Back in the day, only a handful of cryptocurrencies existed. But now there are thousands of them in existence. In this article, we will look at different types of cryptocurrency and explain their top features. After reading this, you will have a good understanding of all the top crypto coins. Based on that understanding, you can easily choose coins to make investments and make extra money from home. But first, we’ll explain to newbies what a cryptocurrency is.
What is a cryptocurrency?
Cryptocurrency is digital cash that only exists on the internet. It uses cryptography techniques to keep hackers at bay. Experts define cryptocurrency as “digital cash that creates itself and conducts transactions without an intermediary.”
Cryptocurrency users can make transactions without revealing their identities, which makes it the best option for those who prefer to make money from home anonymously.
The most significant advantage of crypto coins is that they eliminate the need for banks or third parties to handle user-assets.
DIFFERENT TYPES OF CRYPTOCURRENCY IN 2020
There are three major types of cryptocurrency: Bitcoin, Altcoin, and Tokens. Below, we’ll take a detailed look at each type separately.
Bitcoin was launched in 2008 by an anonymous person named Satoshi Nakamoto. Later, it was revealed that this was not the creator’s original name. The real identity of Bitcoin’s creators is unknown to this day.
Initially, nobody knew Bitcoin would become the giant that it is today. But it has, and it has revolutionized the financial industry.
When discussing significant types of cryptocurrency, Bitcoin tops the list. It is a cryptocurrency that you can send or receive at any place, any time of the day. You can also use Bitcoin to send gifts and buy products or services. It’s just like the paper money we use. The only difference is that it’s digital, not physical.
In addition, Bitcoin is decentralized, meaning that no central bank or financial institution has control over it. The transactions of Bitcoin happen directly between two people using blockchain technology that eliminates the need for a third party.
Since you don’t need a third party, you can transfer funds without revealing your identity.
Bitcoin is an excellent option to make money for people with financial capacity.
How Bitcoin works?
As mentioned earlier, Bitcoin uses a shared database named blockchain to sort and verify transactions. Blockchain encrypts the transaction information so that no one can see it. This information can only be decrypted by the owner of coins using a private key that is given to each user separately.
Now, you might be wondering if banks don’t manage Bitcoin transactions, who does?
It’s blockchain that verifies/processes Bitcoin transactions. Blockchain is a decentralized network that is run by various individuals/companies using a network of powerful computers. Each computer in the network is called node/miner, and every node uses software specifically developed to handle Bitcoin transactions.
Running this software requires a lot of electricity, though, which means higher bills. So how do people and companies running those computers pay for their bills? Through a process called mining.
For each verified transaction, the nodes are rewarded with new bitcoins. This is also how new bitcoins are generated.
Bitcoin mining is much similar to gold mining in which the miners are rewarded with gold. In Bitcoin mining, the nodes are the miners, and they get rewarded with new bitcoins.
When a new set of transactions enters the blockchain, the nodes will verify those transactions using an algorithm called Proof of Work. PoW rewards new coins to the first miner that verifies the transaction. This is also the reason a lot of Bitcoin users become miners to make extra money from home.
Altcoins – Types of Cryptocurrency
Altcoins are another significant type of cryptocurrency. Currently, several thousand Altcoins are in existence! However, they aren’t unique. The majority of these coins are just baby bitcoins with minor changes. This is also why they’re called Altcoins meaning alternative coins.
With that said, it’s essential to understand that not all Altcoins are the same as Bitcoin. Some alts are entirely different from Bitcoin and use different algorithms. For example, DashDASH is an alt that uses Proof of Stake rather than Proof of Work. In PoS, there are stakers instead of miners.
Stakers do the same job as miners. They verify transactions on their blockchains. However, instead of racing to become the first to verify transactions, they take their turns one by one. This saves a lot of electricity because there aren’t thousands of nodes trying to verify the same transaction simultaneously. Instead, there’s only one staker per transaction.
Ethereum and NEO are two top alts that are entirely different from Bitcoin. Bitcoin was built to be used as a digital currency, while Neo and Ethereum are designed as platforms to build apps for blockchain.
Using these two platforms, users can build their own crypto apps or digital coins.
Another excellent feature of Ethereum and Neo is that they use Smart Contracts to execute transactions. Smart Contracts is a technology that eliminates the need for intermediaries during transactions.
People that use different types of cryptocurrency know that in Bitcoin, intermediaries are kept away only in transactions. However, in Ethereum and several other Altcoins, third parties stay away in many different things such as the sale of a house or other stuff.
Tokens – Types of Cryptocurrency 2020
Tokens are the third important type of cryptocurrency. Their most unique aspect is that they don’t have their own blockchains. Instead, they have used on decentralized apps; the ones that are built using Smart Contracts.
However, a token still needs to use Ethereum or Neo’s blockchain to verify transactions because the dApps they use are built in those platforms. This means transaction fees are also paid. But those fees are paid in ETH or Neo and not in tokens.
Tokens don’t have a physical form. They exist digitally and can be used to purchase things on dApps. Besides, they can also be used to gain certain benefits such as discounts and reduced transaction fees.
Different tokens can be sold at different prices. That is the reason people that cannot invest in expensive types of cryptocurrency buy tokens to sell them later to make money from home.
You may find this interesting: Make Money with Cryptocurrency
FREQUENTLY ASKED QUESTIONS
According to financial experts, the future of all types of cryptocurrency is bright. Top coins such as Bitcoin, Ethereum, and Ripple are all performing well in the current market, and their value is expected to rise continuously in the foreseeable future.
These are the top 5 cryptocurrencies for 2020:
– Bitcoin: It is the king of cryptocurrencies, and its price will continue to rise for the rest of 2020.
– Ethereum: It is the second-best cryptocurrency after Bitcoin. Due to its latest groundbreaking Constantinople update, Ethereum is likely to perform well in 2020.
– Ripple: Ripple is famous for making quickest transactions in the market and is a good investment option in 2020.
– Litecoin: Litecoin is the most successful Bitcoin-based Altcoin. Its price is likely to go high during 2020, but it will remain below Bitcoin’s price.
– Binance Coin: It is one of the newest coins in the market. The price of Binance has been on a constant rise since its arrival, which makes it an excellent investment option for 2020.
Ethereum’s worth is likely to be around $1,500 by the end of 2020. If Ethereum does reach that figure, then its total market capitalization will be over $150 billion, which is incredible!
Currently, Bitcoin is the most dominant cryptocurrency in the market. Besides, its price is on the rise as well. So if you have resources, and if you’re looking for a crypto that’s worth your investment, that Bitcoin is a top option.