(CNN) – Bitcoin may be the most popular form of digital currency but it is far from unique.
In fact, about 1,500 other cryptocurrencies have emerged since the creation of bitcoins in 2009. And they fall into buckets like coins and tokens.
Coupled with the lack of clear rules or supervision and how new the space is, it is sufficient to leave any new crypto arrived completely confused.
Crypto is valued by investors because it is not regulated by any central figure. It is also exchanged under a pseudonym, which allows greater privacy.
While it was originally used for illicit transactions, it got a wider adoption. Even companies like Overstock and Starbucks have started experimenting with how to let customers use it to make purchases.
For this reason, knowing the fundamental differences it's worth your time
Coins against tokens
First of all, you will want to know the difference between coins and tokens. Coins are essentially virtual money used for many types of transactions. They are bought and sold on many different cryptographic exchanges, including Coinbase, bitbuy.ca and Binance. The first bitcoin transaction recorded was for two pizzas.
Tokens represent assets or anything that has value attributed to it. For example, tokens can be used to represent things such as ownership of a work of art or the number of reward points that a customer has in a company's loyalty program. They both have value and rely on blockchain technology, a digital ledger of transactions that can not be erased. But a currency is virtual money and a token is not.
Bitcoin and coins alt
Bitcoin was the original form of cryptocurrency – and it is the currency with which the others are compared.
"Bitcoin is the cryptographic mother," said Marshall Hayner, founder of Metal Pay, an app that is very as we come for crypto.
Not surprisingly, its emergence triggered the rise of imitations, including alternative currencies such as litecoin, XRP and ether.
Ether is used to power its unique blockchain called Ethereum – one of the greatest creators of smart contracts. These contracts use cryptographic code to verify and activate transactions when certain conditions are met. For example, a smart contract could be set up to pay a certain amount of encryption at 13:00. on a specific day.
Another bitcoin alternative is XRP, which was created to make cross-border payments easier for banks and payers. It is one of the most popular cryptocurrencies.
There are also obscure alternatives, such as dogecoin, which was created as a joke based on a viral meme from a Shiba Inu. The dog's face appears on the front side of the virtual currency. Currency is commonly used on social media to suggest users posting interesting things.
Dogecoin has helped many people to know and delight in cryptocurrency trading because their community tends not to take itself too seriously and is very friendly with new investors.
Stable currencies are anchored in real currencies such as the US dollar, the euro or the British pound. This means that a dollar or a pound will get you an encrypted currency. These coins are designed to mimic current currencies and tend to be less volatile than other cryptocurrencies.
The halter was one of the first stable coins.
"The idea behind it is that you earn a dollar and you get a thread," said Hayner.
But there's still risk, according to Ryan Taylor, CEO of the cryptocurrency Dash. Their value may decrease over time in a similar way to legal currencies such as the US dollar.
Other recent stable coins are more transparent. For example, TrueUSD complies with certain standard financial regulations and uses escrow accounts.
Utility tokens represent a specific service or good on a specific platform: guy as a gift card for a specific store. They are not really investments but they have a value.
Hayner assimilates them to casino chips: when you go to a casino, you change your chips for chips and then you can use those chips to play. The chips serve a function because they allow you to do something and keep the value, but you have to exchange them to get real money.
Taylor said he was skeptical about most utility tokens because they are not the best way to interact with users. They require additional steps that make them more complicated to use and that could drive away some people.
However, he noted that they allow you to make transactions in extremely small quantities.
Security tokens are still relatively new. Their value comes from real assets, which could include commodities such as gold or oil, shares in a company or interest in a fund. These tokens are meant to be investments and because they are considered to be securities and subject to federal security regulations.
Some fans security tokens claim that they would ensure greater accountability for companies as actions would be public and could not be oversized.
Both Hayner and Taylor claim that these tokens are still far from presenting themselves in people's portfolios because of uncertainty about how they would be regulated.
And according to Stephen Innes, responsible for trading in Asia Pacific for the online trading platform Oanda, security tokens do not yet provide enough "a consistent metric on which to base an underlying investment strategy".
Security tokens, which would be regulated, also go against the very core of what was to be encryption – a deregulated currency. But the regulations would be a call for investors.
Non-fungible tokens have a unique value or use. They can store value but not two tokens are equal.
For example, in the video game CryptoKitties, users can use ether to buy digital cats. The digital kittens can be traded and bred, but each has its own non-fungible token that can not be replicated – a bit like a fingerprint.
Future of money?
Digital currency is becoming more mainstream when companies like Starbucks and Goldman Sachs experiment with how to engage with it.
It is not clear if the encryption will be the future of money, but its volatility does not help its case to a wider adoption. As the values continue to fall and rebound, investors continue to show caution.
"There's a lack of adoption on Wall Street," Innes said. "The big banks that most people do business with are reticent to get involved, which I think they're saying."