Why are there so many kinds of cryptocurrency?

 

Why are there so many kinds of cryptocurrency?

It’s important to remember that Bitcoin is different from cryptocurrency in general. While Bitcoin is the first and most valuable cryptocurrency, the market is large.

More than 22,000 different cryptocurrencies are traded publicly, according to CoinMarketCap.com, a market research website. And while some cryptocurrencies have total market valuations in the hundreds of billions of dollars, others are obscure and essentially worthless.

If you’re thinking about getting into cryptocurrency, it can be helpful to start with one that is commonly traded and relatively well established in the market.

NerdWallet has created guides to some widely circulated cryptocurrencies, including Bitcoin and some altcoins, or Bitcoin alternatives:

• Bitcoin is the first and most valuable cryptocurrency.

• Ethereum is commonly used to carry out financial transactions more complex than those supported by Bitcoin.

• Cardano is a competitor to Ethereum led by one of its co-founders.

• Litecoin is an adaptation of Bitcoin intended to make payments easier.

• Solana is another competitor to Ethereum that emphasizes speed and cost-effectiveness.

• Dogecoin began as a joke but has grown to be among the most valuable cryptocurrencies.

• Shiba Inu is another dog-themed token with more complex mechanics.

• Stablecoins including Tether and USDC are a class of cryptocurrencies whose values are designed to stay stable relative to real-world assets such as the dollar.

» Learn more: How to invest in Bitcoin

Thoughtfully selecting your cryptocurrency, however, is no guarantee of success in such a volatile space. Sometimes, an issue in the deeply interconnected crypto industry can spill out and have broad implications on asset values.

For instance, in November of 2022 the market took a major hit as the cryptocurrency exchange FTX struggled to deal with liquidity issues amid a spike in withdrawals. As the fallout spread, cryptocurrencies both large and small saw their values plummet.