Cryptocurrency Development cover

Cryptocurrency Development: Types of Cryptocurrencies and Their Applications

publish date September 10, 2018 Tags share article

In recent years cryptocurrency has become quite the buzz word, along with “bitcoin” and “blockchain.” Some states even went so far as to launch a national cryptocurrency, or at least claim to. You see, cryptocurrencies must have a particular value proposition; if they do not solve a specific business need, their very existence comes under question.

Types and Purposes of Cryptocurrency

With that in mind we decided to save our readers some time and offer a quick review of different crypto assets to help discern the real value of what’s being offered.

  1. Currency.

  2. A new store of value which enables one to interact with others and can be exchanged for goods and services. Examples include Bitcoin, Dash, and Litecoin. There are also special private cryptocurrencies that claim to be totally anonymous: Monero and ZCash.

  3. Security tokens.

  4. Let’s be clear here: most crypto enthusiasts consider their investment as a speculative one. With the rise of ICOs, regulators like SEC have raised questions regarding the nature of these tokens (which, by the way, did “not promise any return”). Everything changed with the launch of actual Security Tokens known as STO. Now, investors purchase a tokenized security which is legal, has a predictable income model, and secures the investors’ funds. Some examples are Ordebook by Ambisafe which supports quality ICOs, and Polymath that facilitates the issuance and dissemination of legally compliant token-based securities. In fact, one can launch one’s own platform.

  5. Utility tokens.

  6. Although a utility token is neither a currency nor a security, it is still being traded on exchanges which can confuse many. An example of the utility token is ether (ETH), used within the Ethereum network. It powers the Ethereum Virtual Machine created with a vision of a world computer to support decentralized apps or DApps. There are several variations and purposes of these tokens and we present them below.

  7. Work tokens.

  8. The model of a work token presumes that distributed contributors must stake the native network token to earn the right to perform work for the network. Pioneered by Augur, if the work of a participant in such a network is “correct”, he gets rewarded with a proportional amount of tokens or fees. If the work is “incorrect”, his supporting stakes can be taken.

  9. TCR tokens.

  10. Token-Curated Registry (TCR) tokens convert the right of holders to determine over the contents of a registry. Such a registry usually involves a minimum stake for new listings to come through.

  11. Access-based tokens.

  12. This is a model with two tokens: one is intended for staking, the other is intended for paying fees. The primary token functions as a generation machine for the secondary token (fee credit). The amount of secondary tokens created for every primary token staked depends on the particular platform usage. This resembles the effect of holding a license and gives access to a service at a fixed cost. See Gnosis, SpankChain, or VeChain.

  13. Proof-of-Burn tokens.

  14. The Proof-of-Burn consensus mechanism allows one to earn tokens by burning some of them first. Miners send coins to a special address from where they can not be retrieved or spent. This transaction is recorded in the block, as evidence of burning coins, after which the user is rewarded. The idea of Proof-of-Burn is that by burning the crypto currency, the user demonstrates a readiness to accept short-term losses for the sake of long-term investments.

  15. Stablecoins.

  16. Stablecoins present an opportunity to cut the volatility of cryptocurrencies and preserve an intended value. Technically, there are three approaches to achieving this stability:

    • Issuing real-world-asset-pegged tokens — see Tether.
    • Issuing crypto-collateralised tokens — see Maker.
    • Algorithmically expanding the supply of a token according to its usage, also known as seigniorage shares — see Basecoin and Carbon.
  17. Other types of tokens.

  18. Rest assured that this is not a complete list. Innovative thinkers constantly come up with better system ideas and experienced blockchain developers help to fulfill their vision. Whatever one’s venture requires — a buyback token, perpetual discount token, or a triple-token stable system — these can be achieved with the assistance of deep expertise in cryptocurrency development.

Cryptocurrency Development Services

To simply create a cryptocurrency is not hard. One can simply fork, or copy, the source code of Bitcoin or other existing open-source projects. The difficult part is to integrate it into business processes and make it popular enough so that the opportunity cost is much smaller than the expected returns. Since just developing a cryptocurrency is not enough today, the following services are often the cornerstone of the process:

  • Blockchain consultancy
  • Proof-of-Concept (POC) workshops and development
  • Integration with Distributed applications (DApps)
  • CEX, DEX, or HEX (centralized, decentralized, and hybrid crypto exchanges)
  • Distributed environment (both public and private)
  • Tokenized ecosystems
  • AML/KYC/GDPR compliance
  • Interoperability of the cryptocurrency
  • Continuous support

There are firms that are solely consulting-oriented, such as Eden Block and MLG Blockchain Consulting. They can help with navigation in the blockchain space and advise on the types of cryptocurrency one needs for existing or novel business.

In addition, there are token-based plug-and-play platforms that eliminate the need for developing one’s own cryptocurrency from scratch.

In addition, there are token-based plug-and-play platforms that eliminate the need of developing one’s own cryptocurrency from scratch. For example, Stratis, an end-to-end solution for development, testing and deployment of native C# blockchain applications on the .Net framework; Komodo, an integral currency with its own Komodo ecosystem; Waves, an open-source blockchain platform with own decentralized exchange; and Qtum, a hybrid of Ethereum and Bitcoin technologies that ensures both security and flexibility.

Of course, there are development-driven blockchain firms too. Let’s review some of them.

Cryptocurrency Development Teams

When it comes to quality blockchain development, a top cryptocurrency development company must meet certain requirements:

  • Possess experience and expertise
  • Understand the complete ecosystem
  • Empower a client with strategic partnerships
  • Have their own research and development

What’s more, it needs to deliver novel cryptocurrency development concepts to address a wide range of demands. International Blockchain Consulting (IBC Group), IBM Blockchain, and Coinfabrik, for example, fit this description. See our selected list of top blockchain companies.

On a final note, when business leaders are interested in making their own cryptocurrency, they need to ask themselves a few simple questions: what is the motivation behind this decision? How will it lift the competitiveness of their business? What clear goals do they aim to achieve? Based on that, the leading cryptocurrency development teams will offer the solution that suits these needs the best.