The image above provides a comprehensive and simplified overview of the types of cryptocurrencies, making it an ideal reference for beginners who want to understand the basics of the market. Let's delve into these major types.
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1 Cryptocurrencies Coins
Cryptocurrencies are the basic units used in the blockchain network and operate independently. They are divided into:
Proof-of-Work
Bitcoin Litecoin Examples
Mining-based and energy-intensive
Proof-of-Stake
Solana Ethereum Examples
More energy efficient and relies on coin locking to secure the network.
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2 Tokens
Tokens are used for multiple purposes within blockchain projects and operate on other networks and are divided into:
Utility Tokens
Used within systems to provide services or products.
Binance Polygon Examples
Governance Tokens
Gives users the right to vote and make decisions.
Aave ApeCoin Examples
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3 Stablecoins
Stablecoins are digital currencies backed by assets to reduce volatility. Types include:
Flat Backed
Tied to fiat currencies such as the dollar
Crypto Backed
Backed by digital assets
Algorithm
It relies on algorithms to adjust supply and demand.
Commodity Backed
Backed by gold or oil
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Why are these categories important?
Understanding these types helps you make better investment decisions as you can choose the most suitable currency or token according to your investment goals.
reminder
For more investment tools and tips check out the pinned post on my page.