Different Types Of Cryptocurrencies And Their Uses
Cryptocurrency is a digital form of currency that most people in Canada can use as an investment. The investor exchanges their own money for a version of the cryptocurrency at the rate stated by the worth of the currency.
One reason for this is because the value of cryptocurrency can rise alongside its place on the stock market, rather than the effects of economic inflation.
The second reason is because you cannot use cryptocurrency as legal tender in Canada. It is still legal to own it as an investment, but there is no way to purchase goods and services with a digital currency in this country.
However, there is a lot more to cryptocurrency than you may think. There are so many different types that it can be hard to navigate the world of online cryptocurrency without some help. Let’s look at some of the most recognisable cryptocurrency options and how they can be used.
Why Do People Invest In Cryptocurrencies?
The main reason why people choose to invest in a cryptocurrency over something else is because of the block chain. This block chain keeps a running track of where the cryptocurrency is, what it has been used on and its current worth.
This means that your cryptocurrency can be safely stored. If it stolen, the developers of the currency can find the perpetrator and block any transactions or further investments.
Also, cryptocurrency is not tied to the economy. This means that its worth will not shift in the event of an economic crash or inflation. Cryptocurrency can be stored away for the future without the risk of it losing its value. When it comes time to cash in, you can then sell your currency on for more real world money than what you originally invested. That is the plan anyway.
The cryptocurrency market is fickle, and not every investment will allow you to reap the rewards. So, what types of cryptocurrencies are there?
The grandad of all cryptocurrency is Bitcoin. This version was the first cryptocurrency to hit the market back in 2009 and it is still going strong. The idea behind this currency was that it could be used independently from banks and other government controlled currencies to try avoid the pitfalls of those establishments.
Bitcoin set the stage for every cryptocurrency that followed, including the introduction of block chain transactions and crypto wallets. A block chain represents a security benefit of the currency. Each bit of digital data is imbued with a code that can be traced whenever it is used.
A crypto wallet is an app that allows the owner of the bitcoin to monitor their transactions and watch its progress on the stock market. For more a more detailed representation, check out Wealth Simple to find bitcoin wallets in Canada.
People choose to invest in Bitcoin as it is the most successful example of a cryptocurrency. Therefore, there is some reliability there for new investors. However, since its inception the market has been flooded with copycats and innovators. Do any of these hold a candle to the original?
Dogecoin is considered by experts to be the rebel of the cryptocurrency family. It was released a full four years after Bitcoin and was mainly introduced to the market as a joke alternative. The owners of Dogecoin wanted to show how they felt about the introduction of a new type of currency by copying the process of Bitcoin in an attempt to point out how ludicrous the system was.
In a strange twist of fate, Dogecoin suddenly became the second most popular form of cryptocurrency in a very short time. As such, the owners decided to play ball and introduced the block chain and crypto wallet parts of the process. As a result, Dogecoin became a solid choice of cryptocurrency in its own right.
The main difference between Bitcoin and Dogecoin is that Bitcoin comes with a cap of 21 million bits per customer. However, Dogecoin does not have a cap, which means that you can invest as much money you want into Dogecoin.
The next legitimate form of cryptocurrency to garner the attention of the general public was Etherum.
Etherum works very much like the Bitcoin currency did before it; however, its method of introducing a block chain was a swerve away from the normal process. Its’ block chain still keeps a log of every transaction made with the currency, but some investors are allowed to publish their own forms of the currency.
As a result, Etherum saw the first non-fungible tokens released in 2019. The non-fungible tokens, or NFT’s are bits of digital art or decals that can be traded as a form of currency. This form of cryptocurrency becomes a little harder to quantify as NFT’s are still a fairly new introduction to the market, but it seems that this is the natural evolution of cryptocurrency. NFT’s are slowly growing popularity, even though their introduction was scoffed at like cryptocurrency was in in its infancy. Now look at where that is.
If you want to invest in a cryptocurrency that is shaping the future, and be a little forward-thinking, then Etherum is the way to go.
Litecoin is often considered to be the younger brother of Bitcoin. This form of cryptocurrency does everything that Bitcoin does, with the added advantage of hitting the market later.
This introduction delay has allowed the developers of Litecoin to monitor the success of Bitcoin and discover where it has succeeded and where certain tweaks to the formula need to be made. As such, Litecoin has improved the speeds of its block chain to work twice as fast as Bitcoin. That means transactions and investments are so much quicker. Other than that, though, there is no real advantage of Litecoin over Bitcoin.
If a higher speed is enough to tempt you into an investment, then perhaps Litecoin is the cryptocurrency for you. However, everyone else is probably better off with a bitcoin wallet.
Polkadot is a cryptocurrency that was developed by one of the founders of Etherum. If Etherum is so successful, then why would they need to create a new type of cryptocurrency?
The main draw of Polkadot is that it runs on not one, but two block chains. One of these chains is the standard, permanent chain that tracks every transaction made using the currency, while the second can be manipulated by the buyer.
This malleable chain allows the user to customise their chain to work alongside other currencies, and therein lies the beauty of Polkadot. This cryptocurrency works as a supplement to other forms to allow the investors to exchange currencies across different wallets.
Polkadot is a form of cryptocurrency that should only be used by experts. One block chain is enough for most casual users to wrap their heads around, add another to the mix and it gets far more confusing.
The XRP brand of cryptocurrency is the most popular form of crypto that does run on a block chain. The developers of XRP are known as Ripple Labs, a global finance company that mainly focus on money transfers.
That is why the currency can run using the developers own verification system, which makes transactions with XRP quicker and less costly. However, the one downside that comes with XRP is that all investors are capped as there are only one hundred billion units of XRP on the digital market.
Therefore, XRP is a limited resource perfect for anyone that only wants to dip their toe in to the cryptocurrency market.
Which Cryptocurrency Is Best Used In Canada
All of the cryptocurrencies mentioned in this article are global entities that can be used and exchanged in accordance with the crypto laws of each country. Canada has very strict laws on cryptocurrency and does not accept it as legal tender in any circumstance. As such, the Canadian public are forced to only use cryptocurrency as an investment opportunity.
Therefore, it isn’t wise to invest in any cryptocurrencies that offer benefits for those that wish to make transactions. This rules out XRP, Polkadot and Etherum straight away. There is no need to worry about the types of block chain that they utilise.
Dogecoin is a good option, but it isn’t likely to reach the investment potential of other types of cryptocurrency due to its origins. That leaves just Bitcoin and Litecoin as possible contenders for Canadians. However, there are dozens of other smaller crypto currencies out there and even more on the way. Each one fills a niche in the market, so it worth doing some research into what type of cryptocurrency suits your needs.
This article has looked at some of the more popular forms of cryptocurrency, and what makes them so tempting for investors.
Of course, things are different for those who live in Canada. The crypto market is strong, but it is more for the prudent investor. Make sure you do as much research as possible before you invest in any digital currency, and be safe while making purchases online.