Knowing the various classes of crypto assets can help you avoid holding several assets that behave similarly under specific circumstances and have similar attributes.
Highlighted below are some of the common cryptocurrency groups you should know about, according to the Digital Asset Classification Standard put together by CoinDesk.
Crypto Categories
Cryptocurrencies
These are digital money systems based on private blockchains. The most well-known cryptocurrency is Bitcoin (BTC), which is a class unto itself. Litecoin (LTC), Monero – Guide, Tips & Insights | Learn 2 Trade (XMR), and Bitcoin clones like Bitcoin Cash (BCH) and Dogecoin (DOGE) are some examples of altcoins (or alternatives to Bitcoin).
Smart Contract Platforms
These are the “Layer 1” or foundational blockchain operating systems, which serve as a host for other cryptocurrency applications to be built on. With its ERC-20 standard, Ethereum is the market leader in this niche, but there are several others, including Cardano (ADA), BNB Chain (BNB), and Solana (SOL).
DeFi
One of the most effective applications of blockchain technology is decentralized finance (DeFi). The majority of DeFi initiatives, such as Uniswap (UNI), Aave (AAVE), Compound (COMP), Yearn Finance (YFI), and Balancer (BAL), produce their own tokens.
Stablecoins
These are digital tokens whose value is fixed to a fiat currency, typically the US dollar, commodities, such as gold, or other tangible assets. Stablecoins serve as bridges between the crypto and traditional economies and provide secure storage for cryptocurrency investors’ funds.
Non-fungible Tokens (NFTs)
These investments typically reflect something irreplaceable and have a unique worth. The replacement of your Bitcoin with another would not bother you, but each NFT has a unique identity and selling price. NFTs can represent actual or digital products like luxury items, works of art, or intellectual property.
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