange their crypto coin holdings to Stablecoins instead of USD or other fiat currencies, saving some transaction fees.
I hope the above information has provided you some useful information that will help you decide where to invest your money. However, make sure you have enough capital support to invest in cryptocurrencies because they are highly risky and unpredictable. Please share your views on this post, and you can ask your queries related to this post in the comment section.
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