Bitcoin (BTC) was the first cryptocurrency, and it came into the world as a purely digital version of money that could be used in peer-to-peer transactions and lives on a decentralized database called a blockchain.
Since Bitcoin, thousands upon thousands of cryptocurrencies and crypto assets have been created and serve purposes other than just being a new version of money, though they’re all underpinned by blockchain technology. There are technically over 1.8 million cryptocurrencies, according to CoinMarketCap, but most just fall into a few categories.
Bitcoin is in a class of its own in the digital asset space.
In Fidelity’s “Bitcoin First” report, the institution explains that Bitcoin (BTC) is “fundamentally different from any other digital asset.” The authors describe how BTC is in a class by itself because of the asset’s perfect scarcity — there will only ever be 21 million Bitcoins — and the fact that the asset exists on the most secure and decentralized blockchain network in existence.
Because of Bitcoin’s unique properties, it’s best to think of the asset as a monetary good.
While other cryptocurrencies and crypto assets share some of the same characteristics as Bitcoin, none share all of them, which is why BTC is unique.
| Response | % of crypto investors |
|---|---|
| Oct, 23 | 54% |
| Oct, 22 | 58% |
| Jul, 23 | 55% |
| Jan, 23 | 52% |
| Apr, 23 | 46% |
bitcoin (BTC) might be losing it’s chokehold on the cryptocurrency market, with the percentage of crypto owners who said BTC was their first coin falling year over year, with 54% saying saying BTC was their first coin in October 2023 compared to 58% in October 2022.
A crypto coin is the native asset of a blockchain and serves the purpose of transferring value on a blockchain. BTC and ether (ETH) — the native asset of the Ethereum blockchain — are examples of crypto coins. To transact on the Bitcoin and Ethereum networks, you have to use these coins to both transfer value and pay transaction fees.
A crypto token is created and stored on top of a blockchain that already exists, and there are a few main types of tokens.
“Altcoin” is short for “alternative coin.” The term was coined in 2011 and refers to all digital currencies or fungible crypto assets other than Bitcoin (BTC).(2)
Technically, the term is a misnomer, because the majority of the crypto assets that exist today aren’t coins but tokens.
Ether (ETH) is the largest altcoin by market capitalization — the total number of ETH coins multiplied by the current price of ETH — while other major altcoins include Solana (SOL) and Polygon (MATIC).
Very few of the numerous altcoins on the market today purport to be money like Bitcoin (BTC). Instead, they are tokens that serve some of the various purposes described in the previous and following sections.
Stablecoins are crypto tokens pegged to the price of real-world assets like fiat (national) currencies or gold.
Collateralized stablecoins are the most popular type of stablecoins. These include Tether (USDT) and USD Coin (USDC) and are both issued by financial institutions and backed with the real version of the asset or something comparable, like US Treasury bills.
Algorithmic stablecoins are another version of this technology, but they aren’t as prevalent as collateralized stablecoins. These use algorithms to maintain their fixed price.
The biggest algorithmic stablecoin on the market today by market cap is DAI. DAI is backed by other cryptocurrencies, including ETH, Wrapped Bitcoin (WBTC) and even other stablecoins like USDC.(3) The crypto assets that back DAI are automatically bought and sold via smart contracts to maintain DAI’s $1 peg.(4)
TerraUSD (UST), the failed algorithmic stablecoin of the now mostly defunct TerraLuna ecosystem, operated with a similar mechanism that involved the burning and minting of its sister coin, LUNA.(5)
Meme coins are little more than gambling chips. They have no intrinsic value. In fact, the largest meme coin on the market today by market cap, Dogecoin (DOGE), was created as a joke.
These types of coins gain popularity through memes that circulate virally through social media, and there are currently more than 300 meme coins on the market today.(6)
There’s Shiba Inu (SHIB), the second-largest meme coin by market cap, and Pepe (PEPE), which is the latest meme coin to gain popularity in the crypto space.
It’s best to approach trading meme coins with caution, as their prices are driven purely by speculation.
| Type of crypto | Native to blockchain | Pegged to or represents a share of a real-world asset | Used as money | Speculative asset, as far as the price of the asset |
|---|---|---|---|---|
| Bitcoin (BTC) | Yes | No | Yes | Yes |
| Coin | Yes | No | In some cases | Yes |
| Token | No | In some cases | No | In some cases |
| Stablecoin | No | Yes | Yes | No |
| Meme coin | In some cases | No | No | Yes |
Purchase cryptocurrency through either a centralized exchange (CEX) like Coinbase or Kraken or a decentralized exchange (DEX) like UniSwap or dYdX. To use most centralized exchanges, you’ll have to go through the Know Your Customer (KYC) process and potentially link your bank account. With a DEX, there is no KYC process, nor is there an option to link a bank account. You can only trade from one crypto to another on a DEX, and you have to know how to use a browser extension wallet like MetaMask to do so.
The native software for certain hardware wallets like Ledger and Trezor also have built-in crypto exchanges. The same is true for software wallets like Atomic Wallet and Exodus.
The number of cryptocurrencies and crypto assets on the market today has expanded dramatically since Bitcoin arrived on the scene in 2009.
In just 14 years, a plethora of crypto assets have been created to serve different functions.
While it can be exciting to witness such growth, it’s very difficult to tell which crypto assets will continue to exist in the long run. Invest in this asset class with caution.
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