In early 2009, an anonymous developer (or group) launched the cryptocurrency known as Bitcoin.This developer went by the name Satoshi Nakamoto. In the years since, the technology that makes Bitcoin possible has taken on a life of its own, and numerous other cryptocurrencies have sprung up to compete with it. To an outside observer, today's cryptocurrency market might appear to be little more than a group of similar offerings all competing for the attention of investors. There's quite a bit of variance between today's cryptocurrencies. They rely on different versions of the original blockchain technology that powers Bitcoin, and not all of them are designed to function like fiat currencies. Making sense of it all requires careful study and a fairly extensive understanding of how cryptocurrencies work under the hood. As a guide for those not immersed in the intricacies of crypto-technology, here's a look at the four major types of cryptocurrency, and what they're good for.

1. Four Major types of Cryptocurrency
In early 2009, an anonymous developer (or group) launched the cryptocurrency
known as Bitcoin.This developer went by the name Satoshi Nakamoto. In the years since,
the technology that makes Bitcoin possible has taken on a life of its own, and numerous
other cryptocurrencies have sprung up to compete with it. To an outside observer, today's
cryptocurrency market might appear to be little more than a group of similar offerings all
competing for the attention of investors.
There's quite a bit of variance between today's cryptocurrencies. They rely on different
versions of the original blockchain technology that powers Bitcoin, and not all of them are
designed to function like fiat currencies. Making sense of it all requires careful study and
a fairly extensive understanding of how cryptocurrencies work under the hood.
As a guide for those not immersed in the intricacies of crypto-technology, here's a look at
the four major types of cryptocurrency, and what they're good for.

2. 4- types of cryptocurrency
1. Proof of Work (PoW)
2. Proof of Stake (PoS)
3. Tokens
4. Stablecoins
1. Proof of Work (PoW):
To get started, the first type of cryptocurrency is the one that began with Bitcoin, which
relies on blockchain technology that uses a concept known as proof of work (PoW) to
process transactions. To understand what that means, though, you first have to
understand what blockchain is.
Put simply, blockchain is a distributed ledger system. On a blockchain network, every
participating computer (called nodes) maintains a complete copy of the system's ledger.
It's a bit like sharing a copy of a check register with multiple people – except that no
individual member can add something to that register alone.
To add a transaction, nodes compete to solve a complex cryptographic problem that
represents the data to be added. The first to solve the problem then broadcasts the

3. answer to the rest of the network for verification. This process is what has
commonly become known as mining because the node that gets the right answer first
gets a reward from the network. It's a secure and self-policing way of keeping airtight
records.
The security of blockchain technology, besides making cryptocurrencies possible, is also
making its way into other industries of all kinds. Walmart is using it to manage its produce
supply chain, Maersk is using it to track shipping containers as they travel the globe, and
even the diamond industry has adapted it to track precious stones as they move through
the value chain.
Cryptocurrencies using PoW:
Right now, the two major cryptocurrencies that rely on proof of work also happen to be
the biggest, in terms of market value: Bitcoin and Ethereum. Together, they have
a market capitalization of around $150 billion, a figure that dwarfs all other competition.
As the legacy technology of the cryptocurrency world, PoW has proven stable and
resilient, powering the two aforementioned currencies to unheard-of values in the past
few years.
2. Proof of Stake (PoS):

4. The major problem with PoW systems is the fact that they don't scale well. To overcome
that problem, a different consensus model for blockchain was developed that allows
smaller pools of nodes to validate transactions. It's known as proof of stake (PoS), and it
ensures security in a fundamentally different way than PoW.
In a PoS system, not every node must validate every transaction. Instead, participating
nodes have to use their own cryptocurrency holdings as a deposit to join a transaction
validation group. That deposit is where the concept of proof of stake gets its name. Any
node that tries to cheat or pass bad data into the ledger automatically forfeits their stake
as a penalty. Those that play by the rules receive interest on their deposits as a reward
for their work. In a PoS blockchain, that's the incentive system that keeps things secure
and operating fairly.
Cryptocurrencies using PoS:
Right now, there are several cryptocurrencies that rely on PoS blockchains. The most
notable among them are Eos, Dash, and Tron. Although they are tiny when compared to
the PoW behemoths, that's about to change in a big way. That's because as mentioned
earlier, Ethereum's about to join their ranks within the coming year. It's also worth noting
that the vast majority of new and planned cryptocurrencies rely on PoS, as it's seen as
the future of scalable blockchain technology.

5. 3. Tokens:
The two cryptocurrency types we've covered so far have been distinguished from one
another by the technology that powers them. That's not the only kind of difference you'll
find in the market, though. There are also differences in the purposes of the various
offerings on the market. That brings us to the next major cryptocurrency type: tokens.
Tokens are distinct from traditional cryptocurrencies in that they're not intended to be
used as general-purpose currency. They're also created on top of existing blockchains,
such as Ethereum, and do not exist as stand-alone systems. In a way, the simplest way
to understand the concept is to think about the chips you use to place bets in a casino.
While they represent cash or other assets of value, they may only be used in the specific
casino who issued them.
For example, online music streaming service Musicoin facilitates direct payment from
listeners to artists using a token called Music. The token itself is built using the Ethereum
blockchain (which is home to the majority of tokens), and cannot be converted directly
into fiat currency. Instead, artists paid in this way must convert their tokens into standard
cryptocurrencies like Bitcoin or Ethereum before cashing out their earnings.
Major Tokens:

6. Oddly enough, there are so many tokens currently in existence that it would be impractical
to list them all. To the general public, however, there are two worth mentioning – BAT and
Tether. BAT, which stands for Basic Attention Token, is used as a payment system within
the recently-released Brave web browser. The idea is to compensate users for viewing
online advertising as a means of changing the current equation which has led to rampant
use of ad blocking technology.
Tether, on the other hand, is a token whose sole purpose is to remain at a value that's on
par with the US dollar at all times. It's also a member of the next group of cryptocurrencies
we're about to discuss: stablecoins.
4. Stablecoins:
As the name suggests, stablecoins are cryptocurrencies created for the sole purpose of
providing reliable value storage. They came about because standard cryptocurrencies
like Bitcoin and Ether (the Ethereum coin) can fluctuate wildly in value over a short span,
making them difficult to manage. That's the reason that some crypto-investors have
become multi-billionaires overnight, only to see their net worth evaporate almost as
quickly.

7. Stablecoins represent something of a hybrid between tokens and standard
cryptocurrencies, in that they are built on existing blockchains but may be exchanged for
fiat currency. Within the market, they play a vital role in allowing day-to-day, repetitive
transactions that are free from value swings. Most stablecoins achieve this feat by
pegging their value to one or more fiat currencies, and keeping reserves of those
currencies as a guarantee of the token's value.
Major Stablecoins:
Besides Tether, which represents almost 90% of stablecoin trading volume, there are a
few more examples in the market today. The most well-known among them include
Paxos, Gemini, and TrueUSD.
There is, However, another stablecoin on the way that has grabbed the spotlight in recent
months. It’s Libra, Facebook-backed cryptocurrency that sparked controversy when plans
for its debut became the subject of a congressional hearing this past year. Still, if Libra
can clear the regulatory hurdles, it might become the dominant stablecoin almost
overnight- changing the face of cryptocurrency market in the process. If you want to learn
more about the types of Cryptocurrency, feel free to leave your valuable comments. We
are happy to assist you. All the best for your future.
(All the material in this article are only the view of the author, and couldn’t be taken as
“Financial Advice”)
For other such topics and material please click here