Understanding the Different Types of Cryptocurrency

Understanding the Different Types of Cryptocurrency

Many investors consider cryptocurrency because it is decentralised and it has limited supply. Decentralised means there are no government authorities or institutions that control or regulate it. Cryptocurrencies have limited supply but it has strong demand, which means the values rise every day. Aside from these things, smartoptions cryptocurrencies are equipped with cryptography that secures and verifies the transactions.

If you are investing, there are two approaches here – you invest in one currency or you can diversify your portfolio. A seasoned investor diversifies and balances his portfolio. This is to mitigate the risk. There are a plethora of cryptocurrencies in the market these days. For this reason, the investors are diversifying a portfolio. If you want to diversify, you should create a balance based on the different types of cryptocurrencies. Here are the different types of cryptocurrencies:

transactional coins

What are transactional coins?

As the name suggests, transactional coins are used for transaction purposes. The most common is the Bitcoin. You will notice the growing number of merchants accepting Bitcoin as a form of payment. It is preferred because it has a low transaction fee. Other altcoins include Litecoin, Dash, and Monero. Even though other transaction coins grow their value every year, Bitcoin will still remain to be the dominant currency.

What are platform coins?

Platform coins allow the generation of applications on them. Examples of platform coins include Ethereum, NEO, and Cardano. The created platforms present an actual need, which is why it is in demand. For many investors, this is the safest crypto or smartoptions. It also presents a large growth potential.

What are utility coins?

Utility tokens seek to give access to a particular blockchain application, which is designed for a particular task. According to investors, utility coins are extremely risky because it is early for mass production and the technology is not yet ready.

What are security tokens?

Security tokens do not have an intrinsic use. It is just issued by companies to raise funds. As an investor, you are allowed to participate in the company’s growth by buyback of tokens from the companies.

What are stable coins?

Stable coins are becoming popular these days. It represents the value of an asset like fiat currencies, gold, art and other alternative investments. It presents investors with an accessible way to invest in other assets through cryptocurrencies.

If you are thinking about ICOs (Initial Coin Offerings), it can be one of the cryptocurrencies mentioned above. ICO is another way of investing. It seeks to raise funds for a new cryptocurrency venture. In an ICO campaign, you will buy a percentage of cryptocurrency in exchange for other cryptocurrencies or legal tender. If you want to know more about cryptocurrencies, browse through smartoptions.

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