Since the invention of Bitcoin in 2009, thousands of cryptocurrencies have been created with different architectural designs and use cases. Beyond just digital currencies, cryptocurrencies can represent utility tokens, securities, stablecoins, central bank digital currencies (CBDCs), and more.

Digital Currencies

Digital currency is the broadest cryptocurrency category, representing any coin or token designed to work as money on the blockchain. They are exchanged and transferred digitally between parties. Well-known examples include Bitcoin, Litecoin, and Solana. Hallmarks of digital currency

Cryptocurrencies include:

• Decentralized: No central control or oversight of the currency’s operation and issuance. Governed by users through consensus rules.
• Peer-to-peer: Transfers occur directly between users with no intermediary financial institutions. Enables accessibility.
• Irreversible: Transactions cannot be reversed or canceled once executed on the blockchain. Provides certainty.
• Pseudonymous: Users transact with generated blockchain addresses rather than real-world IDs. Enables privacy.
• Open source: Anyone can review and audit the underlying protocol code. Provides transparency.
• Scarcity: Many employ a capped fixed supply model or controlled inflationary emissions schedule. Drives value through digital scarcity.

Digital currencies aim to function as efficient mediums of direct exchange and storage of value. Their goals include facilitating transactions, serving as stable stores of value, and enabling new economic models.

Utility Tokens

Utility tokens provide access to a blockchain network's products, services or transactional functions. Think of them like API keys. By owning the token, you can use the application. Major utility token cryptocurrencies include:

• Ether: Provides access to the Ethereum network to execute smart contracts and Dapps.
• Filecoin: Allows users to buy decentralized file storage on the Filecoin network.
• Livepeer: Enables video transcoding services on the Livepeer network.

Utility token hallmarks include:

• Usage rights: Owning the token grants the ability to utilize the blockchain’s native functions.
• Incentive alignment: Encourages users to participate in and secure the network to increase the token’s value.
• Staking models: Tokens are often staked or bonded to provide network services in return for rewards.
• Governance: Tokens enable voting on protocol changes and treasury management in a decentralized autonomous organization model.
• Non-speculative value: Derived from the token’s intrinsic utility rather than just price speculation.

The goal of utility tokens is driving adoption of the blockchain platform by aligning incentives around token value appreciation through service usage.

Security Tokens

Security tokens represent ownership interests, similar to traditional securities like stocks and bonds. They enable fractionalized ownership of assets that is easily tradable on blockchains. Popular examples are:

• Uniswap: UNI token holders can vote on governance decisions for the Uniswap decentralized exchange protocol.
• MakerDAO: MKR tokens represent fractional ownership of the MakerDAO decentralized finance organization.
• Filecoin: FIL tokens provide proportional ownership of the Filecoin data storage infrastructure.

Key attributes of security token cryptocurrencies include:

• Asset backing: Represent fractional ownership in real-world assets like companies, debt, real estate, commodities, or fiat currencies.
• Regulation: Classified as securities under most jurisdictions and subject to applicable laws.
• Voting power: Enable holders to vote on governance matters related to the underlying asset.
• Transferability: Digitally transferable ownership shares improve liquidity compared to traditional securities.
• Transparency: On-chain data provides insights into assets backing the tokens.

Security tokens aim to leverage blockchain efficiencies to enable improved trading, governance, and transparency for financial securities.

Stablecoins

Stablecoins are cryptocurrencies designed to maintain price parity with an external reference like the U.S. dollar or gold. This minimizes volatility. Three primary types:

• Fiat collateralized: Reserves of fiat currencies like the dollar back the tokens 1:1. Example: USDC
• Crypto collateralized: Reserves of volatile crypto assets back the tokens at overcollateralized ratios. Example: DAI
• Algorithmic: Advanced protocols automatically expand and contract supply to maintain the peg without collateral. Example: TerraUSD

Stablecoin attributes include:

• Price stability: Maintains constant value through reserves or algorithms. Useful for risk-averse applications.
• Liquidity: Easy to swap in and out of volatility-prone assets like Bitcoin.
• Faster settlements: Transfer faster and cheaper than bank wires for transactions.
• Decentralized: Many models are decentralized by using crypto reserves or algorithms vs fiat in bank accounts.

Stablecoins create usable liquidity and stable pricing to enable everyday blockchain payments and transactions. Most are pegged to the U.S. dollar given its status as global reserve currency.

Altcoins

Altcoins refer to the thousands of alternative digital currency cryptocurrencies launched after Bitcoin. They aim to improve upon Bitcoin's shortcomings or target different use cases. Prominent examples include:

• Litecoin: Faster and cheaper transactions than Bitcoin due to faster block times.
• Monero: Employs advanced privacy tech to enable fully anonymous transactions.
• Ripple: Targets enterprise cross-border payments with its XRP token and RippleNet software.
• Ethereum: Supports smart contract functionality for programmable money and apps.

Common altcoin attributes include:

• Innovation: Introduce new features and capabilities beyond Bitcoin like smart contracts, privacy, higher speeds, different consensus algorithms, etc.
• Different tradeoffs: Prioritize different aspects like security, scalability, decentralization, governance, etc. compared to Bitcoin.
• Speculation: Most altcoins still rely on price speculation for value accrual rather than utility value.
• Challenges: Very few have achieved meaningful adoption so far besides Ethereum. Most fade away over time.

Altcoins offer potential technology improvements but still suffer from speculation, challenges to sustainable differentiation, and lack of adoption.

Only a few achieve meaningful utility value and longevity.

Central Bank Digital Currencies (CBDCs)

CBDCs represent digital forms of fiat money like the dollar or euro issued by central governments. They enable direct digital transfers denominated in the fiat currency. Examples in development include:

• Digital Dollar Project: Collaboration between government agencies and researchers.
• Digital Yuan: In pilot trials across China.
• Digital Euro: Slated for potential launch by the European Central Bank by middle of the decade.

CBDCs aim to modernize payment systems by moving from physical to digital while still maintaining central issuance and control. Key features include:

• Government-issued: Created and regulated by central banks and governments.
• Legal tender status: Valid monetary unit by law within the issuing jurisdiction.
• Fiat-pegged: Maintains stable 1:1 value with the underlying fiat currency.
• Centralized: Monetary policy and supply controlled by central issuers.

While CBDCs incorporate blockchain-like technology for transfers, they contradict cryptocurrencies’ decentralization ethos. They could, however, be onramps to broader crypto adoption.

Non-Fungible Tokens (NFTs)

NFTs are unique blockchain tokens that represent ownership of digital or physical assets like art, collectibles, real estate, etc. Data points include:

• Non-fungible: Each token has unique attributes unlike fungible tokens like Bitcoin where each unit is identical.
• Digital scarcity: Verifiable scarcity establishes authenticity and proofs of ownership.
• Transferability: Allows trading collectibles and assets through cryptocurrency wallets and marketplaces.
• Custom metadata: Can store additional data like asset descriptions, art provenance, etc.
• Smart contracts: Programming logic can be added to trigger royalties, transfers, or other rules.

NFTs authenticate digital ownership and allow trading of unique assets and collectibles through cryptocurrency rails. They are expanding from art into a broader asset tokenization technology.

Cryptocurrencies for Machine Economies

Some cryptocurrencies target machine-based economies and the Internet of Things (IoT). They allow devices to exchange value automatically:

• IOTA: Enables connected devices to transact value with zero fees using a Tangle architecture.
• Halo Network: Allows connected vehicles to earn and spend cryptocurrency through a blockchain mesh network.
• Waltonchain: Assigns RFID tags to products to track provenance and enable supply chain payments.

Machine economy cryptocurrency features include:

• Microtransactions: Allow nano-payments between machines with minimal fees.
• Offline transactions: Use mechanisms like mesh networking that enable value transfers without Internet connectivity.
• Automated payments: Smart contracts automatically trigger payments between machines based on data inputs.
• Supply chain tracking: Enables provenance tracking and payments across supply chains.
• Internet of Things connectivity: Integrates with device sensors, RFIDs, etc. to build interactive machine economies.

These niche cryptos aim to provide embedded payment rails as machine and device connectivity expands.

As we can see, cryptocurrencies have expanded far beyond just digital currencies. Today there is growing tokenization of utility, securities, stable value, physical assets, and more. We may continue to see blurring of boundaries between categories as crypto protocols expand in utility. This further solidifies cryptocurrencies as a fundamental Web3 building block driving value, ownership, incentives, and programmability across the new digital economy.