The first type of cryptocurrency ever existed was Bitcoin, a decentralized electronic payment system for settling payments on a peer-to-peer network. Developers managed to launch other cryptocurrencies in the thousands after Bitcoin to solve an existing problem in Bitcoin or provide other services different from it. Hence, various types of cryptocurrencies were born.
Cryptocurrencies types may be classified according to their network architecture, the sector they influence, the role and function they play, or the purpose they serve.
Bitcoin, for example, is classified as a layer one network or a payment system for settling transactions. Others are classified as layer 2s, DeFi, NFTs, Metaverse, etc. In this article, we attempt to classify the top 100 coins and tokens accordingly.
Layer one is a cryptocurrency running its own network and blockchain and uses its native coin to process and finalize transactions on its own network. A distinction can be made between a coin and a token from the previous statement. Tokens operate on someone else blockchain and network, while coins operate on their own blockchain and network. Therefore, all layer 1s cryptocurrencies are coins and not tokens.
It is essential to understand that all cryptocurrencies, whether coins or tokens, can theoretically be used to settle transactions, just like bitcoin, as long as the coin or token in question is accepted as payment by others. Settling a crypto transaction could happen on that crypto’s own blockchain and network, or it could occur on an existing blockchain and network.
Crypto-based payment systems use their network and blockchain to settle transactions and are designed for one purpose only, which is payment settlements. These layer 1s or coins that serve one purpose only, which is payment settlement, include:
- Ripple XRP
- Shiba Inu
- Bitcoin Cash
Other layer 1s cryptocurrencies are multifunctional, serving another prime purpose other than payment settlement. These types of cryptocurrency layer 1s have smart contact functionality enabled. Smart contacts are pre-programmable codes that self execute when specific conditions are met. They allow developers to build decentralized applications on an existing network and blockchain. These layer ones from the top 100 cryptocurrencies include:
- Near protocol
- Klaytn network
- Internet computer
Layer 2 protocols
Layer 2 crypto projects are protocols that primarily help layer 1s scale their network to process more transactions per second and use the security and consensus mechanism of layer 1s. The two notable layer 2s from the top 100 crypto-list are:
- Polygon (Matic)
Stablecoins are a type of cryptocurrency allowing users to convert their digital assets to real-world assets. They act as a monetary bridge that connects digital assets such as cryptocurrencies with physical assets such as traditional money and commodities. They are normally pegged to reserve assets such as the US dollar and gold at one to one ratio.
For example, a stablecoin pegged to the dollar will always equal one dollar. Some stablecoins are pegged to commodity reserves such as gold, and others maintain their peg using other cryptocurrencies.
Stablecoin has many different types. They include fiat-backed, commodity-backed, crypto-backed, multi-asset backed, and algorithmic stablecoins. For more info read, understanding stablecoins.
Stablecoin from the top 100 coins and tokens include:
- Tether (USDT) Fiat backed
- USD Coin (USDC) Fiat backed
- Terra USD (UST) Algorithmic
- Dai (DAI) Crypto-backed
- Neutrino USD USDN algorithmic crypto-backed
- Pax Dollar USDP gold-backed
Play-to-Earn (P2E) or GameFi is a new gaming model where gamers can earn cryptocurrencies and NFTs by playing a crypto-based game. Players receive cryptocurrency for achievements or collect NFT cards and then sell them on the market.
The most popular and valuable game today is Axie Infinity (AXS). It is the only game ranked on the top 100 list.
Decentralized finance (DeFi) is a set of specialized financial applications powered by smart contacts, peer-to-peer networks, and blockchain technology. It is founded on the premise of financial inclusion, where anyone can participate without needing permission and revealing sensitive personal information.
The main idea of DeFi is to replicate traditional financial products while creating an independent, permissionless, and transparent financial ecosystem on the blockchain without a central authority, regulatory body, or human interference. For more details read, what is DeFi?
There are many Defi applications in various financial sectors. We rank them according to their sector:
Lending and borrowing
- Avalanche (AVAX)
- Aave (AAVE)
- Compound (COMP)
- Anchor Protocol (ANC)
- THORChain (RUNE)
- Uniswap (UNI)
- PancakeSwap (CAKE)
- Wrapped Bitcoin
DAO and governance
- Maker (DAO)
- Curve DAO (Token CRV)
- Yearn.finance (YFI)
Data storage crypto projects store user data in a decentralized way without the need for a centralized authority to manage and control the storage process. The only three storage coins that have made to the top 100 list are:
- Filecoin (FIL)
- Holo (HOT)
- Arweave (AR)
NFTs stand for nonfungible tokens, tokens that prove the ownership of specific and unique digital assets such as images and music tracks or an in-game item. While cryptocurrencies under this category are not NFTs in them selfs, they offer services that may facilitate the minting, storage, and trading of these digital assets. For more info read: what are NFTs?
Enjin Coin (ENJ)
Centralized crypto exchanges
Centralized Crypto exchanges as the name implies are centralized entities that operate a trading platform designed for cryptocurrencies. The management and administration lie on the shoulders of a single organization that acts as an intermediary between traders: buyers and sellers. People who sign up for such exchanges hand the control of their personal information, wallets, and funds over to the exchange.
- Binance (BNB)
- Cronos (CRO)
- FTX (FTT)
- UNUS SED LEO
- Huobi Token (HT)
The term metaverse consists of two parts: the prefix Meta, a Greek word meaning beyond or after, and the suffix verse, short for the universe. Hence, the metaverse comes to mean the universe beyond the material world. A metaverse is a place where the physical and virtual world converge through technological advances such as the internet and extended reality (ER).
Many crypto projects could be classified under this category and other categories could overlap with it such as NFTs and P2E games. The following are the top metaverse or virtual places where people could buy land and wonder in the metaverse:
- The Sandbox
- Axie Infinity AXS (gaming metaverse)
Chainlink is the largest oracle by market capitalization and the only one claiming one of the top 100 cryptocurrencies. According to Chainlink, “blockchain oracles are entities that connect blockchains to external systems, thereby enabling smart contracts to execute based upon inputs and outputs from the real world”.
The basic idea of an interoperable crypto project is allowing blockchain-based crypto projects to communicate with one another and exchange data such as digital assets without an intermediary. The two largest interoperable crypto projects are:
- Quant (QNT)
- Cosmos (ATOM)