What Cryptocurrencies Are There and How Do I Buy Them?

With cryptocurrencies becoming a more regular part of daily lives around the world, many people are beginning to wonder what types of cryptocurrencies are available and how they can purchase them and add them to their portfolios.

While people are most familiar with Bitcoin, there are many different types of cryptocurrencies and some of them work in different ways. Here are a few of the most popular types available to purchase, and more information on exactly how you can go about acquiring them yourself.

Types of Cryptocurrencies

There are a few different types of cryptocurrencies available. The original cryptocurrency category, which includes Bitcoin, is called transactional cryptocurrency. These are cryptocurrencies that are designed to be used like money and exchanged for goods and services.

A second type is platform cryptocurrencies, like Ethereum, which are designed to help create markets (and even launch other types of cryptocurrencies) without a middleman. Utility cryptocurrencies are a third type, and these are used to facilitate a particular task, like Ripple (XRP).

Bitcoin (BTC)

Of all the cryptocurrency types available, Bitcoin is probably the most well-known: it is the original cryptocurrency. A transactional cryptocurrency, bitcoins are designed to be used like any other currency and exchanged for services or for goods.

Photo by Dmitry Demidko on Unsplash

The backbone of Bitcoin is its use of blockchain technology. Without a centralized bank or third party controlling the currency and verifying transactions, the blockchain instead acts as a ledger holding information about all transactions in Bitcoin history. Blockchain technology is what makes Bitcoin secure and helps prevent fraud.

Ethereum (ETH)

Unlike the transactional cryptocurrency Bitcoin, Ethereum is considered a platform cryptocurrency. Ethereum uses the blockchain technology that helps make Bitcoin work to create a platform that facilitates smart contracts.

Photo by Nick Chong on Unsplash

These smart contracts are small bits of code that are written to the blockchain. When it is time to use the contract, a new transaction is created on the Ethereum blockchain referencing that contract, allowing the network to verify it. Writing smart contracts using blockchain makes it nearly impossible to change them.

Litecoin (LTC)

Like Bitcoin, Litecoin is a transactional cryptocurrency. It is designed to improve the speed of transactions and the scalability of transfers.

Litecoin transactions can be verified up to four times faster than Bitcoin transactions. Because of this increase in speed, Litecoin is able to support more transactions than Bitcoin and the transaction fees can be lowered.

While Bitcoin uses a processing-intensive proof of work system, Litecoin uses a memory-intensive proof of work system, which makes it easier for hobbyists to participate. This in turn makes the distribution of the blockchain larger.

Ripple (XRP)

Ripple is considered a utility cryptocurrency, since it was designed for a particular task. The Ripple platform was designed specifically to facilitate fast and easy transfers between different countries.

Its cryptocurrency is also called Ripple, like the name of the platform itself. Using this platform, users can convert their own specific currency to Ripple and send the transaction through the blockchain. The receiver converts the Ripple back into their own currency on the receiving end.

Unlike other cryptocurrencies, Ripple does not use mining. Instead, it relies on a fixed supply of the currency, which is held in time-locked contracts.

How Do I Buy Cryptocurrency?

There are several different ways that you can purchase cryptocurrencies for yourself. Which option you choose depends somewhat on your particular goals and interests in cryptocurrency. For your first cryptocurrency purchase, you will need to find a platform that allow you to purchase cryptocurrency with actual money.

One of the most popular of these platforms is called Coinbase, a platform launched in 2012. It allows users to buy, sell, and store their cryptocurrency all in one place. Once you have registered on the site, it is relatively simple to get started buying and selling cryptocurrencies. This makes the platform popular with everyone from experienced traders to those brand-new to cryptocurrency.

You can also purchase cryptocurrencies in an exchange, like Kraken. Users are required to be verified and registered on the exchange in order to buy and sell cryptocurrencies. The most popular exchanges will likely have the three largest coins (Bitcoin, Litecoin, and Ethereum) available.

If you are specifically interested in other cryptocurrencies, you may need to look for a different exchange. Keep in mind that each exchange has its own fee structures in place when purchasing and trading. They can be quite different from one another, so make sure you pay attention to this before participating.

Anyone can purchase cryptocurrency, and it could be a good addition to your investment portfolio. However, keep in mind that like any other type of investing, cryptocurrencies come with risks. There is no guarantee that you will get a return on your investment. Be careful to only risk what you know you can afford to lose.

Written by

Robert Ryerson authored the 2016 book What’s the Deal With Identity Theft?: A Plain English Look at Our Fastest Growing Crime.

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