What are the 4 types of cryptocurrency – overview

Discover the world of digital assets as we explore what are the four types of cryptocurrency, their unique features, and use cases.

Cryptocurrencies have rapidly gained popularity as digital assets with the potential to revolutionize finance, technology, and various industries. As the market expands, it is essential to understand the diverse range of cryptocurrencies available. In this guide, we will answer the question: What are the 4 types of cryptocurrency? and explore their unique features, use cases, and examples.

I. Payment Cryptocurrencies

Payment cryptocurrencies are digital assets primarily designed to function as a medium of exchange, allowing users to send and receive funds securely, quickly, and efficiently. These cryptocurrencies aim to offer several advantages over traditional currencies, such as lower transaction fees, faster transaction times, and global accessibility.

Examples of payment cryptocurrencies

Bitcoin (BTC)

Bitcoin, the first and most well-known cryptocurrency, was created in 2009 by an anonymous individual or group known as Satoshi Nakamoto. Its primary purpose is to serve as a digital alternative to traditional fiat currencies, enabling peer-to-peer transactions without relying on a central authority, such as a bank or government.

Litecoin (LTC)

Litecoin, often referred to as the “silver” to Bitcoin’s “gold,” was created in 2011 by Charlie Lee. It is a payment cryptocurrency designed to offer faster transaction times and lower fees compared to Bitcoin. Litecoin uses a different consensus algorithm, called Scrypt, which allows for more efficient mining and faster block generation.

Bitcoin Cash (BCH)

Bitcoin Cash is a hard fork of Bitcoin that was created in 2017 due to disagreements within the Bitcoin community regarding scalability solutions. Bitcoin Cash aims to address the issue of slow transaction times and high fees by increasing the block size, allowing for more transactions to be processed in each block.

Dash (DASH)

Dash, formerly known as Darkcoin, is a payment cryptocurrency launched in 2014 by Evan Duffield. It focuses on providing faster transaction times and enhanced privacy features. Dash utilizes a unique two-tier network architecture, combining Proof of Work (PoW) and Proof of Service (PoSe) consensus mechanisms to improve transaction speed and security.

II. Utility Tokens

Utility tokens are digital tokens issued by a specific blockchain project to grant holders access to the platform’s products or services. These tokens often serve multiple functions within the ecosystem, such as facilitating transactions, rewarding users, or providing governance rights. Utility tokens can be seen as a means to interact with and contribute to the development of a blockchain project.

Examples of utility tokens

Ethereum (ETH)

Ethereum, launched in 2015 by Vitalik Buterin, is a decentralized platform that enables developers to create and deploy smart contracts and decentralized applications (dApps). Ether (ETH), the native utility token of the Ethereum blockchain, is used to pay for transaction fees and computational services on the network.

Chainlink (LINK)

Chainlink is a decentralized oracle network that connects blockchain-based smart contracts with off-chain data sources, enabling them to access real-world information securely and reliably. The Chainlink token (LINK) serves as a means of payment for data providers and node operators within the ecosystem.

Binance Coin (BNB)

Binance Coin is the native utility token of the Binance ecosystem, one of the largest cryptocurrency exchanges in the world. BNB can be used to pay for trading fees on the Binance platform, participate in token sales on the Binance Launchpad, and access various products and services within the Binance ecosystem.

Basic Attention Token (BAT)

Basic Attention Token is a utility token designed for the digital advertising industry. It was created by the team behind the Brave browser, a privacy-focused web browser that blocks ads and trackers by default. BAT is used to reward users for their attention and to facilitate transactions between advertisers, publishers, and users on the Brave platform.

III. Stablecoins

Stablecoins are a type of cryptocurrency designed to maintain a stable value by pegging them to a reserve of assets, such as fiat currencies, commodities, or other cryptocurrencies. The primary purpose of stablecoins is to provide a stable store of value and a reliable medium of exchange within the crypto market, reducing price volatility and enabling more practical everyday use of cryptocurrencies.

Types of stablecoins

Fiat-backed stablecoins

Fiat-backed stablecoins are pegged to traditional fiat currencies, such as the US dollar or euro, and are usually backed by a 1:1 ratio of the underlying asset held in reserve. These stablecoins are often considered the most straightforward and secure type, as their value is directly tied to a well-established and widely accepted currency.

Crypto-backed stablecoins

Crypto-backed stablecoins are collateralized by other cryptocurrencies, typically using smart contracts to maintain their value. To account for potential price fluctuations in the underlying crypto asset, these stablecoins are usually over-collateralized, meaning that the value of the collateral exceeds the value of the stablecoins issued.

Algorithmic stablecoins

Algorithmic stablecoins maintain their peg without the need for collateral by employing complex algorithms that adjust the supply of the stablecoin in response to changes in demand or market conditions. These stablecoins rely on economic incentives and market mechanisms to maintain their value and stability.

Examples of stablecoins

Tether (USDT)

Tether is a popular fiat-backed stablecoin that is pegged to the US dollar. Each USDT token is meant to be backed by a 1:1 ratio of US dollars held in reserve, providing a stable and liquid alternative to volatile cryptocurrencies for traders and investors.


USD Coin is another prominent fiat-backed stablecoin pegged to the US dollar. It is issued by the Centre Consortium, a collaboration between Circle and Coinbase, and aims to offer a transparent, secure, and regulated stablecoin for the crypto market.

Dai (DAI)

Dai is a crypto-backed stablecoin that is pegged to the US dollar and collateralized by Ethereum. It is issued by the MakerDAO platform, a decentralized autonomous organization (DAO) that utilizes smart contracts to manage the creation and redemption of Dai tokens and maintain their value.

IV. Privacy Coins

Privacy coins are a type of cryptocurrency designed to provide enhanced privacy and anonymity features for their users. These cryptocurrencies employ various cryptographic techniques and protocols to obfuscate transaction data, making it difficult for third parties to trace or link transactions to specific users.

Privacy technologies and features

Ring signatures

Ring signatures are a cryptographic technique used by some privacy coins to mix the sender’s transaction with other transactions, making it difficult to determine the true origin of the funds.

Stealth addresses

Stealth addresses are one-time-use addresses that allow users to receive payments without revealing their actual wallet address, thereby enhancing privacy by preventing transaction linkability.

Zero-knowledge proofs

Zero-knowledge proofs are cryptographic protocols that allow users to prove the validity of a transaction without revealing any information about the transaction itself. This ensures that transaction details, such as sender, receiver, and amount, remain private.

Examples of privacy coins

Monero (XMR)

Monero is a leading privacy coin that was launched in 2014. It uses ring signatures, ring confidential transactions (RingCT), and stealth addresses to ensure the privacy of its users. Monero transactions are designed to be untraceable, unlinkable, and confidential, making it a popular choice for users seeking enhanced privacy and anonymity.

Zcash (ZEC)

Zcash, created in 2016, is a privacy-focused cryptocurrency that employs zero-knowledge proofs, specifically zk-SNARKs (Zero-Knowledge Succinct Non-Interactive Argument of Knowledge), to ensure transaction privacy. Users can choose between transparent and shielded transactions, providing them with a flexible privacy option based on their needs.

Dash (PrivateSend feature)

Although Dash is primarily a payment cryptocurrency, it also offers a privacy feature called PrivateSend. This feature enables users to mix their transactions with others to obscure their transaction history, providing an additional layer of privacy and anonymity.

Horizen (ZEN)

Horizen, formerly known as ZenCash, is a privacy coin that employs zero-knowledge proofs and other cryptographic techniques to provide users with privacy and security. In addition to offering private transactions, Horizen also supports secure messaging and decentralized applications (dApps) on its platform.


In conclusion, understanding what are the 4 types of cryptocurrency is crucial for anyone interested in the rapidly evolving world of digital assets. These four main types—payment cryptocurrencies, utility tokens, stablecoins, and privacy coins—each serve unique purposes and offer distinct features.

By exploring the differences between these types of cryptocurrencies, users can make informed decisions about which digital assets best align with their needs and interests.

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