Many people still think that Bitcoin is the only cryptocurrency out there. It would be nice and simple if that were the case, but it’s not. Pretty much everything about cryptos is fiddly, and there hundreds of new cryptocurrencies popping up every year. Just as stocks have different sectors (tech and pharmaceutical, for example), there is now a plethora of different crypto types & sectors, too, and this is just the start.
Currently, these are the main cryptocurrency type and sectors:
- General-purpose platform
- Distributed storage
- Distributed computation
- Prediction markets
- Payment platform
It’s a bit of a funfair, isn’t it? Let’s briefly have a look at each type so you’re able to pigeonhole a token when you see one.
This is an easy one. Currency is the original cryptocurrency genre and digital cash has for a long time been the goal of many developers. Bitcoin was the first and many have since followed, like Litecoin, Monero and Dash.
Read related post: 7 Reasons Why You Should Own Some Cryptocurrencies
This was the next natural development in the cryptocurrency world. In the early days of cryptos, the barrier to entry was quite high, so it wasn’t long before platforms emerged that helped developers launch their own tokens. Ethereum was the first to gain traction in this type. Think of these as being like WordPress. Just as WordPress is an engine that enables people to create websites, Ethereum, EOS, Waves, NEO and so on enable people to launch their own tokens.
Distributed storage is a Cloud storage killer. Dropbox and Google Drive had better pivot before they lose their market share. The term ‘Cloud storage’ is a bit misleading, because your data isn’t stored online but in a few data centres across a particular country or two. That’s fine as long as the data centres are secure, but let’s say a war breaks out and they’re destroyed. You can say goodbye to your cherished photographs and data.
This is where cryptocurrencies like Siacoin, come in. They are disrupting this industry by enabling users to upload their data to a blockchain, where it’s shredded into millions of tiny fragments and stored on computer hard drives all over the world. So your data is everywhere but nowhere, and no individual or group can piece it together. What’s even better is that it rewards those who contribute to the network, so you could leave your computer on overnight, for example, and the network will use up a tiny portion of your hard drive and you’ll earn tokens as a result.
Read related post: Bitcoin Mining – What is ? How does work?
This is similar to distributed storage except for computation power. Imagine a doctor or a researcher trying to solve a complex calculation. Until now, if they needed to number-crunch things, they had to go to a specialist university with a supercomputer, which is rather costly. Not any more: cryptocurrency like Golem disrupt this by harnessing the unused power of the public’s spare RAM (random access memory). So when you’re not using your computer you can hook it up to the network and the network will use a small portion of your computer’s RAM, again earning you tokens in the process. It’s a brilliant idea because now the public has access to power of a supercomputer for a fraction of the cost.
There’s not much to say here other than that at least 90 per cent of the cryptocurrencies out there are just plain stupid. They’re either copycats of successful cryptos, promoting a stupid cause or created by people in their bedroom for fun, like Titcoin and Wankcoin. Yes…Earth has reached a new low. Long story short, don’t waste your time with these shitcoins.
These cryptocurrencies were created with anonymity and privacy as their main feature and are coins like Monero and Zcash. With Monero, you can transact with complete privacy, with no traceability or linkability. It’s no surprise that the black market loves Monero.
There are also non-currency privacy cryptos, like Digital Note. This privacy-protected blockchain offers instant untraceable encrypted messaging. It’s a remarkable system and it’s surprising how low their market cap is right now. It’s definitely one to watch when the black market finds out about this cryptocurrency.
This is a fascinating new industry. There are a few companies out there that make a living by crunching data mined from Twitter, Facebook and other social media networks. By analysing patterns and linguistic trends about a particular topic/matter/event, they can accurately predict the outcome. For example, there’s a company in South Africa that accurately predicted Brexit, Trump and a few other outcomes. As a result, they have governments knocking on their doors all the time. Gnosis and Augur are the main prediction cryptocurrencies, although they are not like the company I just mentioned. At the moment, they are playing more of a ‘market maker’ role, so if you think a team will win a football game, you can buy ‘shares’ in that outcome and be rewarded in tokens if you win.
Read related post: Bitcoin Mining – What is ? How does work?
Getting verified for things can be a bit of a chore, which is why this small sector is starting to emerge. Identity verification cryptos such as Civic aim to allow you to upload all your relevant information to the blockchain, so that whenever your identity needs verifying you can simply issue a code for any third party to access the information they need. This would speed up the whole verification process greatly as background checks wouldn’t then need to start from the ground up every time.
Advertising is a new type that will grow rather fast when cryptocurrency go mainstream, because attention is everything these days. Advertisers pay a lot of money for attention. BAT is a crypto aiming to capitalize on this by creating a token that can be exchanged between publishers, advertisers and users within their network. It’s not really an original concept, but watch this space…
This is a crucial aspect of business and accounting. I’ll say this throughout the book: blockchain represents a revolution of trust. What this means is that we no longer need to trust third parties, as everything and anything can be immutably recorded on a blockchain. Factom aims to do just this by providing the world’s first verifiable and immutable audit trail. It’s perfect for accounting, auditing, system processes, workforce attendance, financial markets, paying transactions and legal documents. Whoever hoovers up the market share in this type will become a huge business.
Read related post: What’s The Difference Between Altcoins And Tokens?
These are exactly what it says: payment platforms for cryptos, the cryptocurrency equivalents of PayPal, Worldpay, Stripe and so on. Players in this space at the moment are Metal, Tenx and Omisego. Metal already has a debit card, which you can load up with cryptos and use for daily transactions. Once cryptocurrencies go mainstream this type will explode, as people will need to be able to pay with and accept cryptos.
Currently there are two types of crypto exchange, those that don’t accept Fiat currencies and those that do. The main players that accept Fiat are Coinbase, Kraken and Lykke and there are dozens of non-Fiat-accepting exchanges like Bittrex, Poloniex and Shapeshifter. The basic model for how a cryptocurrency exchange token grows in value is due to commissions. An exchange like Binance has a token called Binance Coin (BNB). When users use the exchange and Binance makes their tiny commission per transaction, it increases the tradable value of BNB.
This is a simple but by no means exhaustive list of the different sectors in this market. As tech and innovation grows, there will be more sectors sliding on to the dance floor but, for now, you’re fully briefed on the main ones.