Types of cryptocurrencies

Overview

Since the launch of Bitcoin in 2009, the world of cryptocurrencies has expanded into a diverse ecosystem of digital assets. While all cryptocurrencies are based on blockchain technology, they serve different purposes and use cases. Some aim to be a digital form of money, while others power decentralized applications, smart contracts, or privacy-focused transactions.

Understanding the main types of cryptocurrencies helps traders and investors make informed decisions based on utility, volatility, and long-term potential.

Although cryptocurrencies call themselves a form of money, the Internal Review Service (IRS) considers them financial assets or real estate. And as with most other investments, the government wants a share of the profits if you make capital gains when you sell or trade them.

On May 20, 2021, the U.S. Treasury Department announced a proposal that would require taxpayers to report any cryptocurrency transaction over $10,000 to the IRS.4 Exactly how the proceeds would be taxed – as capital gains or ordinary income – depends on how long the taxpayer holds the cryptocurrency.

Please note: GBE brokers do not offer direct investment or ownership of cryptocurrencies.

Bitcoin – The Original Cryptocurrency

Bitcoin is the first and most recognized cryptocurrency. It was created as a peer-to-peer electronic cash system, offering an alternative to traditional fiat currencies. It is often referred to as “digital gold” due to its limited supply (21 million coins) and its role as a store of value.

Main use cases:

Store of value
Hedge against inflation
Borderless payments

Altcoins – Alternatives to Bitcoin

“Altcoin” is a collective term for all cryptocurrencies other than Bitcoin. Many altcoins are forks or variations of Bitcoin with modified features, while others are completely different in function and technology.

Examples include:

Litecoin (LTC) – Faster transactions, lower fees
Bitcoin Cash (BCH) – Increased block size for scalability
Dash (DASH) – Focused on speed and privacy

Smart Contract Platforms

These cryptocurrencies support programmable applications and decentralized services through smart contracts. Ethereum was the first to introduce this concept, and it remains the dominant platform.