There are a ton of different blockchains out there. Bitcoin is the one everyone knows because it started it all(not exactly, BitGold and others tried and failed before Satoshi built on their work), but not every altcoin aims to be like BTC. There are many use cases for blockchain technology, resulting in the many distinct networks we have now. Some cryptos referenced in this article are so different in function that they can hardly be compared, other than their underlying infrastructure. I’ll be breaking down different generalized types of cryptocurrencies and giving examples of each here.

First, a few important points:

• this list is not comprehensive
• many cryptos belong to more than one group
• some classifications may be up for debate

Store Of Value

Bitcoin (BTC), Bitcoin forks (BSV, ... ), Litecoin (LTC), Terra (RIP)

I’m sure you’ve heard someone refer to Bitcoin as ‘digital gold’ before. Bitcoin is the first ever scarce digital object, and it was born from the 2008 financial crisis. Fiat currencies such as the US dollar lose some value to inflation every single year. Store of value cryptos strive to be a solution to that problem. BTC has a maximum supply, unlike fiat; this makes it scarce. Scarcity limits supply, so as adoption and usage increase the demand, the price can theoretically only go in one direction. The same concept applies to precious metals: if you have a limited resource with intrinsic value, it will appreciate. This is one of the most subjective categories, as really any crypto should act as a store of value.

Smart Contract Layer 1

Ethereum (ETH), Solana (SOL), Secret Network (SCRT), Cardano (ADA), Avalanche (AVAX)

Smart contract cryptocurrencies are an entire ecosystem. A smart contract is simply a protocol set to execute some predetermined action when requirements are met; this can mean sending a token to a wallet when a specific amount of ETH is received from that wallet. It acts as the intermediary, escrow, or authority between two parties; this allows decentralized ecosystems to exist, where you don’t need to trust the other party OR some central authority that wants to take a cut as the middle man – you only have to trust a computer protocol that is ideally open-source and audited. In short, a smart contract is a digital vending machine.

Ethereum is the first of its kind and the largest, and while many others in this category are direct copies, some are innovators of their own. Smart contract cryptos act as networks for these protocols to operate on.

Smart Contract Layer 2

Polygon Matic (MATIC), Loopring (LRC), Immutable X (IMX), Optimism (OP)

Layer 2s are extensions of a Layer 1. For example, Loopring is a Layer 2 for Ethereum and only Ethereum; Layer 2s are built on top of a specific Layer 1 and work exclusively with it. Layer 2s exist to improve upon speed, efficiency, accessibility, or some other feature of its underlying Layer 1. If they can improve all these features, why not just create your own network as a competitor? Well Layer 2s can still utilize all the advantages of their network such as security, existing user-base, and established connections. Layer 2s take many forms and don’t all aim to improve networks in the same way. I won’t get into the technologies that Layer 2s use here, but it mostly consists of running a parallel blockchain that periodically sends ‘compressed’ blocks to the main chain for validation.

Interoperability

Cosmos (ATOM), Polkadot (DOT), Avalanche (AVAX), Thorchain (RUNE)

These projects focus on interoperability between different networks/blockchains. This is extremely important because implementation is limited if a service exists in a silo. Polkadot is like a Layer 0, where parachains(L1’s) can be built on top of DOTs infrastructure. Cosmos has many similarities to DOT, but there are distinctions within governance, communication between chains, and consensus. AVAX is an independent EVM compatible chain, but it offers very flexible combinations of its (or ETH’s) features to be used in the creation of a new network; why would you want to create (and maintain) an entire blockchain from scratch if you’re only using it for a specific use-case?

Infrastructure

Helium (HNT), Arweave (AR), Filecoin, Boring Protocol (BOP)

Services we’re all familiar with, but using a decentralized model instead of the centralized ones we know. Helium provides internet for IoT devices. Smart fridges, parking meters, dog tracking collars, and many more devices use the internet. Arweave provides immutable data storage; Solana uses AR to store data for its network. Boring Protocol is a decentralized VPN service. The tokens themselves have some type of utility within their respective networks and are often required to use the services; sometimes the tokens are also payment for supporting the ecosystem, similar to mining rewards.

Oracle

Chainlink (LINK), Band Protocol (BAND)

Oracle cryptos act as just that, an oracle! They make real world information available to smart contracts (the date, the price of something, the weather, the outcome of an NBA game). This is different from an API because the data feeds are decentralized.

Privacy

Monero (XMR), Haven (XHV), Secret Network (SCRT)

Blockchains are public ledgers. Everyone can see everything that’s happening. Anyone can go check the activity of a specific wallet address, or how much crypto it holds. This is not ideal in every situation, so some projects set out to preserve your privacy and keep this vital information from the blockchain. Privacy coins use various technologies to maintain a secure, decentralized blockchain of transactions without exposing sender addresses, recipient addresses, or even the amount of transactions. See my for Monero article more details on some of the technologies used – truly cool stuff.

Payment

Stellar (XLM), Nano (XNO) , Monero (XMR), Bitcoin (BTC)

This was one of the first use-cases of cryptos in general. Sure any coin can be used to pay someone, but some are simply not practical. To improve on established payment methods, these coins allow for instant transfers (no more 3-5 business day waits to get your money), low or no fees (Western Union’s business model is currency exchange fees for people sending money to other countries), and permission-less actions (no more needing to be approved by an institution to bank with them – be your own bank instead). Nano is also a completely green project, allowing it to scale without requiring more computing power. Check out some more about what makes Nano unique in my article here.

Meme

Doge (DOGE), Shiba Inu (SHIB), Banano (BAN)

Hype, pump & dumps, and scams. With the rare project that may survive. Please please please look at the market cap of these, not the coin price, when you’re looking at these. These coins are mostly made for fun (and without utility) if not to scam you, but hey they often have fun, tight-knit communities.

Other Categories To Check out

• Exchange tokens (SUSHI from SushiSwap, RUNE from Thorchain)
• Stablecoins (USDC from Circle, xUSD from Haven, algorithmic stables )
• CBDCs (hoping these never exist so I don’t have to list any here)