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Guide to Different Cryptocurrency Types | Bitcoin IRA

Investor's Guide to Different Cryptocurrency Types | Bitcoin IRA

Investors who are ready to try cryptocurrency investing often learn that the goals accomplished by different cryptocurrencies tend to vary. Just like companies from various industries that issue stock shares, each crypto has specific attributes that define its overarching mission (and particular use cases) as well as allow it to contribute to the world of cryptocurrency in a myriad of ways.

To date, there are more than 18,000 cryptocurrencies available for investors, which may seem like an overwhelming number of options to some. In an effort to best serve their users, the team at Bitcoin IRA carefully curated over 60 different cryptocurrencies that are available on their innovative crypto IRA platform.

Similar to sectors of the stock market, investors may consider spreading investments across different cryptocurrency use cases when working to diversify a portfolio. One way to begin is by breaking down cryptocurrencies by type and general use case. There are two main types of cryptocurrency — coins and tokens — with various ways to use them, including as a form of payment or as a service. As more investors continue to consider adding and trading cryptocurrency in their IRAs, it would be a good idea for them to gain a solid understanding of what differentiates cryptocurrencies from one another.

Different Cryptocurrency Types

Coins and tokens are digital assets that can be bought and sold, which tends to make the task of discerning between the two a bit tricky. Cryptocurrency coins are virtual or digital currencies, while tokens are only digital assets. Essentially, a coin acts as a single unit of currency and all transactions, whether to other coins or tokens, are recorded on the blockchain. Coins can sometimes be exchanged for different coins or tokens that come from another blockchain.

Unlike coins, tokens can’t be mined and are often created on third-party blockchains. The value of tokens varies, much like stocks, and tokens can hold different classifications, such as utility tokens or decentralized finance tokens. In addition, tokens can often represent a stake in the company.

Investors may still trade both, providing enough liquidity exists in the market to make the exchange.

Cryptocurrency Use Cases

There is no general rule for the best uses on the various cryptocurrency types. So, to fully understand an investment, some options for investors are to seek out the whitepaper for the crypto project as well as to identify a specific user group who is well versed in its underpinnings.

Payment Cryptocurrencies

Bitcoin, the original cryptocurrency, is a payment cryptocurrency. Payment cryptos are used to make purchases of goods and services that accept crypto. Since Bitcoin, other popular payment cryptocurrencies were developed to speed up transaction times, such as like Litecoin and Ethereum. These cryptocurrencies may also be considered infrastructure cryptocurrencies in that they are the base of the blockchain infrastructure and pay the miners and participants approving transactions.

Financial Cryptocurrencies

Financial cryptocurrencies serve as a conduit for trading other cryptocurrencies. For example, investors may choose to purchase a particular financial cryptocurrency (Augur, for instance) to access other cryptocurrencies or lending strategies.

Another financial cryptocurrency that happens to also double as a service cryptocurrency is Compound. This crypto serves as a frictionless option for investors to use Ethereum-based coins and tokens as collateral for borrowing, lending, and collecting interest. Meanwhile, investors who hold Ether, for instance, have the option to keep a portion of it under the Compound token.

Service Cryptocurrencies

Service cryptocurrencies break the mold a bit in that they are generally token-based and are designed to link records from the real world to the blockchain.. Smart contracts, which are associated with a token and stored on the blockchain, are a standard application in service crypto.

For example, if you have ever bought property or a car, it may be difficult to guarantee the historical chain of past ownership. However, with a smart contract, all transactions are recorded on the blockchain, and they cannot be tampered with, meaning that the chain of ownership will always exist somewhere.

How to Start Investing for Retirement in Cryptocurrencies

Investors seeking to diversify their cryptocurrency investing may do so by utilizing crypto projects that produce different results. It is wise to learn about projects first by reading through published information before deciding which crypto is right you.

Bitcoin IRA* is on a mission to help Americans retire. Their innovative platform equips users with over 60 cryptocurrency options that are available to buy, trade or sell in real-time, 24 hours a day, seven days a week. With over 3,500 5-star reviews and over 100,000 users, their platform helps users can easily diversify their self-directed IRAs with cryptocurrency.

As the most trusted crypto IRA platform, Bitcoin IRA has processed more than $2 billion+ in transactions.. In addition, the platform is the industry’s go-to source for crypto thought leadership and has been featured extensively in the media, with coverage in Forbes, CNBC, Bloomberg, CoinDesk TV, and The Wall Street Journal, among other leading publications and media outlets.

* Alternative IRA Services, LLC dba Bitcoin IRA is a platform that connects consumers to qualified custodians, digital wallets and cryptocurrency exchanges. The company is not a custodian, is not a digital wallet and is not an exchange. Self-directed purchases processed through Bitcoin IRA have not been endorsed by the IRS or any government or regulatory agency. Bitcoin IRA is not an adviser. Information contained on this website is for educational purposes only. We encourage you to consult an adviser or professional to determine whether Bitcoin IRA makes sense for you. Cryptocurrencies are very speculative and involve a high degree of risk. By using the website, you understand the information being presented is provided for informational purposes only and agree to comply with our Terms of Use and Privacy Policy.

Recommended article: Growing Your Nest Egg with Crypto

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