Types of cryptocurrency and how they work

Cryptocurrencies are digital money. Unlike traditional currencies such as dollars or euros, they run on decentralized systems — meaning no central bank or payment processor controls them. Since Bitcoin launched in 2009, crypto has grown into a $4 trillion global market, with thousands of coins and tokens used for payments, savings, applications, and speculation. According to CoinMarketCap, Bitcoin alone makes up around 57% of the market, while Ethereum holds about 13%.

But how many types of cryptocurrency are there? The answer depends on how we classify them. Broadly, crypto splits into coins (native cryptocurrencies), stablecoins, altcoins, meme coins, and tokens (utility and security). Each type has its own purpose, risks, and value for users and businesses.

What is cryptocurrency and how it works

A cryptocurrency is a digital asset that exists only in electronic form and is secured by cryptography. It is not issued by governments or central banks. Instead, it runs on blockchain technology — a distributed ledger where all transactions are recorded in linked blocks, secured by mathematical proofs.

How it works:

• Blockchain acts as a transparent, tamper-resistant ledger replicated across thousands of computers
• Consensus mechanisms (proof-of-work, proof-of-stake, or hybrids) secure the network and validate transactions
• Wallets allow users to store and transfer digital assets via public and private keys
• Mining or staking rewards participants who secure the network with coins

Cryptocurrency can serve as:

• Store of value (Bitcoin often compared to digital gold)
• Medium of exchange (stablecoins widely used for payments)
• Platform currency (Ethereum, Solana, Avalanche powering smart contracts and apps)
• Speculative asset (meme coins, DeFi tokens)

Types of cryptocurrency

There are thousands of cryptocurrencies, but they fall into several main groups:

1. Coins (native cryptocurrencies) — BTC, ETH, SOL, TON, AVAX, LTC
2. Stablecoins — pegged to the U.S. dollar or other assets (USDT, USDC, DAI)
3. Altcoins — all non-Bitcoin coins, including smart-contract platforms and niche projects
4. Meme coins — culture-driven tokens like DOGE, SHIB, PEPE
5. Utility and security tokens — access tools and regulated investment claims issued on existing blockchains

Coins (native cryptocurrencies)

Coins are the backbone of crypto. They have their own blockchains and function as the main asset of their network.

Bitcoin (BTC)

• Launched: 2009
• Market share: ~57% of global crypto value, as reported by CoinMarketCap
• Price (Sept 2025): around $115 000, according to Yahoo Finance

Bitcoin is designed as a decentralized peer-to-peer payment network. Its scarcity (21 million supply cap) makes it a deflationary asset often compared to gold. BTC is widely used as collateral, treasury reserve, and macro hedge.

Ethereum (ETH)

• Launched: 2015
• Purpose: Smart contracts and decentralized applications
• Price (Sept 2025): about $4,500, based on YCharts data

Ethereum transformed crypto by introducing programmable money. Today, it powers decentralized finance (DeFi), NFTs, tokenization, and DAOs. Its shift to proof-of-stake in 2022 cut energy usage by 99% and enabled ETH staking for network security.

Solana (SOL)

• Launched: 2020
• Focus: High-speed, low-fee blockchain
• Price (2025): near $240, as noted by CoinTelegraph

Solana is popular for DeFi, NFTs, and meme coins. It’s known for speed (thousands of transactions per second) and low transaction costs. It became the #3 blockchain by DeFi activity in 2025.

Toncoin (TON)

• Launched: By Telegram developers, later revived by community
• Use case: Integrated into Telegram apps for payments and services
• Trend: In 2025, TON is one of the fastest-growing L1s thanks to Telegram’s ~900 million users, as reported by Reuters

Avalanche (AVAX)

• Launched: 2020
• Use case: Custom subnets for financial institutions and gaming
• Adoption: Used by enterprises to build regulated blockchain solutions, as per Reuters

Litecoin (LTC)

• Launched: 2011
• Features: Faster block times than Bitcoin, high liquidity
• Still widely used for payments but overshadowed by newer chains

Stablecoins

Stablecoins are cryptos designed to maintain a stable value, usually pegged 1:1 to the U.S. dollar.

• Tether (USDT): Largest stablecoin, market cap near $172B, according to CoinMarketCap
• USD Coin (USDC): Issued by Circle, with about $70–74B in circulation and monthly reserve audits, as shown on Circle’s transparency page
• DAI: Decentralized stablecoin backed by crypto collateral

Why they matter:

Stablecoins are the backbone of crypto trading (used as base pairs on exchanges), cross-border remittances, and DeFi. Businesses use them for settlements because they avoid crypto’s volatility.

Risks: Dependence on issuers, reserve transparency, and regulatory changes. In 2025, the U.S. GENIUS Act established federal rules for stablecoin issuers, reported Bloomberg Law.

Altcoins

‘Altcoin’ is a broad category for any coin that isn’t Bitcoin. Major examples:

• Ethereum (ETH): programmable money
• Solana (SOL): speed and DeFi dominance
• Toncoin (TON): Telegram integration
• Avalanche (AVAX): customizable subnets
• Polkadot (DOT): interoperability across blockchains
• Ripple (XRP): settlement-focused token used in cross-border payments

Altcoins innovate with scalability, privacy, interoperability, and new financial products. But they carry higher risks of failure, security bugs, and market decline.

Meme coins

Meme coins are community-driven tokens born from internet culture. Their value comes from attention, not fundamentals.

• Dogecoin (DOGE): Launched as a joke in 2013, now integrated into payments and supported by Elon Musk
• Shiba Inu (SHIB): Ethereum-based meme coin with DeFi ecosystem
• Pepe (PEPE): 2023 launch, became one of the fastest meme coin rallies

Figures from CoinGecko indicate the meme-coin market cap is around $85B.

In 2025, the U.S. approved the first Dogecoin ETF (ticker DOJE), giving meme coins a presence in traditional finance, as per Business Insider.

Pros: viral adoption, liquidity when trending.

Cons: extreme volatility, speculation-driven, little utility.

Utility tokens and security tokens

Utility tokens: Provide access or functions inside a project (e.g., governance, discounts, credits). Example: Uniswap (UNI) for protocol governance.

Security tokens: Represent regulated investment claims (equity, bonds, real estate). They require compliance with securities laws such as those enforced by the SEC in the U.S. and FINMA in Switzerland.

Key difference: Utility = product access; Security = regulated investment.

Key differences between cryptocurrency types

Why it matters for users and businesses

For users:

• Bitcoin as a store of value
• Ethereum, Solana, Avalanche as platforms for apps
• Stablecoins for everyday transactions
• Meme coins for speculation (high risk)

For businesses:

• Accepting stablecoins reduces settlement time and cost
• Tokenization of real-world assets (RWA) opens new funding models
• Regulatory clarity allows enterprises to adopt security tokens

Integrated ecosystems like EMCD offer mining, wallets, and savings tools to manage crypto flows efficiently, as described in EMCD’s positioning materials

The future of cryptocurrency: trends and what to expect

1. Institutional adoption: Bitcoin and Ethereum ETFs are already live; Dogecoin ETF launched in 2025
2. Stablecoin regulation: U.S. and EU rolling out frameworks for fiat-backed stables
3. RWA tokenization: Growing market for tokenized treasuries, bonds, and real estate
4. CBDCs: Central banks piloting digital currencies alongside crypto
5. Layer-2 scaling: Ethereum rollups, Bitcoin Lightning Network, and Solana parallelization improving speed and cost
6. AI + crypto: Integration of AI-driven trading, compliance, and wallet security
7. Meme finance: Meme coins continue as a culture-finance experiment, shaping social liquidity

FAQ

Are all cryptocurrencies decentralized?

No. Bitcoin and Ethereum are decentralized, but stablecoins and exchange tokens rely on central issuers.

What is the difference between a coin and a token?

A coin is native to its own blockchain (BTC, ETH, SOL). A token is issued on top of another blockchain (e.g., USDC on Ethereum).

Are stablecoins really stable?

Fiat-backed ones like USDT and USDC track $1 closely, but carry issuer and banking risks.

Which type is best for payments?

Stablecoins — especially USDT and USDC — dominate crypto payments.

Why are meme coins so popular?

They blend humor, community, and speculation. Popularity comes from culture, not fundamentals.

What risks are associated with different cryptocurrencies?

• Coins: volatility, regulation
• Stablecoins: issuer risk
• Altcoins: execution and competition
• Meme coins: extreme volatility
• Tokens: compliance and smart-contract risks