TAXAJ

CryptoCurrency

A cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of exchange that uses strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets. A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation.

Internet based

Cryptocurrency is an internet-based medium of exchange which uses crypto-graphical functions to conduct financial transactions. Cryptos leverage blockchain technology to gain decentralisation, transparency, and immutability.

Decentralized

The most important feature of a cryptocurrency is that it is not controlled by any central authority: the decentralised nature of the blockchain makes crypto currencies theoretically immune to the old ways of govt control and interference.

No Institutions

Cryptocurrencies can be sent directly between two parties via the use of private and public keys.  These transfers can be done with minimal processing fees, allowing users to avoid the steep fees charged by traditional financial institutions.

"There are now more than 3000 cryptocurrencies in existence, with each falling into one of the three major categories: altcoins, tokens, and Bitcoins"

In this article, we will explain the differences between these cryptocurrencies. We will also look at some of the common subtypes used for cryptocurrencies, such as ‘stablecoins’ and ‘privacy coins’. 

After reading this, you should have a good understanding of all the major  types of crypto and be able to differentiate between them easily. Let’s get started!

The three main types of cryptocurrency

Bitcoin

Bitcoin (BTC) was the first cryptocurrency to be created and remains the world’s leading cryptocurrency by market cap. Bitcoin is a global peer-to-peer electronic payment system that allows parties to transact directly with each other without the need for an intermediary or institution such as a government or any bank.

The Bitcoin whitepaper, which outlined how this revolutionary new currency would work, was released in 2008, and the Bitcoin network launched in 2009. Since its launch Bitcoin has experienced no downtime, allowing anyone to transfer value at any time and from anywhere. The transaction time has also improved a lot in recent years.

Bitcoin’s creator goes by the pseudonym Satoshi Nakamoto, their real identity remains unknown to this day. It is also unclear whether Nakamoto represents a single person or a group of individuals who worked on the Bitcoin project.

Bitcoin is often regarded as the digital alternative to both fiat currencies and gold. That is because Bitcoin can be spent and saved just like traditional money, but is also a scarce finite resource and thus good store of value like gold.

Altcoins

The release of Bitcoin and its open-source code in 2008 paved the way for thousands of other cryptocurrencies to be created. These new coins have been dubbed ‘alternative coins’ or ‘altcoins’ as they are alternatives to Bitcoin

While some do serve a similar purpose to Bitcoin, other cryptocurrency types  such as altcoins actually encompass a wide range of different uses. For example, Ethereum (ETH), the world’s first programmable blockchain, enables developers to build and deploy decentralised applications (DApps) and smart contracts. 

IOTA is specifically designed to be a new data transfer and transaction settlement layer for the machine economy and the Internet of Things (IoT).

IOTA also uses its own proprietary distributed ledger technology called the Tangle. 

Litecoin (LTC) is a peer-to-peer currency and global payment network similar to Bitcoin. In fact, Litecoin’s creator Charlie Lee states that his intention was for Litecoin to be a complementary cryptocurrency to Bitcoin.

Like Bitcoin, all altcoins are able to operate independently on their own networks utilising distributed ledger technology (DLT). The most famous and commonly used type of DLT is blockchain technology, which was introduced to the world by Satoshi Nakamoto via Bitcoin. While all coins use DLT, variations in the underlying code of each protocol are what gives altcoins their own unique attributes.

There are at least 856 altcoins in existence according to data from CoinMarketCap, and the top 5 altcoins by market cap are Ethereum, Ripple (XRP), Bitcoin Cash (BCH), Litecoin, and EOS.IO (EOS).

Tokens

Unlike Bitcoin and Altcoins, tokens are not able to operate independently and are dependent on the network of another cryptocurrency. That means they do not have their own underlying DLT or blockchain, but instead, are built on top of an existing cryptocurrency’s blockchain.

Data from CoinMarketCap shows that there are at least 1496 tokens in existence, which are deployed on the blockchain platforms of 24 cryptocurrencies. Some prominent examples of different types of cryptocurrencies that host tokens include:

  • Ethereum - The Ethereum platform has by far the most tokens deployed on it. Tokens that run on Ethereum include Basic Attention Token (BAT), Chainlink (LINK), Huobi Token (HT), USD Coin (USDC), and hundreds of others.

  • Omni - Tether (USDT), the leading stablecoin and world’s most traded cryptocurrency, is a token that is deployed on Omni, along with three other tokens.

  • NEO - NEO is often referred to as the Chinese rival to Ethereum, and as a platform for smart contracts and DApps, it has many tokens deployed on it. Top examples of NEO tokens include Nash Exchange (NEX) and Gas (GAS).

  • TRON - As a leading platform for DApps, TRON has numerous tokens deployed on it, including BitTorrent Token (BTT), which can be used for faster downloads on the BitTorrent file-sharing protocol.

The top 5 tokens by market cap are Tether, UNUS SED LEO, Chainlink, Huobi Token, and Maker, all of which are deployed on the Ethereum blockchain apart from Tether which takes the top spot.

Tokens are much easier to create as you do not need to build a blockchain from scratch. You may have heard the phrase “tokenise the world,” which refers to the ability for tokens to represent almost any asset.

This is thanks to the use of smart contracts, and we have already seen tokenised versions of stocks, commodities, fiat currencies, other cryptocurrencies, property, and more. And the chances are, we have barely even scratched the surface yet as to what else can be tokenised.

Common terms used to categorise cryptocurrencies

While we are on the topic of different types of cryptocurrency, we may as well look at some of the various subtypes that you will likely come across in the crypto world. 

Here are four terms commonly used to categorise cryptocurrencies that have specific characteristics:

Privacy Coins

Cryptocurrencies that focus on providing private transactions, such as Monero, Zcash, and Dash.

Stable Coins

Cryptocurrencies that are pegged to ‘stable’ assets such as fiat currencies to reduce price volatility dramatically. Prime examples include Tether, Dai, USD Coin, and Paxos.

Exchange Tokens

Cryptocurrencies created by crypto exchanges to be used primarily on their own trading platform and services. Prime examples include Binance Coin, Huobi Token, and KuCoin. 

CBDC

Cryptocurrencies that are created or backed by a central bank. The People’s Bank of China (PBoC) is currently developing its digital yuan, and it is expected that most countries will digitise their national currencies in the future.

History of Cryptocurrency

Then, in early 2009, an anonymous programmer or a group of programmers under an alias Satoshi Nakamoto introduced Bitcoin. Satoshi described it as a ‘peer-to-peer electronic cash system.’ It is completely decentralised, meaning there are no servers involved and no central controlling authority. The concept closely resembles peer-to-peer networks for file sharing

Many people believe that cryptocurrencies are the hottest investment opportunity currently available. Indeed, there are many stories of people becoming millionaires through their Bitcoin investments. Bitcoin is the most recognisable digital currency to date, and just last year one BTC was valued at $800. In November 2017, the price of one Bitcoin exceeded $7,000.

Ethereum, perhaps the second most valued cryptocurrency, has recorded the fastest rise a digital currency ever demonstrated. Since May 2016, its value increased by at least 2,700 percent. When it comes to all cryptocurrencies combined, their market cap soared by more than 10,000 percent since mid-2013.

Legality of Cryptocurrency

As cryptocurrencies are becoming more and more mainstream, law enforcement agencies, tax authorities and legal regulators worldwide are trying to understand the very concept of crypto coins and where exactly do they fit in existing regulations and legal frameworks. With the introduction of Bitcoin, the first ever cryptocurrency, a completely new paradigm was created. Decentralised, self-sustained digital currencies that don’t exist in any physical shape or form and are not controlled by any singular entity were always set to cause an uproar among the regulators.

A lot of concerns have been raised regarding cryptocurrencies’ decentralised nature and their ability to be used almost completely anonymously. The authorities all over the world are worried about the cryptocurrencies’ appeal to the traders of illegal goods and services. 

Moreover, they are worried about their use in money laundering and tax evasion schemes. As of November 2017, Bitcoin and other digital currencies are outlawed only in Bangladesh, Bolivia, Ecuador, Kyrgyzstan and Vietnam, with China and Russia being on the verge of banning them as well. Other jurisdictions, however, do not make the usage of cryptocurrencies illegal as of yet, but the laws and regulations can vary drastically depending on the country.

Types of Cryptocurrencies:

You won't be able to count the number of cryptocurrency currently circulating in market. There are numerous organisation and group of people keeps on launching a new Currency every day. Some of the currency that are recognised globally are: 

Bitcoin

Bitcoin is a cryptocurrency. It is a decentralised digital currency without a central bank or single admin that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries.

Ledger start: 3 January 2009
Supply limit: ₿21,000,000
Release: 0.1.0 / 9 January 2009 
Founder: Satoshi Nakamoto
Symbols: BTC, ฿, ₿

ISO 4217 codes: BTC, XBT

Ethereum

Ethereum is an open source, public, blockchain-based distributed computing platform and operating system featuring smart contract functionality. It supports a modified version of Nakamoto consensus via transaction-based state transitions.

Initial release date: 30 July 2015
Software used: EVM 1 Bytecode
Release: Muir Glacier / 1 January 2020
Total users: 91,994,515 (2020-03)
Developer(s): Ethereum Foundation

Original authors: Vitalik Buterin, Gavin Wood

Ripple

Ripple is a real-time gross settlement system, currency exchange and remittance network created by Ripple Labs Inc., a US-based technology company.

Stable release: 1.0.0 / 15 May 2018
Developed by: Ripple Labs
Operating system: Linux 
(RHEL, CentOS, Ubuntu), 
Windows, macOS (development only)
Founder: Chris Larsen
Original author(s): Arthur Britto, David Schwartz, Ryan Fugger

Initial release: 2012

BITCOIN CASH

Bitcoin Cash is a cryptocurrency that is a fork of Bitcoin. Bitcoin Cash is a spin-off or altcoin that was created in 2017. In 2018 Bitcoin Cash subsequently split into two cryptocurrencies: Bitcoin Cash, and Bitcoin SV. Bitcoin Cash is sometimes also referred to as Bcash.

Split height: #478559 / 1 August 2017
Split ratio: 1:1
Block reward: 6.25 BCH
Ledger start: 3 January 2009 (11 years ago)
Supply limit: 21,000,000 BCH

Latest release: 0.19.10 / 25 July 2019

NEM

NEM is a peer-to-peer cryptocurrency and blockchain platform launched on March 31, 2015 written in Java.

Genesis Block Production: Fixed 8,999,999,999 XEM total
Date of introduction: 31 March 2015
Symbol: XEM
User(s): Global
Issuer: Fixed Decentralized; peer-to-peer consensus
Programming languages: Java, C++, Qt

Litecoin

Litecoin is a cryptocurrency released under the MIT/X11 license. Creation and transfer of coins is based on an open source cryptographic protocol and is not managed by any central authority. Litecoin was an early bitcoin spinoff or altcoin, starting in October 2011.

Symbol: Ł
Project fork of: Bitcoin
Supply limit: 84,000,000 LTC
Circulating supply: 62,424,175 LTC (26/06/2019)
Initial release: 0.1.0 / 7 October 2011;

Hash function: scrypt

IOTA

Almost before we knew it, we had left the ground. All their equipment and instruments are alive.

NEO

Almost before we knew it, we had left the ground. All their equipment and instruments are alive.

Dash

Almost before we knew it, we had left the ground. All their equipment and instruments are alive.

Qtum

Almost before we knew it, we had left the ground. All their equipment and instruments are alive.

Monero

Almost before we knew it, we had left the ground. All their equipment and instruments are alive.

Ethereum Classic

Almost before we knew it, we had left the ground. All their equipment and instruments are alive.

The Crypto's Story

Come out of Stone Age and know the moves

How to Buy?

There are a lot of different options when it comes to buying Bitcoins. For example, there are currently almost 1,800 Bitcoin ATMs in 58 countries. Moreover, you can buy BTC using gift cards, cryptocurrency exchanges, investment trusts and you can even trade face-to-face.

When it comes to other, less popular cryptocurrencies, the buying options aren’t as diverse. However, there are still numerous exchanges where you can acquire various crypto-coins for flat currencies or Bitcoins. Face-to-face trading is also a popular way of acquiring coins. Buying options depend on particular cryptocurrencies, their popularity as well as your location.

How to Store?

Cryptocurrencies are digital, which entails a completely different approach, particularly when it comes to storing it. Technically, you don’t store your units of cryptocurrency; instead it’s the private key that you use to sign for transactions that need to be securely stored.

There are several different types of cryptocurrency wallets that cater for different needs. If your priority is privacy, you might want to opt for a paper or a hardware wallet. Those are the most secure ways of storing your crypto funds. There are also ‘cold’ (offline) wallets that are stored on your hard drive and online wallets, which can either be affiliated with exchanges or with independent platforms.

Knowledge base

What is Bitcoin?

Bitcoin is a cryptocurrency first introduced on October 31 2008 with a computer science paper that described how it would work. A few months later, on January 3, 2009, the code was released and the first bitcoins appeared.


Bitcoin is often compared to gold in that there is a limited supply — the maximum number of bitcoins that will ever enter circulation is 21 million. Unlike gold, however, bitcoin is digital, making it far easier to divide, transfer, and store.

When is the best time to sell cryptocurrency?

When making a decision on when to sell (or not), you’ll need to consider things like your finances, your tolerance for risk, the tax consequences, and why you bought crypto. As you figure out the answers, what you’ll find is that your situation — like everyone’s situation — is unique, which means there is no universal “best” time to sell cryptocurrency.

How do I sell cryptocurrency?

Selling on an exchange is typically easy. If you already hold your cryptocurrency on some trading platform, you just visit the sell page, enter the amount you want to sell, confirm, and finish.

When can I sell my cryptocurrency?

Unlike the stock market, crypto markets never close. You can sell cryptocurrency at any time — it’s completely up to you. If you’re a customer in Canada, Australia, or Singapore, it’s important to know that you can currently buy crypto but not sell it. We hope to add the ability to sell crypto in these countries soon.

What is cryptocurrency mining?

Mining is the process of validating other people’s transactions with a computer and then adding them to the long, public list of all transactions known as the blockchain. In exchange, people get rewarded with cryptocurrency.


Anyone with a computer and an internet connection can become a miner. But before you get excited, it’s worth noting that mining is not always profitable. Depending on several factors, such as which cryptocurrency you’re mining, how fast your computer is, and the cost of electricity in your area, you may end up spending more on mining than you earn back in cryptocurrency.

When is the best time to buy cryptocurrency?

If you’re buying cryptocurrency to spend it, gift it, or donate it, then you’ll want to buy it before you plan to use it. When is the exact best time? Like many financial decisions, it depends on a lot of factors: which cryptocurrency you’re buying, the reason you’re buying it, your personal financial situation, and the current state of the overall cryptocurrency market — just to name a few.


We recommend being skeptical of articles or social media posts that claim to know which cryptocurrency to buy or when to buy it. The authors may have a personal interest in affecting the price of a cryptocurrency they recommend. Instead, always do your own research or seek help from an accredited financial advisor to decide which cryptocurrency to buy and when.

Are cryptocurrencies anonymous?

Generally, no. Although a few cryptocurrencies are genuinely anonymous, the vast majority (including Bitcoin and Ethereum) are not.


With these cryptocurrencies, all transactions are publicly available, and experts can generally use this information — along with sophisticated software — to trace transactions back to the original owners.


It’s also worth noting that Crypto Trading platforms requires ID verification to withdraw cryptocurrencies. This helps prevent fraud and is one of the many reasons why Cryptocurrencies is considered a trustworthy.

What’s the best way to store cryptocurrency?

Storing crypto is similar to storing cash, which means you need to protect it from theft and loss.


As part of our commitment to customer security, we leads the industry by holding 98% of its cryptocurrency in offline storage that is encrypted and copied to drives and paper backups that are distributed in safe deposit boxes and vaults around the world. If that sounds like a lot of work, that’s because it is. Our #1 priority is to be the most trusted cryptocurrency platform, which means our security practices are continually evolving as we evaluate and adjust our approach to address the ever-changing security landscape.

Do I have to buy a whole coin?

This one’s easy — you do not need to buy a whole coin. You can buy in increments as little as 2 dollars, euros, pounds, or your local currency.

Why do experts like cryptocurrencies?

Experts often talk about the many ways crypto can address the shortcomings of our current financial system. Things like high fees, identity theft, and extreme economic inequality are an unfortunate part of our current financial system and they’re also things crypto has the potential to address.

How can crypto make the world better?

Cryptocurrencies have the potential to make the world better by letting any two people in the world exchange money directly, without involving a financial institution or government. This will mean more equality of opportunity for those without access to traditional financial services, like bank accounts and credit cards.


In addition, the blockchain technology that makes cryptocurrencies possible is being used in novel new ways to improve the world. Examples include blockchains that help verify identity, manage healthcare records, validate ownership, and even accelerate research on diseases like cancer, Alzheimer’s, and tuberculosis.

What is Bitcoin?

Bitcoin is a cryptocurrency first introduced on October 31 2008 with a computer science paper that described how it would work. A few months later, on January 3, 2009, the code was released and the first bitcoins appeared.


Bitcoin is often compared to gold in that there is a limited supply — the maximum number of bitcoins that will ever enter circulation is 21 million. Unlike gold, however, bitcoin is digital, making it far easier to divide, transfer, and store.

What are the different Cryptocurrencies?

Bitcoin is the oldest and most well-known cryptocurrency, but there are hundreds of others. Some cryptocurrencies, like Litecoin and Bitcoin Cash, share Bitcoin’s core characteristics but explore new ways to process transactions. Others offer a wider range of features. Ethereum, for example, can be used to run applications and create contracts.

Where do cryptocurrencies get their value?

The economic value of cryptocurrency, like most goods and services, comes from supply and demand. Supply refers to how much is available — like how many Bitcoin are available to buy at any moment in time. Demand refers to people’s desire to own it — as in how many people want to buy Bitcoin and how strongly they want it. The value of a cryptocurrency will always be a balance of both factors.


There are also other types of value. For example, there’s the value you get from using a cryptocurrency. Many people enjoy spending or gifting crypto because it gives them a sense of pride to support an exciting new financial system. Similarly, some people like to shop with Bitcoin because they like its low fees and want to encourage businesses to accept it.

What is a blockchain?

At its most basic, a blockchain is a list of transactions that anyone can view and verify. The Bitcoin blockchain, for example, is a record of every time someone sent or received bitcoin.


This list of transactions is fundamental for most cryptocurrencies because it enables secure payments to be made between people who don’t know each other without having to go through a third party verifier like a bank.

Why is Cryptocurrencies Exciting?

Cryptocurrency has the potential to be the fastest, easiest, cheapest, safest, and most universal way to exchange value that the world has ever seen.


And if that’s not exciting enough, crypto also provides equality of opportunity, regardless of where you were born or where you live. As long as you have a smartphone or another internet-connected device, you have the same access to cryptocurrency as everyone else.

What can I do with cryptocurrency?

Besides buying and selling cryptocurrency, you can…

  • Shop: Over 100,000 merchants accept Bitcoin including Microsoft, Overstock, and NewEgg.

  • Dine out: Worldwide, you can dine in or carry out at thousands of restaurants using Bitcoin or Bitcoin Cash.

  • Donate to causes: GiveCrypto.org is a nonprofit that distributes cryptocurrency to people living in poverty. The Internet Archive, The Mozilla Foundation, and The Wikimedia Foundation (just to name a few) also all accept donations in Bitcoin.

  • Gift it: Cryptocurrency makes a great gift for friends and family.

  • Tip someone: Authors, musicians, and other online content creators sometimes leave Bitcoin addresses or QR codes at the end of their articles. If you like their work, you can give a little crypto as a way of saying thanks.

  • Travel the world: Because cryptocurrency isn’t tied to a specific country, traveling with crypto can cut down on money exchange fees. There’s already a small but thriving community of self-titled “crypto nomads” who primarily, or in some cases exclusively, spend crypto when they travel.

Is cryptocurrency legal?

Yes, crypto is legal to buy, sell, send, receive, and own in most parts of the world. The full list of countries we support includes the USA, UK, Australia*, Canada*, Singapore*, and the following countries in Europe:

Austria  Czech Republic Ireland Monaco San Marino
 Belgium DenmarkItaly  Netherlands Slovakia
 Bulgaria Finland Latvia Norway Slovenia
 Croatia Greece Liechtenstein Poland Spain
 Cyprus Hungary Malta Portugal Sweden
Switzerland    

In some countries there is still a lot of confusion in trading so countries like Canada, Australia, and Singapore currently allows you to buy crypto but not sell it.

Which cryptocurrency should I buy?

 You can buy Bitcoin (BTC), Litecoin (LTC), Ethereum (ETH), Bitcoin Cash (BCH), and Ethereum Classic (ETC). While we can’t recommend one currency over another, we can still share a few approaches that can help you decide which crypto is right for you.

One simple option is buy some of each currency. It’s a straightforward way to get started without playing favourites.

Another good option is to ask yourself what you’re hoping to do with crypto and choose the currency that will help you achieve your goals. For example, if you want to buy a T-shirt with crypto, then Bitcoin might be a good option because it is the most widely accepted cryptocurrency. On the other hand, if you want to play a digital card game, then Ethereum is a popular choice.

How is cryptocurrency different from regular money?

Cryptocurrencies and regular money share some traits — like how you can use them to buy things or how you can transfer them electronically — but they’re also unique in interesting ways. Here are a few highlights.

TAXAJ

Blog
SiteMap
Partner Us
Appointment
User Reviews
Help Center
Community
OL Payment
Knowledge Base
Mobile App
Templates
Contact Us

Guides

E-Pay I-Tax
E-Pay GST
E-Pay TDS
E-Verify ITR
E-Way Bill
TDS Rate Chart
View Form 26AS
Income Tax Slab
I-Tax Deductions
I-Tax Registration
DSC Verification
Compare Business
DSC Associate MCA

Frequent Services

Start your Business
Close Your Business
MCA-ROC Filings
Business Tax Filing
Individual Tax Filing
Digital Signatures
Digital Marketing
Digital Accounting
Brand Registration
Insurance
Co-Working
Calculators & Tools

Latest News

GST Updates
MCA -ROC Updates
Income Tax Updates
Depreciation - I.T Act
Depreciation - MCA

Legal

Privacy Policy
Pricing
Refunds & Cancellation
Terms & Conditions
TRP
TAXAJ Start Up india
Created by potrace 1.15, written by Peter Selinger 2001-2017

ISO 27001
​Data Center

SSL Certified Site
​128-bit encryption

New Delhi   |   Bangalore   |   Ahmedabad   |   Kota   |   Kolkata   |   Mumbai   |   Manali

TAXAJ Corporate Services LLP

Head Office: 1/11, 1st Floor, Sulahkul Vihar, Old Palam Road, Dwarka, New Delhi-110078

Phone: +91 8961228919 ; E-mail: support@taxaj.in

© 2021 TAXAJ® is a Registered Trademark of TaxaJ Corporate Services LLP. All Rights Reserved
Unless otherwise indicated, all materials on this site are copyrighted by TAXAJ. No part of this site, either text or image may be used for any purpose.