Cryptocurrency is a new type of digital asset class that first started with the creation of Bitcoin. The word “cryptocurrencies” is a blanket term for the broader market of crypto assets. The name cryptocurrency is a compound word originating from the fact that Bitcoin used cryptography for privacy and security to protect the first ever form of digital currency.
As the cryptocurrency industry has grown, additional assets that utilize cryptography have emerged that have use cases beyond simply acting as a digital currency. Crypto assets are typically classified as the following:
Payment currencies are the original cryptocurrencies, used to pay merchants, send money to friends, or anything else you can do with cash. Payment currencies include Bitcoin (BTC), Litecoin (LTC), and Ripple (XLM).
These coins employ unique technology to obfuscate the details of cryptocurrency transactions such as receiver, sender, and total amount transacted. Privacy coins include ZCash (ZEC) and Monero (XMR).
Utility tokens act as the central currency required to power blockchain economies, decentralized applications, and more. Utility tokens include Basic Attention Token (BAT) and Golem (GNT).
Exchange tokens are the native token issued by certain cryptocurrency exchanges. These tokens often provide unique benefits such as trading fee discounts, voting, or access to initial token offerings. Exchange tokens include Binance Coin (BNB) and KuCoin Shares (KCS).
Stablecoins are typically backed by fiat currencies, namely the dollar, due to its global reserve currency status and commonality and familiarity. Stablecoin valuations are tied 1:1 against the dollar, and are often used as a safe haven during crypto market downturns. Stablecoins include Tether (USDT) and USD Coin (USDC).
To serve the increasing demand for gold and bring the asset into the digital era, many new tokens backed by a corresponding ounce or gram of gold have grown in popularity. Gold-backed tokens include Tether Gold (XAUT) and Digix Gold Token (DGX).
Stocks, bonds, and other assets deemed as securities by the SEC’s Howey Test, once cryptographically tokenized to represent digital ownership, are security tokens.