Different Types Of Crypto And How They Work

Ever since Cryptocurrencies were introduced to the market, the market has flourished with different types of Cryptos. Each time a new Cryptocurrency came, it gained popularity if it had the right prospects. With the help of Affiliate marketing also, Cryptocurrency has had its share of fame.

The debate has always been on as to what is the best Cryptocurrency to buy. Well, this is a debate no one can win by generalizing one Crypto as the best. It always depends on your preferences. Let us make you familiar with the different types of Cryptos and how they work:

  • Bitcoin And Altcoins 

Bitcoins and Altcoins are the Crypto coins that are used widely for Crypto investment. They are similar in nature because they both are coins. The Crypto coins that are not Bitcoin are Altcoins. 

Some of the Altcoins use a different consensus mechanism to facilitate their transactions. Some use Bitcoin. Bitcoin and many Altcoins have a limited supply. However, there are still a certain number of Altcoins that provide you with an unlimited supply. 

How Do They Work?

You can invest in them, and you will be allotted your investment in your digital wallet. Both of them work similarly and adopt a peer-to-peer system or a huge computer system that can process the large number of transactions that are taking place in their network. 

Bitcoin uses the Proof of Work consensus mechanism to create blocks, which many Altcoins also adopt. Other Altcoins use the Proof of Stake consensus mechanism in order to create blocks. 

  1. Crypto Tokens

They are a special currency token or the way in which Cryptocurrencies are denominated. They have their own Blockchain network, and it represents tradable and fungible assets. Their usual use is fundraising for crowd sales, but they can also be used as a substitute for others. 

There is usually an initial coin offering which is like an initial public offering but is used to crowdfund the projects undertaken for development. They differ from Altcoins and Bitcoins, and the purposes they serve are to be used as an investment, store of value, and a medium of exchange. 

How Do They Work? 

Here, digital currencies are denominated into tokens, and these tokens occupy a blockchain of their own. They represent a unit of value. They serve as transaction units on the blockchain network that are created using standard templates that can be used to denominate the currency into tokens. 

These blockchain networks also work on smart contracts and decentralized finance applications, and here they manage and process the many transactions that take place on their network. These tokens can be traded and transferred among the people in the blockchain network. 

The Bottom Line

Even though all Cryptocurrencies are based on blockchain networks, they use different consensus mechanisms to process their transactions and add a block to the blockchain network. The number of Altcoins in the market has given a boost to the many Cryptocurrencies available. You can always choose between coins and tokens for investment.