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Cryptocurrency Types and Potential Use Cases: A Layman's Guide

Cryptocurrency Types and Potential Use Cases: A Layman's Guide

Bitcoin and Altcoins have reached the mainstream media twice, respectively in 2017 and 2021. As foreign as it used to be, nowadays nearly everybody has heard about crypto at least a few times by now. While many newcomers have joined the space, it can be daunting to get a clear overview of the many different projects and all its different aspects. This article is a comprehensive overview of the world of cryptocurrencies and their applications.

1. Bitcoin and Digital Gold

Ah, Bitcoin, the granddaddy of cryptocurrencies! Often called digital gold, Bitcoin's primary use is as a store of value and a hedge against inflation, just like the shiny yellow stuff we all know and love. With a limited supply of 21 million coins, Bitcoin's scarcity and decentralized nature make it an attractive alternative to traditional fiat currencies.

Wonder what are the determinants of Bitcoin price and its valuation models? The article about Bitcoin Value and Price will walk you through the basics in the hope that you can eventually find your own answer to the question.

2. Altcoins and Ethereum

So, what are altcoins? Simply put, they're cryptocurrencies that aren't Bitcoin. And there are thousands of them! Ethereum is the big brother of altcoins and is best known for its smart contract functionality. This nifty feature allows for the creation of decentralized applications (dApps) and the issuance of tokens on its blockchain. Thanks to Ethereum, we've seen innovations in areas like finance, supply chain management, gaming, and more.

3. Stablecoins

Stablecoins are cryptocurrencies designed to maintain a stable value by tying them to an underlying asset, like the US dollar. Tether (USDT) and USD Coin (USDC) are two common stablecoins. They're great for sending money across borders, as a hedge against cryptocurrency market volatility, and for making payments in the digital world.

4. Privacy Coins

Are you a fan of privacy? Then privacy coins might be your cup of tea! These cryptocurrencies focus on providing enhanced privacy and anonymity for users. Some well-known privacy coins are Monero (XMR), Zcash (ZEC), and Dash (DASH). They use advanced cryptographic techniques to hide transaction details, making it hard for anyone to trace transactions or identify the parties involved. Privacy coins come in handy when you need to keep your financial dealings under wraps.

5. Utility and Governance Tokens

Utility tokens are cryptocurrencies that grant holders access to a specific product, service, or platform. They often act as the native currency within a particular ecosystem, encouraging users to participate and contribute to the platform's growth. Examples include Chainlink (LINK), which is used to pay for oracle services on the Chainlink network; Basic Attention Token (BAT), which rewards users for viewing ads on the Brave browser; and BGB - Bitget's own platform token.

On the other hand, governance tokens let holders participate in the decision-making process of a decentralized platform. Token holders can vote on proposals that involve the platform's development and management. Some governance tokens you might come across are Maker (MKR), which allows holders to vote on proposals related to the MakerDAO platform, and Aave (AAVE), which grants voting rights in the Aave DeFi ecosystem.

Closing Thoughts

The world of cryptocurrencies is vast and ever-evolving, offering a wide range of uses and potential applications. From digital gold to utility and governance tokens, cryptocurrencies present opportunities for innovation, financial inclusion, and privacy. As the sector continues to grow and mature, we can expect to define several categories more specifically and eventually fully understand the capabilities of what this amazing technology has to offer.

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Disclaimer: The opinions expressed in this article are for informational purposes only. This article does not constitute an endorsement of any of the products and services discussed or investment, financial, or trading advice. Qualified professionals should be consulted prior to making financial decisions.