Cryptocurrency Development | Types of Cryptocurrencies
The cryptocurrency was thought to be yet another flicker of imagination in 2009 when Satoshi Nakamoto introduced bitcoin. In its momentous journey over a decade, it saw its ups and downs in terms of value, legal acceptance, endorsement, and patronage. Today, it has become almost inevitable that big players like Facebook and IBM have conceptualized their own crypto coins.
With the first cryptocurrency, the bitcoin worth more than $50,000, we know that cryptocurrency is a big deal today. The growing acceptance of the decentralized ledger called the blockchain and its manifestations have prompted a lot of entrepreneurs and business people to create their own cryptocurrency.
The Different Types of Digital ‘Currency’
The world of ‘cryptocurrency’ is far from monotonous. There are different types of cryptocurrencies that have different manifestations and definitions. Based on what your business would need, you can launch your own type of cryptocurrency. Some of them might require an entirely new blockchain, and some of them can be floated on existing blockchains.
- Security Tokens
The security token, in simple definition, is a token or rather a crypto token that represents security. As you may have known, and by the definition of the SEC, a security token is something that can be traded and something that represents a tangible value. While it might inherently have its worth only within the blockchain, it can still be traded for any asset class that makes it valuable across multiple blockchains.
- Utility Tokens
A utility token is the one issued in an initial coin offering. A utility token, as the name implies, entitles the owner to a utility that might not always translate into monetary benefits. The utility can include access to a product or access to certain premium features of a product or voting rights or entry to an event. A utility token does not require a different and new blockchain to exist. Some utility tokens can evolve to be accepted by some crypto exchanges.
- Crypto Coins
Crypto coins are proper currency replacements. They can be used in place of the usual currency like dollars and euros that are in circulation today. They need an entirely new blockchain to exist and they hold value irrespective of wherever they are. It all comes down to the question of whether or not a business or an entity accepts cryptocurrency as a valid method of payment.
- Work Tokens
Work tokens are a special type of crypto tokens that are exclusively used for staking. A user can stake the native network token to perform some work within the network. If the work is valid and contributes to the network, they can be rewarded and the staked amount.
- Access-Based Tokens
The access-based token has two different tokens within it. One of them is used for staking and the other is used to pay the fee. The amount of secondary tokens created is contingent upon the number of primary tokens that are staked in a particular platform. It is almost similar to holding a license that gives access to a service at a fixed cost.
- TCR Tokens
A token curated registry is used to determine the rights of owners over the contents of a registry.
Volatility has been one of the biggest problems that the crypto world has been facing. This problem can be addressed by pegging the value of a token to a real-world asset whose value does not fluctuate very often. Such crypto coins are called stable coins. As the name implies, the value of the coins is stabilized because of the peg. Some stablecoins are collateralized using real-world assets and some of them are issued as crypto collateralized tokens. There are some algorithmically expanding token supplies while still keeping control of the value of the token. They are called seigniorage shares.
- Proof of Burn Tokens
The proof of burn is like a scuttle yard. This consensus mechanism allows users to earn tokens by burning some of them first. Cryptocurrency miners send coins to specific addresses from where they cannot be retrieved. The user burns the coins and gets the rewards, implying that the user is ready to accept short-term losses for long-term investments. It is to be remembered that even burning crypto coins requires quite some computing and electric power.
- Other Types of Tokens
This is not a thing of the past or the present but of the future! There are so many types of new crypto coins springing up left, right, at the center, and the technology is evolving. The entire concept of cryptocurrency is barely a decade old and it still needs to mature and find acceptance. Some of the ideas that have been put forward are buyback tokens and perpetual discount tokens.
Why Go For Cryptocurrency?
The reason why the world has been steadily progressing towards decentralized currency is the plethora of advantages it offers.
- The first advantage is, of course, decentralization. Cryptocurrency does not depend on any centralized authority and can function without the requirements of a bank or anything to control its movement.
- Traditional currency has had its own share of pain when it comes to transactions. Some transactions might even take weeks. With crypto, however, there are no limits in terms of transactions and the transaction from any corner of the world to another is almost immediate.
- It takes a lot of time in traditional finance because of the complications in the process and the intermediaries. Intermediaries generally translate into higher costs. Since there are no intermediaries involved and since everything is handled by smart contracts, the transaction fees are quite low and sometimes, almost close to zero.
- Crypto carries with it, a couple of inherent advantages. Cryptocurrency transactions ensure complete transparency and anonymity. Since the blockchain is immutable, no changes can be made to the records. At the same time, since the crypto address is not publicly confirmed, no one will ever know if the transaction has been done and even if they do, they cannot attribute it to an individual.
- Cryptocurrency can be viewed as the currency of the New World order! It is internationally accepted and it does not mandate that the person has a bank account. It can, therefore, be anonymously and easily used for fulfilling international transactions without any hassle or delay.
How To Create A Token?
Creating a token does not mandate that you have an entirely new blockchain. This means that you can create tokens out of existing blockchains cover and the most preferred blockchain for this purpose is Ethereum. With a few lines of code and by defining the supply, the symbol, and the value, you can create a new token.
The Process Of Creating
- Creating a crypto coin, however, can be a bit demanding and cumbersome. There are various steps involved and the most important of them is that you will need to choose your blockchain.
- The first step is to choose a consensus mechanism. They are protocols that are defined to consider a particular transaction legitimate enough to be added to our block.
- You will need to pick a perfect blockchain for your business and it is contingent upon the consensus mechanism you have selected.
- You can decide from your blockchain’s workings and functionality hope you will design the node. You will also need to define the permission levels, the hosting, and also work on the hardware details for the execution.
- The next step is to build an internal architecture. It is to be remembered that the blockchain is rigid once it starts running. Therefore, all the changes need to be made even before the blockchain is launched. Simple things like address format can go along distance in refining your crypto coin and your blockchain.
- You will need to integrate APIs, so your blockchain can seamlessly communicate with third-party programs and interfaces.
- So far, everything has been done under the hood. Now, you will need to work on making an interface intuitive and interesting. You will also need to ensure top-notch security and make every element of your blockchain flexible enough to accept future updates.
- The last and the most crucial step is to ensure legality. As you may have known, crypto coins have been experiencing some legal turbulence. While it will take some time to stabilize, you should ensure that at no point in time your crypto business is illegal.
Instead of pushing all your effort towards cryptocurrency creation, you can consider outsourcing the process to a reputed cryptocurrency development company. They will take care to understand your requirements and build your crypto coin in line with what your business needs.
If the process of crypto development is made simple, you can concentrate on the business aspects of it, so you can find success in whatever crypto venture you are into.