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Different Types of Crypto: A Comprehensive Guide

Different kinds of crypto are used for different functions and purposes. Here are the important differences between cryptocurrencies.
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Different types of crypto: How can you distinguish between coins? Cryptocurrency has revolutionised the financial landscape, offering an alternative to traditional fiat currency. As the crypto market continues to expand, it’s essential to grasp the nuances of various digital assets.

In this article, we’ll explore the different types of cryptocurrency, their features, and their use cases.

Coins vs. tokens: Unravelling the basics

Before diving into specific types, let’s clarify the fundamental distinction between coins and tokens.


Coins are native digital currencies that exist on their own dedicated blockchains. They are the fundamental units of value within their respective ecosystems.

For example, Bitcoin (BTC) is the original and most well-known cryptocurrency, and operates on its own blockchain. It serves as a decentralized store of value and a medium of exchange.

Ethereum (ETH) powers the Ethereum network. It not only acts as a digital currency but also fuels smart contracts and decentralised applications (apps built on the blockchain, rather than the internet).

When using a coin’s blockchain, transaction fees (such as mining rewards or gas fees) are denominated in that coin. For instance, Bitcoin miners earn BTC as their reward, while Ethereum gas fees are paid in ETH.

Coins operate within decentralized networks secured by multiple computers (nodes). These networks validate transactions and maintain the blockchain’s integrity.


Tokens, on the other hand, rely on existing blockchains (like Ethereum) to function. They represent assets, utilities, or rights within a specific ecosystem. Tokens can be fungible (interchangeable) or non-fungible (unique).

For example, Axie Infinity is a popular play-to-earn (P2E) game. In this game, players collect and battle adorable creatures called Axies.

The game has a token called AXS (Axie Infinity Shards). It gives holders of the token to vote on things like upgrades to the game, and can be used in the NFT marketplace.

There is also another token associated with Axie Infinity called Smooth Love Potion (SLP). Players can earn SLP by participating in battles, completing quests, and breeding Axies. And they can purchase SLP on exchanges.

The value of SLP and AXS can fluctuate based on supply and demand dynamics, making them interesting assets for both gamers and investors.

Other tokens

Another example is the token associated with Uniswap, a decentralized exchange (DEX) protocol built on the Ethereum blockchain. It allows users to swap various cryptocurrencies in a peer-to-peer way.

The utility token associated with Uniswap is called UNI. UNI holders can participate in providing liquidity to Uniswap pools by depositing their tokens. In return, they earn a share of the trading fees generated by the platform.

UNI also serves as a governance token, allowing holders to propose and vote on protocol upgrades, fee adjustments, and other decisions.

Users who stake UNI tokens may receive additional rewards, such as UNI airdrops or access to exclusive features.

Another example is BAT (Basic Attention Token). The Brave browser ecosystem uses it to reward users. They also use it to pay content creators for engagement.

Different categories of cryptocurrencies

Utility Tokens

Utility tokens power decentralised applications (DApps) and grant access to specific services or features.

For example, Ethereum (ETH) is fuel for the Ethereum network, enabling smart contracts and DApps.

The Sandbox is a virtual metaverse where players can play, create, own, and govern their experiences. The utility token is SAND. SAND allows users to purchase and own virtual land within the Sandbox metaverse. This land can be developed, customised, and monetised.

With SAND, players can create and publish their own games, experiences, and assets within the Sandbox world. The community actively participates in governing the metaverse through decentralised decision-making.

SAND is the primary currency for in-game transactions, including buying and selling virtual assets, participating in events, and collaborating with other creators.

Payment cryptocurrencies

These aim to replace traditional payment methods. For example, Bitcoin (BTC) is the original cryptocurrency, often referred to as “digital gold.” This works so well as a payment cryptocurrency that it is legal tender in El Salvador, and some other regions.

XRP is another cryptocurrency designed for payment purposes.

Ripple is the company behind the XRP cryptocurrency. It operates a payment settlement system and currency exchange network that facilitates global transactions. XRP consistently ranks among the top 10 cryptocurrencies by market capitalisation.

Ripple aims to replace traditional systems like SWIFT by providing a faster and more efficient settlement layer between major financial institutions.

The standard fee for conducting transactions on Ripple is set at 0.00001 XRP, significantly lower than the fees charged by banks for cross-border payments.


Stablecoins maintain a stable value by being pegged to an external asset (usually the US dollar). An example is USD Coin (USDC).

USDC is a type of cryptocurrency that aims to maintain a 1:1 peg with the U.S. dollar. In other words, the value of one USDC coin is intended to be as close as possible to the value of one U.S. dollar.

USDC keeps this “sort-of” stability because it is fully backed by U.S. dollar assets. For every USDC in circulation, there is an equivalent amount of U.S. dollars held in reserve. These reserve assets are held in segregated accounts with regulated U.S. financial institutions, ensuring transparency and accountability.

Exchange Tokens

These tokens are native to specific exchanges and offer benefits like reduced fees or voting rights. For example, Binance Coin is used within the Binance ecosystem.

Central Bank Digital Currencies (CBDCs)

CBDCs are the digital version of a country’s national currency. They are issued by central banks. These are still in the experimental phase and there is a lot of controversy that surrounds them.

CBDCs allow central banks to more effectively implement monetary policies, including interest rate adjustments and quantitative easing (money printing to manipulate economic outcomes).

CBDCs make traceability easier, making it harder for illicit activities such as money laundering and tax evasion.

However, many normal citizens are very dubious of CBDCs. Because CBDC transactions are highly traceable, this could potentially compromise user privacy.

More or less, a government could take money away from a citizen by pressing a button, or "freeze" their accounts. CBDCs raise concerns about surveillance and government monitoring of financial activities.


Memecoins (like Dogecoin) and Shiba Inu were created as a joke, however, amazingly, some of the biggest memecoins have become fully-fledged cryptos with buying power and utility.

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Dogecoin (DOGE) is the oldest and largest memecoin at the time of writing.

It was originally created as a joke in 2013 by creators Billy Markus and Jackson Palmer. Initially, they thought it would be fun to come up with a new coin just for themselves. However, Dogecoin gained unexpected popularity and became a significant part of the crypto landscape.

Another popular memecoin is Shiba Inu (SHIB). Shiba Inu is often referred to as the “Dogecoin Killer.” It was launched in 2020. Like Dogecoin, Shiba Inu has a passionate community and has achieved a multi-billion dollar market capitalisation.

Different types of crypto: Conclusion

Understanding the different types of cryptocurrency empowers you to navigate the dynamic crypto market.

Whether you’re a seasoned investor weaving in and out of crypto exchanges, or a curious newcomer, stay informed and you can explore the ever-evolving crypto landscape.

Frequently asked questions

What are non-fungible tokens (NFTs)? Are they a type of crypto?

Non-fungible tokens (NFTs) are unique digital assets that represent ownership or proof of authenticity for specific items, whether physical or digital.

Unlike fungible tokens (such as Ethereum or other cryptocurrencies), each NFT has distinct properties and is provably scarce. NFTs have gained popularity in various sectors, including digital art, virtual collectibles, gaming, and entertainment.

How do NFTs work?

NFTs are built on blockchain technology, with most of them residing on the Ethereum blockchain. Buyers typically use Ether (ETH), one of the most popular cryptocurrencies, to purchase NFTs.

These tokens are indivisible and cannot be exchanged on a one-to-one basis like fungible tokens. Instead, they represent unique assets, such as digital art pieces, music, or virtual real estate.

What are fungible tokens?

Fungible tokens are interchangeable and have identical properties. Examples include Ethereum (ETH) and other Ethereum-based tokens like USD Coin (USDC). These tokens can be traded or exchanged for one another without any distinction.

How Can I Buy NFTs?

To buy NFTs, follow these steps:

Get Ether (ETH): Purchase ether through crypto platforms like CoinJar.

Choose an NFT Marketplace: Explore NFT marketplaces such as OpenSea or Rarible.

Browse and Bid: Browse NFT collections, place bids, and participate in auctions.

Wallet Setup: Set up an Ethereum wallet (such as MetaMask) to store your NFTs.

Ownership Confirmation: Once you win an auction, the NFT is transferred to your wallet.

What Are White Papers in cryptocurrency?

White papers are detailed documents that explain the concept, technology, and purpose behind a cryptocurrency project. They provide insights into the project’s goals, technical specifications, and implementation strategies.

Reading white papers is essential for understanding a crypto project’s fundamentals before investing.

Which cryptocurrencies run on the Ethereum blockchain?

Several popular cryptocurrencies operate on the Ethereum network.

Ethereum (ETH): The native cryptocurrency of the Ethereum blockchain, used for smart contracts and decentralised applications (DApps). However there are others that run on the Ethereum network, including Chainlink and Aave.

What Is Proof of Stake (PoS)?

Proof of Stake (PoS) is a consensus mechanism used by some cryptocurrencies (including Ethereum 2.0) to validate transactions and secure the network. Validators are picked based on the number of coins they hold and “stake” as collateral. PoS aims to reduce energy consumption compared to Proof of Work (PoW) systems.

How Can I Trade Cryptocurrencies Peer-to-Peer?

Peer-to-peer (P2P) trading allows direct transactions between individuals without intermediaries.

To trade crypto P2P:

Find a trusted counterparty Agree on Terms: Negotiate the trade terms, including price, payment method, and escrow.

Execute the Trade: Transfer the agreed-upon cryptocurrency directly to the other party’s wallet.

What Does It Mean When a Cryptocurrency Is Pegged to the US Dollar?

When a cryptocurrency is pegged to the US dollar, its value remains stable because it is backed by a reserve of US dollars.

Examples include USD Coin (USDC). This stablecoin maintains a 1:1 value ratio with the US dollar, making it useful for trading and hedging against market volatility.

What is blockchain technology and smart contracts?

Most cryptocurrencies run on blockchain technology, a decentralised ledger system. Smart contracts, coded agreements executed automatically, enhance functionality.

What is decentralised finance (DeFi)?

DeFi refers to financial services built on blockchain networks. It includes lending, borrowing, and yield farming.

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