Did you know that there are 5,000 different types of cryptocurrency that you can trade online? That’s way more than the number of currencies, where there are around 180 of them globally. And similar to traditional currencies, cryptocurrencies’ trading landscape can be volatile at times.
If you’re a new investor, it can be overwhelming to figure out which cryptocurrency to invest in. So instead of purchasing the most trending cryptocurrency, you might want to choose one based on its utility. In other words, how you intend to use it.
While there are many types of cryptocurrency based on their utility, we will highlight the two most common ones that many are familiar with:
1. Payment Cryptocurrencies
Payment cryptocurrencies are one of the most popular types of cryptocurrency among investors. Typically considered as digital money, these types of cryptocurrency operate via a globally-distributed network of computers known as the blockchain.
Some users use payment cryptocurrencies as an alternative to cash. In contrast, other users use these types of cryptocurrency to make payments for specific types of transactions.
When performing a transaction, a cryptocurrency's network typically works by securing, recording, transferring, and defining the transactions made. Here's a breakdown of cryptocurrencies under this type:
Bitcoin (BTC)
Beginning with the one that started it all, Bitcoin is the world's first cryptocurrency, created in 2008 as an alternative to traditional cash. As a platform for digital transactions, Bitcoin provides lower transaction fees compared to conventional online payment systems, especially for international payments. It has also been used as a store of value.
Leveraging on cryptography for better security, bitcoins do not come in physical form; instead, you have balances saved and recorded on a public ledger system (blockchain) with transparent access (though every record is encrypted).
Ripple (XRP)
XRP is a digital asset primarily for use in the Ripple network. This global payment settlement system aims to be a faster and less costly alternative to payment platforms like SWIFT. Such types of cryptocurrency are used for remittance, asset exchange, and payment settlement purposes.
Compared to Bitcoin, XRP offers a method of mining that is less complicated. As a result, while confirmations of Bitcoin transactions could take longer with higher transaction costs, XRP transactions can be confirmed faster and cheaper.
Litecoin (LTC)
Created in 2011 by a former Google engineer, Charlie Lee, Litecoin is considered a peer-to-peer cryptocurrency. In some ways, Litecoin and Bitcoin are the types of cryptocurrency that share a few similarities. Both have the same basic structure and rely on crypto networks. However, the similarities end here.
Litecoin uses a different blockchain than Bitcoin, enabling a much faster transaction speed. This difference in transaction time could make Litecoin more attractive to merchants due to its use in day-to-day transactions.
Bitcoin Cash (BCH)
Bitcoin Cash was created due to the Bitcoin network being a little too slow and expensive for everyone's liking. The big difference between Bitcoin and Bitcoin Cash is that the latter offers a faster transaction process.
Basically, Bitcoin Cash is one of the types of cryptocurrency that can process transactions quicker than the original Bitcoin network. As a result, it provides shorter wait times and cheaper transaction processing fees. Plus, the network can handle more transactions per second than the Bitcoin network can.
2. Infrastructure Cryptocurrencies
Infrastructure cryptocurrencies are designed to make payments to computers responsible for running programs on a shared blockchain software network.
There are a lot of blockchain platforms that provide different usage and serve a variety of purposes. However, the one thing that they all have in common is that they require their own cryptocurrency infrastructure.
The best example of this type of cryptocurrency is the crypto asset that powers Ethereum, called ether (ETH). Ethereum is considered the largest, most established open-ended decentralised software platform.
As a platform, developers rely on Ethereum to create smart contracts (a self-executing contract with the agreement terms between buyers and sellers directly written into lines of code) and decentralised applications (dApps).
With this, you'll be able to build and run your dApps without interference from a third party. Along with its own programming language, Ethereum runs on a blockchain which allows any developer to build and run applications.
Aside from using ether on the Ethereum network to create contracts and run dApps, users can invest in it as a digital asset.
Start your cryptocurrency investment with Luno, the leading and regulated digital asset platform in Malaysia
Whatever types of cryptocurrency you choose to buy, getting started with cryptocurrency is actually convenient and fast. If you’re wondering how to start investing in Bitcoin, Ethereum, Ripple, Litecoin or Bitcoin Cash, you can log on to Luno's website and register for an account today.
Meanwhile, do you have friends/family who have not signed up for an account with Luno in Singapore? Refer to them and enjoy SGD 30 (~MYR 90) in Bitcoin! Here are the steps to invite your friends:
Share your unique invite code to your friend from the Rewards Page
Your friend signs up, deposits and buys SGD 200 of crypto
You both get SGD 30 (~MYR 90) worth of free Bitcoin
*Read more on the Terms & Conditions for Luno’s referral programme: www.luno.com/en/legal/rewards-and-promotions
This article is for educational purposes only and you should not construe any such information as investment or financial advice. Investing in cryptocurrency is high risk and may result in the loss of capital as the value can fluctuate. We recommend individuals to consult with a licensed financial planner for detailed financial advice on whether cryptocurrency is a good investment option.
Read more on Luno’s Terms of Use and risks associated with cryptocurrencies: www.luno.com/en/legal/terms.
