Laura reviews seven main types of cryptocurrencies and their purposes.
Laura reviews seven main types of cryptocurrencies and their purposes.
Money Girl is hosted by Laura Adams.
Transcript: https://money-girl.simplecast.com/episodes/understanding-digital-assets7-types-of-cryptocurrencies/transcript
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Today, Bitcoin (BTC) reached an all-time high of over $113,000 per coin. It was created in 2009 as the first major cryptocurrency, a digital form of money traded on a secure, open database called a blockchain.
Since Bitcoin launched, many thousands, some say over a million, other cryptocurrencies and crypto assets have been created. Whether you own any crypto or not, it's steadily gaining popularity and is an asset class everyone should understand.
This post will review seven main crypto types and their purposes. You may be surprised by their diversity and the various benefits they give crypto owners.
Welcome back to episode 930 of Money Girl–I appreciate you spending time with me! I'm Laura Adams, an award-winning author, on-camera spokesperson, female money speaker, and founder of The Money Stack, a Substack newsletter. I've brought you personal finance tips and advice weekly on this podcast since 2008, with over 44 million downloads.
You can learn more, ask questions, and sign up for the Money Stack at LauraDAdams.com. Newsletter subscribers automatically receive my Money Success Toolkit with the exact templates I use to manage money.
LISTEN ALSO: Understanding Bitcoin–It’s history, halving, and controversy
7 types of cryptocurrencies
Here's what you should know about the seven main types of cryptocurrencies.
1. Bitcoin (BTC)
Bitcoin will always be in a class of its own in the digital world. As I mentioned, it was created first and fundamentally differs from any other digital asset. One reason it's different is because it was made to have a limited supply.
The anonymous founder or founders of Bitcoin, known only by the pseudonym Satoshi Nakamoto, built the code so there will only ever be 21 million Bitcoins. The currency is a peer-to-peer electronic cash system that exists on the most secure and decentralized blockchain.
While you can spend Bitcoin in some stores and online retailers, many people think about it like digital gold, a store of value that will get more valuable as it becomes more scarce. Investors often buy Bitcoin as a hedge against traditional financial systems because you can exchange it without anyone else, like a bank or the government, knowing.
Bitcoin is a crypto coin where all transactions are recorded on its open blockchain ledger. Ethereum (ETH) is another type of crypto coin with its own blockchain, which I'll discuss next.
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2. Altcoins
Altcoin is short for alternative coin, which is any digital currency other than Bitcoin. Ethereum is the largest altcoin in terms of market capitalization. A few other major ones are Solana (SOL), Ripple (XRP), and Cardano (ADA).
However, very few altcoins serve as digital money, like Bitcoin. Instead, they're actually tokens that serve different purposes, which I'll review next.
3. Tokens
While crypto coins have their own blockchains, a token is a digital asset that gets created and stored on a blockchain that already exists. Here are a few types of tokens you should know:
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4. Stablecoins
Stablecoins are crypto with a price pegged to a real-world asset, such as gold or the U.S. dollar. For instance, Tether (USDT) and USD Coin (USDC) are issued by financial institutions and maintain a 1:1 peg with the U.S. dollar. In theory, one USDT or USDC should always be worth $1.
Stablecoins reduce price volatility, making trading different coins easy across various exchanges. With a consistent price, you can pay for goods and services without worrying about the value changing drastically. Plus, you can hold a stablecoin without the risk of a sudden loss due to market changes.
5. Meme coins
You've probably heard of meme coins, like the Donald Trump ($TRUMP) coin, which launched in January 2025, shortly before his second presidential inauguration. Others include Dogecoin (DOGE) and Shiba Inu (SHIB). They're similar to a gambling chip or baseball card that has no intrinsic value except to their collectors.
Most meme coins get inspired by internet memes or pop culture and become popular on social media. Their prices get driven by speculation, often by a community of like-minded people.
6. Privacy coins
Privacy coins give their owners anonymity because the transactions don't show details like the sender and receiver's wallet addresses or transaction amounts. They use enhanced cryptography to obscure certain information.
An example is Zcash (ZEC), which launched in 2016 as a fork of the Bitcoin code. It allows transactions to be recorded on the blockchain but be hidden from the public's view.
7. Central bank digital currencies (CBDCs)
A CBDC is a digital form of a country's currency issued and backed by its central bank. Unlike crypto coins, like Bitcoin, which are decentralized and derive value from market forces, a CBDC is centralized. It's similar to the physical money created by the federal government.
A CBDC isn't a new currency but a new form of a country's existing currency. In other words, a digital U.S. dollar CBDC would still be a dollar, just in digital form. It would have the same legal status as physical banknotes and coins.
So, a CBDC isn't a cryptocurrency but a digital form of money with a value pegged 1:1 to the country's fiat currency. We don't have a CBDC in the U.S., but the government has been exploring it as the use of physical cash is declining. Other countries like
China, India, and the Bahamas are researching or have already launched a CBDC.
Theoretically, a CBDC would be a public, digital alternative to cash that isn't linked to a traditional bank account or subject to fees for domestic or global transfers. However, a significant concern is the potential for government surveillance of transactions.
There are many more types of crypto than the seven I've covered here. But this overview should help you understand that the crypto market has thousands of unique projects, each with its own technology, functionality, and goals.
That's all for now. I'll talk to you soon. Until then, here's to living a richer life!
Money Girl is a Quick and Dirty Tips podcast, and I want to thank our fantastic team! Steve Riekeberg audio-engineers the show. Holly Hutchings is our director of podcasts, Morgan Christianson is our advertising operations specialist, and Nathaniel Hoopes is our marketing contractor.