Cryptocurrency Types: Digital Cash | Privacy Coins | Smart Contacts | Finance
So one of the most important things to consider about cryptocurrency is that it’s not about Bitcoin anymore and to that end. The cryptocurrency market is extremely diverse, that’s not to say that Bitcoin is dead or anything akin to that.
But rather it’s accurate to say that cryptocurrency as a whole has become a microcosm of larger economies. It’s not even accurate to use the term cryptocurrency to refer to the entire space as many new tokens are more focused on utility than peer-to-peer transferability.
Types of Cryptocurrencies
All digital coins share a common heritage with bitcoins genesis. Generally speaking, all coins aim to disrupt some centralized established industry. How they do that is largely dependent upon what so-called sector they’re operating in. So in the name of becoming educated about what kinds of cryptocurrencies are out there.
More specifically about what sectors and sub-sectors they operate in let’s explore. Many captivating and compelling use cases of this blossoming technology ideally once you finish the series of articles you’ll have a greater understanding of the many possibilities we’re just scratching the surface of.
welcome to Thoughtsfire, so before we dive headfirst into this understand that even with all the time and thought that it took to prepare these blog I will in no way be able to give you a comprehensive treatise on every possible use case or blockchain and distributed ledger technology as a whole. Not only that but I recognize that even when I try to place projects in certain buckets, you might disagree with that determination or believe they deserve their own special category what I need to impress is that I can’t cover everything even with multiple articles on this topic a more holistic.
SmartMoney approach to evaluating cryptocurrencies for example instead of investing in a coin because someone said to evaluate the sector it belongs to. See how it stacks up against its competition then if you find merit and similar projects invest in this sector
As a whole not in the individual crypto itself too often I see this erroneous approach where people get tribalistic to adopt an us-versus-them mentality. Do everything they can to build up their favorite project while knocking down the competition. It’s nonsense and indicative of an immature investor.
This smart move is to head your bets not go all-in in the first round like an amateur poker player the truth is we are years away from seeing how this will all play out so having a closed mind approach to investing in certain projects is malarkey and will not benefit you in the long run over a more diversified portfolio. So I digress you guys know that I’d like to use my soapbox to speak two things that I’m confident will benefit you in the long term to that end let’s get into the different sectors and sub-sectors of crypto and hopefully learn a few things.
Digital cash which is synonymous with cryptocurrency
So the first sector to talk about is digital cash which is synonymous with cryptocurrency in its purest sense. So digital cash simply put is money that can be transferred electronically from one party to another during a transaction.
- Nano coin
Above all are great examples of digital cash. When it comes to digital cash you’re probably pretty familiar with these. They’re what most people think of when they think of cryptocurrency as space what makes them compelling is that they’re more secure and efficient than government-issued fiat currencies.
Fiat being Latin for word let it be done predicting the notion that currencies of the world are not backed by an underlying physical asset and instead are bolstered only by the fate that the issuing government has the ability to collect taxes soon.
We’ll see digital cash that can process transactions faster than your typical electronic fund transfers and do it for cheaper than solutions utilizing. For example, the Swift Network the thing to know with digital cash, It’s highly dependent on user adoption and why we’ll likely see only a few coins make it at the top of the heap. I do think that coins that will win this sector will be the best at being ubiquitous while being Effortless. Why I support the notion that cryptos will only succeed if people don’t realize they’re using them another reason.
Digital cash is gaining support
I see digital cash gaining support is just look what happens when you buy something at a grocery store, let’s say you spend $100 if you use a debit or credit card there’s a fee associated with that transaction. Even if you don’t see it it’s no surprise that everyone who touches the transaction wants to get paid including the issuing bank the credit card associations such as Visa and MasterCard.
The Merchants Bank and the payment processor at a basic level every time, you process a transaction you pay several fees of that $100 likely two to four percent is going to the various middlemen involved. Again you don’t see that fee but it’s not as if the grocery store is just going to eat that they’re going to have to raise prices to make up for that.
This is just one example once you realize that everything you pay for with a card is going to cost more because of that fact. It certainly loses its luster I think if more people knew or cared about this they demand change because cryptocurrency has shown us that we shouldn’t accept egregious fees on every transaction. As an absolute truth so that’s digital cash in a nutshell.
Understand that the blockchain technology that makes cryptocurrency a reality
There’s way more to it than I can get into here such as consensus algorithms double spend and Byzantine fault tolerance but understand that the blockchain technology that makes cryptocurrency a reality isn’t. Some completely new foreign concept.
It’s the amalgamation of three principal technologies that existed well before Satoshi Nakamoto’s white paper in 2008 those being the internet private key cryptography and a protocol governing incentivization.
Now there are two sub-sectors of digital cash the first are stable coins, these are coins that are backed by an asset and meant to be pegged against a stable currency such as the US dollar.
The most well-known is
but I look forward to coins like
becoming more accessible due to concerns over tethers practices, Potential insolvency.
The second sub-sector is privacy coins these are coins that mask the identities of the parties involved allowing for such transactions to take place outside the purview of the law.
Now not all privacy coins are created equally and some have had issues with bridges and a none amenity but for all intents. Purposes of privacy coins can currently provide the services that they advertise good examples of privacy coins include
For one additional perceived benefit of privacy coins that is not often discussed as that it protects against taxable events normally. There is sales income or other taxes involved in every transaction involving large entities but when the transaction is anonymous and no public record is kept this allows businesses and individuals to operate outside the view of tax-hungry governments.
As I mentioned earlier fiat currency like the US dollar is really backed and valued by the ability of the government to collect taxes without this ability the government loses power. Without power, governments cannot provide the public of adequate services nor maintain the status quo of society.
As such the governments of the world must maintain that coercion the threat of hardship and loss of society. Should taxes fail to be collected it’s definitely an interesting point of contention moving forward for crypto. Especially for privacy-focused coins as they could very well be in the crosshairs of governments desperate to maintain their power.
As an example, Japan is forcing exchanges into de-listing or limiting privacy-focused coins. It’s a little concerning to see and it’s sure to become a trend with more countries which is why I anticipate more exchanges to move to blockchain friendly nations like Malta in the near future.
Smart contracts and Decentralized apps or DAPs
so moving on the next major sector to discuss is platforms specifically those that deal with smart contracts and decentralized apps or DAPs. Now cryptocurrency today is the era of the smart contract while Bitcoin may have shown us that a payment system can exist in a decentralized peer-to-peer environment, which was certainly groundbreaking.
It was the advent of an Ethereum that really moved the whole space forward and closer to mainstream acceptance and adoption Ethereum assured in the era of the second-generation blockchain as people saw the true potential of DAPs.
And smart contracts for those unaware smart contracts were a huge leap forward over what bitcoin introduced us to because smart contracts helped you exchange not only money but property shares or really anything of value.
Importantly it does so in a transparent conflict-free way while avoiding the services and fees of a middleman think of smart contracts like an ATM or vending machine. If you wanted to arrange a contract with someone for business or ownership or whatever you need a lawyer or notary to organize everything.
But with smart contracts, you go up to that ATM or vending machine deposit your cryptocurrency and in return, your contract is automatically given to you what’s cool is that the smart contract automatically has the rules penalties.
Other legalese all defined in the code and the terms are automatically enforced because the code is law. I think there are a lot of people it’s hard to think of the implications of that right now but as an example, you book a flight. You expect to depart at a certain time because otherwise, you might miss your connecting flight at the next airport.
Well if your flight is delayed, since your airline ticket is actually a smart contract you are automatically reimbursed for the delay or miss flight without having to talk to anyone. That’s the future I want to live in the other big piece of these platforms like an Ethereum is that they facilitate the building Decentralized apps or DAPs.
Initial Coin Offering (ICO)
This is where the term ICO comes from or initial coin offering as a lot of AI SEOs are built on top of platforms like an Ethereum. The greater implication of this is that now people don’t have to reinvent the wheel when it comes to the complicated technology of blockchain.
They can utilize the benefits of a distributed ledger without having to explicitly code it this allows them to focus on what they can do with the tech instead leading to the explosion of cryptid projects. We’ve seen over the last year other good examples of these platforms are NEO, CARDANO, and EOS. The thing with these platforms is that user adoption is key over the long term only.
The projects that can attract a critical number of users will survive people won’t want to launch an ICO(Initial Coin Offerings) on a platform that has no users but want to launch to the platform where they can get the most exposure with a few exceptions. The vast majority of blockchain platforms don’t offer clear significant benefits against the established ones which in turn will likely result in a large number of zombie platforms.
And I’m hesitant to invest in anything outside the top 50 in this sector. For that reason now there’s one sub-sector for this platform sector and its one that I’m pretty excited about that sub-sector is interoperability platforms which aim to connect the platform so that value and information move seamlessly between them I think that’s huge. Will become even more of a big deal in the coming years.
Above all are good examples of this with a nod to chain-link for a building. Oracle’s that will help make smart contracts more fluid and data operated by building an Oracle network.
Finance: the major sector in Cryptocurrency
The next major sector in crypto is finance which deals with the operations of money outside simple peer-to-peer transfer as we saw with digital cash overall. This is the biggest sector in crypto but, if you look at it closer it’s really just comprised of six large sub-sectors that each deserve special mention
The first is payments and this is for anything that deals with processing, Merchant services, remittance, payment cards, connecting banks, connecting payment providers and really just anything that is looking to be more efficient than the legacy banking and Payment processing industries.
- OmiseGO (OMG)
is looking to quote bank the unbanked. Any user of OmiseGO will be able to conduct financial transactions such as payments remittances payroll deposit B2B commerce.
Supply chain finance loyalty programs asset management and trading in a decentralized inexpensive way. The thing is that two billion people worldwide do not have a bank account or access to a financial institution via mobile phone or any other device.
Giving people access to a low-cost way to process all these services. I just described is why I believe crypto is here to stay. Projects like OmiseGO are leading that charge other good examples.
A payments sub-sectors are
- Request network(REQ)
The next finance sub-sector are Exchanges the two big types of coins that dominate this sub-sector are exchanged dividend coins like
Another kind of interesting coin in the exchange sub-sector is an exchange interoperability. A utility token with the purpose of facilitating the upcoming liquid platform the intention is to take silos of liquidity which are on individual exchanges. This will ultimately increase the overall liquidity of the cryptocurrency market improving the market.
Encouraging organic growth exchanges will continue to be an important cornerstone of the crypto sphere and I look forward to seeing how they evolve after exchanges.
The next sub-sector in finance is investing these are coins that will help facilitate some aspect of investing through the use of a blockchain for example a polymath enables trillions of dollars of securities to migrate to the blockchain, is another example you could invest in a mutual Allowing you to diversify your risk after investing.
We have the lending sub-sector this sector facilitates lending between parties without having to use a middleman or high-interest lender typically a bank. For example, FL end and ripple credit network facilitate peer-to-peer lending allowing people to lend money in a trustless fashion and for significantly fewer fees while I think this sub-sector does have a lot of promise.
I think this is one of the toughest sub-sectors in crypto to facilitate as people are used to trusting banks for loans despite their high fees next we have the funding sub-sector which facilitates peer-to-peer crowdfunding without large overhead fees.
For example, kik ICO is an ecosystem that allows every participant to benefit. It’s a community-based platform which is used to host fundraising campaigns support rate. Discuss them and purchase their tokens via cryptocurrencies think of this sub-sector as a decentralized Kickstarter or go fund me.
The last sub-sector of Finance is insurance which deals with decentralized insurance payments, claims facilitated through smart contracts. For example, bite ball is building peer-to-peer insurance which allows you to hedge against the negative events without having to deal with an insurance company and their questionable morals.
It allows you to buy insurance from peers in case a negative event occurs or you can sell insurance for profit in this way insurance is just a simple smart contract for instance. This would be a perfect example of how you get reimbursed with a flight delay example from earlier there would be a flight delay Oracle that would be notified the flight delay.
A contract allowing you to be reimbursed, should your flight be delayed okay so those were the major sectors of crypto digital cash smart contract App platforms and finance you should definitely be familiar with these as they comprise easily half of the top 500 coins in some capacity there’s certainly some of the best use cases for blockchain.
I fully anticipate we’ll continue to see them become even bigger when it comes down to it digital cash. Smart contracts and crypto finance are all big improvements over existing systems especially because they all eliminate the need for middlemen, taking fees so as I mentioned this will be a multi-part series because we’ve gotten many more sectors to cover thankfully.
I’ll spend less time covering the subsequent sectors because the ones we discussed in this blog are by far the biggest. Deserve the majority of the attention so thanks for reading.