10 Types of Cryptocurrency for Transactions vs. Stored Value

Payment cryptocurrency is designed to function as digital currency for completing transactions. Bitcoin is the most well-known example and runs on the Bitcoin network (duh) using a decentralized network and a consensus mechanism called proof of work.

These cryptocurrencies aim to replace or complement fiat currency such as the U.S. dollar for cross-border transactions and online payments. Some investors view Bitcoin as a store of value because of its fixed supply.

Smart contract platforms allow developers to build decentralized applications on a blockchain platform. The Ethereum network is the best known example and powers a wide range of decentralized finance systems and crypto projects.

These networks rely on consensus mechanisms such as proof of stake to validate transactions and maintain the decentralized network. Other blockchains such as the Solana network compete by offering faster speeds for financial transactions and digital services.

Stablecoins are cryptocurrencies designed to remain stable in value compared with traditional currency such as the U.S. dollar.

Some stablecoins are backed by real assets held by financial institutions, while others rely on algorithmic stablecoins that attempt to maintain price stability through software rules. These tokens help traders move funds within the crypto market without converting back to fiat currency.

Utility tokens provide access to services within a blockchain ecosystem. They often act as the native token for decentralized applications or platforms.

Users spend these tokens to access services, pay transaction fees or participate in governance decisions on a decentralized exchange. Many utility tokens were originally distributed through initial coin offerings during the early stages of the cryptocurrency market.

Security tokens represent ownership or financial rights in a real asset or investment contract. These tokens resemble traditional financial products such as stocks or bonds.

In the United States, the Securities and Exchange Commission (SEC) regulates many of these assets because they function like securities. Investors should remember that investing involves risk and past performance does not guarantee future results.

Governance tokens give holders voting rights in decentralized finance projects. Token owners help decide changes to protocol rules, development priorities or treasury spending.

These tokens support community driven governance in blockchain networks and allow users to influence policy decisions in decentralized finance ecosystems.

Exchange tokens are cryptocurrencies issued by major trading platforms. Binance Coin is a well-known example used to reduce trading fees or access additional services on an exchange.

These tokens may gain value as the exchange grows and attracts more trading volume within the cryptocurrency market.

Infrastructure tokens support technical services within blockchain networks. These tokens may help store data, secure the network, or process machine learning data used by decentralized systems.

By providing computing resources or real world data, infrastructure tokens help power many decentralized applications and blockchain platforms.

Non-fungible tokens represent unique digital assets. Unlike other cryptocurrencies, NFTs cannot be exchanged on a one-to-one basis because each token is unique.

NFTs are commonly used for digital art, gaming assets, and entertainment tokens tied to media projects or internet meme culture.

Meme coins are cryptocurrencies inspired by internet jokes or viral culture. These tokens often begin as community experiments but sometimes gain large market capitalization during speculative trading periods.

While some projects attract large communities, investors should approach them carefully and consult a qualified professional before making financial decisions.

The cryptocurrency ecosystem continues evolving as new blockchain platforms, decentralized finance services, and digital assets enter the market. Understanding the different types of cryptocurrency helps investors evaluate crypto projects, compare investment strategies and navigate the rapidly changing world of digital money.

We created this article in conjunction with AI technology, then made sure it was fact-checked and edited by a HowStuffWorks editor.