There are over 10 000 cryptocurrencies out there in the Crypto Market, and about five new ones are created every week. Some of these cryptos are junk with no use cases and are referred to as shitcoins. Some others are outright scams to defraud innocent investors of their capital. The Secondary SOC discusses them in detail.
If you desire to make financial fortunes in the Crypto Market, you should be knowledgeable about the various cryptocurrencies and how to invest in them. To help your understanding, the SOC has grouped all the cryptos into six classes.
Lecture 1.0.0. The Six Classes of Cryptocurrencies
All the cryptocurrencies can be divided into 6 classes:
(1). Tradocoins
These are the traditional cryptocurrencies. They are mostly the cryptocurrencies that use the Proof of Work (POW) algorithm as their consensus mechanism. They require the usage of ASIC machines and a huge consumption of electricity for mining. See the Modules of Class 2 in the Secondary School of Cryptocurrencies.
Examples of tradocoins are Bitcoin, Bitcoin Cash, Bitcoin SV, Bitcoin Vault, Electric Cash, Litecoin, etc.
(2). Smartcoins
These are cryptocurrencies that are smart contract compatible. That is, their blockchains are smartchains that have the ability to run smart contracts. Smartcoins often utilise the Proof of Stake (POS) algorithm or its modified forms such as the Proof of Authority (POA) algorithm as their consensus mechanism.
As such, smartcoins are cryptos that can be staked to mint new coins or tokens. Examples are Cardano, Binance coin, Solana, Polygon, Polkadot, etc.
(3). Stablecoins
These are cryptocurrencies that are backed by other currencies or commodities. There are four different types of stablecoins:
(a). Fiat-backed Stablecoins:
These are the cryptocurrencies that are backed by fiat currencies such as the USD. Examples are USDT, USDC, TUSD, BUSD, etc.
(b). Commodity-backed Stablecoins:
These are the cryptocurrencies that are backed by commodities such as gold. An example is Gold Secured Cryptocurrency (GSX).
(c). Cryptocurrency-backed Stablecoins:
These are the cryptocurrencies that are backed by other cryptocurrencies such as Ethereum. An example is Virtual Gold, which is backed by Ethereum.
(d). Algorithm-backed Stablecoins:
These are stablecoins that are neither fiat backed, commodity-backed, nor crypto-backed. They are purely algorithmic, relying on market forces of supply and demand to maintain their stable price. That is, they adjust their prices depending on the market movements. An example is Super Algorithmic Token (SATO).
(4). Memecoins
Memecoins are cryptos that have been created to mimic a popular character, often with no defined use case other than the mimicry.
A meme is an idea, behaviour, or style that spreads by means of imitation from person to person within a culture. The term meme is a shortening of mimeme, which comes from the Greek term mīmēma, meaning “imitated thing.” Often, a meme carries a symbol (mascot) to represent what it tries to imitate.
In the Crypto Market, a crypto can be created to imitate popular behaviour or character. The picture of the dog Shiba Inu (nicknamed “Shibe”) has been a delight on the internet by many dog admirers.
In 2013, software engineers Billy Markus and Jackson Palmer, decided to create a payment system to make fun of the young Crypto Market. They decided to use the face of the Shiba Inu dog as the symbol of their coin, which adopted the name Doge, a slang for dog, thus, marking the birth of Dogecoin.
Therefore, Dogecoin is a memecoin created as a joke of Bitcoin. But what appeared as a joke has now gone viral in the Crypto Market. Indeed, after Dogecoin was created, a number of other memecoins, more than a thousand, have now appeared in the Crypto Market, and more will still be created.
Popular examples of memecoins are Pandainu, Shibainu, Safemoon, Safemars, Elongate, NFTArts, etc.
(5). Nonfungicoins
These are the non-fungible tokens (NFT). In simple language, an NFT is a digital asset that represents real-world objects like art, music, in-game items and videos. So instead of getting an actual oil painting to hang on the wall, the buyer of NFT gets a digital file instead.
Examples include CryptoPunk, CryptoKitties, CryptoDads, MILF Mama, etc.
(6). Gamecoins
These are cryptos that have been created for digital gaming. A digital game is an interactive virtual game that is powered by the internet. To access such games, tokens can be minted on blockchains for the purpose. Such tokens are the gamecoins.
Gamecoins are the newest class of cryptos and are rapidly spreading in the Crypto Market. Examples include CasinoCoin, GameFi, BNBGold, Gamestarter, etc.
(7). Atifcoins
These are coins that have been created to power artificial intelligence (AI) works and big data projects, most of which are now coming into the Crypto Market.
They are growing in popularity and gaining good market penetration. The market capitalisation of AI and big data projects in the crypto industry was over 20 billion USD and 7 billion USD for generative AI as at January 2024. The total daily trading volume for Atifcoins in January 2024 was about 3 billion USD (CMC, 2024; CMCap, 2024).
These are expected to grow exponentially in the coming years as artificial intelligence and big data technologies deepen.
In Summary:
Remember the Seven Classes of Cryptos – Tradocoins, Smartcoins, Stablecoins, Memecoins, Nonfungicoins, Gamecoins, and Atifcoins. Having this information will help you to organize and build your Crypto Portfolio as discussed below.