Cryptocurrency Types and Their Uses Explained

Cryptocurrencies can be divided into several types, each serving different purposes. The first type is Central Bank Digital Currencies (CBDCs). These are digital versions of a country’s currency, issued by the nation’s central bank. They work alongside physical cash.

Countries such as the Bahamas, Jamaica, and Nigeria have launched CBDCs, while China has conducted extensive work on them. Currently, around 134 countries are exploring CBDCs through research, pilots, or projects.

The second type is payment cryptocurrencies, which run on their own blockchains and act as digital money. Bitcoin is the largest and first payment cryptocurrency, with a 57% dominance in the crypto market. Litecoin is another example.

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The third type is tokens, which are built on existing blockchains and do not have their own. Tokens represent assets or provide access to services within a specific network. ERC-20 tokens on Ethereum are a common example.

Next are stablecoins, which are less volatile and pegged to fiat currencies or tangible commodities such as gold, silver, dollars, or euros. Tether and USDC are major examples with large market capitalisations.

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Finally, altcoins include all cryptocurrencies other than Bitcoin. Many altcoins offer unique features such as faster transactions, improved transparency, or better scalability. Examples include Solana, Cardano, Ripple, Avalanche, and Polygon.

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