What’s all this cryptocurrency stuff about?

A common question we are asked is, “what’s it all about?”, or, “how do these coins have any value?”.

In simple terms, cryptocurrency coins (tokens) can be broken down into six key areas or types, that give investors a reason to do so.

1 . A Store Of (Volatile) Value 

In our article, Crypto versus Money, we discussed how crypto cannot be regarded as money (yet) because it can never be a store of value. However for many investors, crypto is a long-term game, and accretion of the asset is why people are playing. Bitcoin (BTC) is now even considered digital gold, and the first stock-market trading in the form of ETFs was made available this year. Any such store of value can only be mimicked through BTC investing, although still volatile, and through investing in stable coins, such as USDT. Stablecoins are asset backed by real-world reserves, to ensure the coin's value remains secure and stable.

2. Blockchain Utility

These are blockchain native currencies, such as ETH (Ethereum), BNB (Binance Coin) and MATIC (Polygon). In order to use these blockchains you need to buy these coins. They are well adopted for this reason, and they are commoditised and appreciate with the adoption of the particular blockchain. Such coins can simply be held as an investment, or swapped for utility tokens (see below).

3 . Exchange Coins

These coins are used for rewards and transactions on exchanges. They appreciate as the exchange is adopted and exchange benefits increase. They may be the same as the Blockchain Utility token, but in some cases they could be a separate type of token.

4 . Utility Coin

These are coins that are "sub coins" of a Blockchain utility coin. They serve a specific use case and appreciate with their own adoption and the adoption of their parent blockchain. For instance, the Ethereum blockchain runs on smart contracts, which essentially means any product or service can be served via computing coding and the internet, rather than people. New business ideas can be built on the Ethereum blockchain’s smart contracts technology, and anyone can create their own coin or token to serve their protocol or platform.

5. MEME Coins

These coins have limited utility and are coins representing communities, and come with a ‘meme’ type branding or front character. Shiba Inu is the best example of this, which made many people very rich, very quickly!

6. Non-Fungible Tokens (NFTs)

NFTs are the latest craze in crypto. They are quite simply, pieces of digital art or property, that are unique and cannot be replicated. More specifically, they are a digital file or a collectible digital item. As with any active market place, values are derived by market perception. The most popular, like Cryptopunks and Bored Ape Yacht Club, are worth millions of dollars each. You can buy, sell, trade or gift NFTs just like cryptocurrency.