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5 types of cryptocurrency you should know about

5 types of cryptocurrency you should know about
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You might have only heard of Bitcoin, but there are actually many different types of cryptocurrency. There are a number of digital assets making up the rest of the cryptocurrency market.

Calling all investors…

The tax year ends on 6th April – which means there’s still time to invest up to £20,000 tax-free with a stocks and shares ISA.

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Keep in mind that tax rules can change, and the value of any benefits depends on your personal circumstances.

Let’s take a look at five different cryptocurrencies that are worth having on your radar.

Types of cryptocurrency

Before diving in, it’s worth just explaining a few things. Cryptocurrency can be a pretty complex topic if you’re not a computer programmer.

A key thing to remember is that most cryptocurrencies are designed to be used as digital tokens on specific networks.

Although there are competing types of cryptocurrency, their price is just one small aspect. The companies, organisations, and foundations behind these technologies are mostly trying to create useful digital networks and marketplaces, not just coins for trading on the Internet.

Here are five important cryptocurrencies that you should know about.

1. Ethereum (ETH)

Ether (ETH) is the cryptocurrency used in the Ethereum network. It is the second-largest cryptocurrency on the market and Bitcoin’s biggest rival. The name of the platform and the programming language is Ethereum.

Ethereum is the creation of programmer Vitalik Buterin, among others, and it went live in 2015. It uses blockchain and is open-source but it’s more sophisticated than Bitcoin in its design.

The idea is for Ethereum to be used for smart contracts and distributed applications (DApps). This may sound complicated but basically, it just means creating ways for different parties to interact and do business in an efficient and secure way.

Many cryptocurrencies available actually run on the Ethereum network. Ether’s price is up over 90% since the beginning of the year, and it’s currently sitting around $1,400. This is a price similar to highs it reached back in 2018.

2. Cardano (ADA)

Launched in 2015 by a co-founder of Ethereum, Charles Hoskinson, Cardano and its token ADA are also for use with smart contracts and DApps. You can think of it as a competitor to Ethereum. Indeed, ADA is a similar type of cryptocurrency to ETH.

It’s interesting because it’s the only blockchain that’s peer-reviewed and developed by academic experts in the field. The Cardano team are dead-set on changing the world, not just making money from the ADA token.

Looking to invest for the future this ISA season?

The ISA deadline is approaching so if you’ve not yet made the most of this year’s allowance, time is of the essence.

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Keep in mind that tax rules can change, and the value of any benefits depends on your personal circumstances.

3. Litecoin (LTC)

Designed to be an improvement on Bitcoin, Litecoin aims to become a global payment network. Launched in 2011 by Charlie Lee, this is a payment-oriented type of cryptocurrency. If Bitcoin is digital gold, the hope for Litecoin is to become digital silver.

Litecoin’s programming structure makes it faster and easier to acquire than Bitcoin. The idea is to use this altcoin for smaller transactions and it has a coin limit almost four times higher than Bitcoin.

Litecoin’s price has seen positive movement of over 28% this year, up to around $150 per coin, but it’s still way off its highest ever valuation of just over $350.

4. Stellar Lumens (XLM)

This is an open network focusing on the movement and storage of money. Stellar uses a cryptocurrency token called Lumens (XLM). This is another financial type of cryptocurrency. However, rather than being aimed at individuals, Stellar’s aim is to use their XLM cryptocurrency to make it easier and cheaper for institutions to be able to trade things like assets across borders.

The aim of the network is to work alongside fiat currency (regular money) and not replace it. Their ambitious goal is to make global markets more fluid, open and less congested than they are today.

The price of the XLM token has shot up by over 130% this year to $0.31. Like many others, it’s still way off its highest price, which was $0.87.

5. IOTA (IOTA)

Launched in 2016, the IOTA Foundation’s main goal is to power the Internet of Things (IoT) using their IOTA cryptocurrency. This just means machine-to-machine transactions. Instead of blockchain, IOTA uses a technology known as Tangle. Most blockchains have issues with speed and scalability, so this is a different approach.

If there are too many transactions, blockchains can get clogged up. IOTA’s Tangle design allows it to become faster with more users. And because there are no miners, there are no transaction fees. This makes it potentially really useful for networks with lots of small transactions.

The IOTA Foundation has already partnered up with massive car manufacturers like Jaguar Land Rover and even cities like Taipei in Taiwan.

IOTA’s price has seen a really positive upswing of over 60% this year to $0.48. But this is still way off its highest price of $5.25, so there is perhaps plenty of room for the price to expand again.

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