Types of cryptocurrency

Crypto is not one thing. There are payment coins, smart contract platforms, stablecoins, DeFi tokens, and more. Understanding the difference helps you invest wisely and avoid scams.

1. Payment coins

Purpose: Transfer value. Digital cash. No middleman.

Bitcoin (BTC) - The original. Launched 2009. - 21 million coins maximum (scarcity by design). - Takes 10 minutes to settle transactions. - Used for: Store of value, long-term holding, censorship-resistant savings. - Why Europeans care: Hedge against EUR inflation. No account closure risk.

Litecoin (LTC) - Faster than Bitcoin (2.5 minutes). - Lighter, cheaper fees. - Used for: Faster payments than Bitcoin. Mining with GPUs. - Reality: Rarely used compared to Bitcoin and stablecoins.

Monero (XMR) - Private by default. Untraceable transactions. - Used for: Privacy-focused individuals. Sometimes illegal activity (avoid). - Delisted from most European platforms (regulatory risk).

Dogecoin (DOGE) - Started as a joke (2013). Became real. - No maximum supply. Inflationary. - Used for: Community, tipping, sentiment plays. - Reality: Not a serious store of value.

2. Smart contract platforms

Purpose: Programmable blockchains. Apps run on them.

Ethereum (ETH) - Launched 2015. The most-used smart contract platform. - Supports DeFi, NFTs, DAOs, staking. - Used for: DeFi protocols, trading, building apps. - Why Europeans care: Access to euro loans (Aave), trading, staking pools.

Solana (SOL) - Faster and cheaper than Ethereum. - More centralized (fewer validators). - Used for: NFTs, some DeFi, fast trading. - Reality: Good for developers, less decentralized than Ethereum.

Polkadot (DOT), Cardano (ADA) - Newer alternatives. Academic focus. - Lower adoption than Ethereum. - Used for: Blockchain research, long-term bets. - Reality: Smaller communities, limited real-world use.

Why Ethereum dominates: Network effects. Most developers build there. Largest liquidity pools. Most secure.

3. Stablecoins

Purpose: Hold value stable (usually 1:1 with USD or EUR).

USDC - Backed by USD reserves + US Treasuries. Regulated. - Used for: Inflation hedge, trading pair, freelance payments. - Best for: Europeans. MiCA-compliant.

USDT - Most used stablecoin. Backing less transparent. - Dominates trading volume. - Used for: Trading. Risk of regulatory delisting.

DAI - Decentralized. Backed by crypto collateral. - No issuer. Smart contract governs it. - Used for: DeFi nerds. Censorship hedge.

EURC - Circle’s EUR-backed stablecoin. Coming 2026. - Best for: European native currency exposure.

4. DeFi tokens

Purpose: Governance and access to decentralized finance.

What are they? Tokens that grant voting rights or access to lending/trading protocols.

Examples: - Aave (AAVE): Govern the lending protocol. Earn fees. - Uniswap (UNI): Govern the decentralized exchange. Earn from trades. - Curve (CRV): Govern the stablecoin trading pool. Earn rewards.

Reality: Mostly for sophisticated users. Requires understanding smart contract risks.

5. Utility tokens

Purpose: Access services on a blockchain.

Chia (XCH): Farming protocol. Proof-of-space mining.

Filecoin (FIL): Store files on decentralized network. Pay in FIL.

Reality: Niche use cases. Most fail to gain real adoption.

6. Governance tokens

Purpose: Decentralized decision-making.

Examples: Uniswap (UNI), Compound (COMP), Aave (AAVE).

How it works: Token holders vote on protocol changes, fee splits, treasury spending.

Risk: Whales (large holders) control voting. Not truly democratic.

7. Memecoins

Purpose: Community, humor, speculation.

Dogecoin (DOGE): The original. Has actual adoption (tipping, community).

Shiba Inu (SHIB): Copy of Doge. Minimal real use.

Various new ones: Launch weekly. 99% fail.

Reality: High risk. Entertainment value only. Avoid unless you can afford to lose everything.

Cryptocurrency comparison table

How to evaluate a cryptocurrency

Ask these questions:

1. Does it solve a real problem? Bitcoin = censorship-resistant money. Ethereum = global compute. Memecoins = no.

2. Is there real adoption? BTC: €50B annual transaction volume. SHIB: mostly speculation.

3. Who runs it? Centralized (ripple-controlled XRP) = regulatory risk. Decentralized (Bitcoin, Ethereum) = secure but slow.

4. Is it transparent? Bitcoin code is open-source. Tether reserves are opaque.

5. Can it fail? All can. But Bitcoin has 15-year track record. New tokens fail constantly.

6. What’s the supply? Fixed (Bitcoin) = scarcity. Unlimited (Dogecoin) = inflation risk.

7. Who owns most of it? If 50% is held by 10 people, it’s a rug pull risk.

Bitwala’s crypto focus

Bitwala supports Bitcoin, Ethereum, and USDC.

Why BTC first? It’s the most secure and oldest. Store of value.

Why ETH? Access to DeFi, staking, smart contracts.

Why USDC? Bridge to euro world. Stable. MiCA-compliant.

Why not others? We focus on real adoption and user security. Speculative coins = risk.

Common mistakes

• Buying shiny new coins (99% fail)

• Confusing market cap with price (see section on market cap)

• Holding coins on exchanges (use self-custody)

• Ignoring team and code (marketing ≠ substance)

• FOMO buying after 10x gains (often precedes crash)

FAQ

Which crypto should I buy first? Bitcoin or Ethereum. Proven track records. High liquidity. Then USDC for stability.

Is all crypto a scam? No. Bitcoin and Ethereum have real use. Many newer coins are scams. Do research.

Can I get rich quick with crypto? Possible but unlikely. Most people buy after gains and sell after losses.

Is decentralized always better? For censorship resistance, yes. For speed and cost, centralized systems (PayPal, Visa) are better. Crypto is a tradeoff.

What about NFTs? Tokens that represent unique digital assets. Mostly speculative (digital art, gaming). Not a core investment.

Disclaimer: Cryptocurrency is volatile and risky. Different types carry different risks (smart contracts can be hacked; stablecoins can depeg; new tokens fail). Never invest more than you can afford to lose. Not financial advice. Do your own research before buying. Bitwala prioritizes security and real adoption.

Last updated: April 2026. Information reflects current market conditions.