So, one of the most important things to consider about cryptocurrency is that it’s not about Bitcoin anymore. And to that end the cryptocurrency market is extremely diverse. That’s not to say that Bitcoin is dead or anything akin to that. But rather it’s accurate to say that cryptocurrency as a whole has become a microcosm of larger economies. It’s not even accurate to use the cryptocurrency term to refer to the entire space, as many tokens are focused on utility than peer-to-peer transferability.
All digital coins share a common heritage with Bitcoin’s genesis and generally speaking, all coins aim to disrupt some centralized established industry. And how they do that is largely dependent upon what so-called sector they are operating in. So, in the name of becoming more educated about what cryptocurrencies are out there and more specifically what sectors they operate in, let’s explore many captivating and compelling use cases of this blossoming technology.
The first sector to talk about is digital cash, which is synonymous with cryptocurrency in its purest sense. So, digital cash simply put is money that can be transferred electronically from one party to another during a transaction. Bitcoin, Litecoin, Vertcoin, Nano, and Dogecoin are all great examples of digital cash. And when it comes to digital cash, you’re probably pretty familiar with these. They’re what most investors think of when they think of cryptocurrency as a space. What makes them compelling is that they’re more secure and efficient than government-issued fiat currencies.
Fiat being Latin for ‘let it be done,’ predicating the notion that currencies of the world are not backed by the underlying physical asset. Son we’ll see digital cash that can process transactions faster than your typical electronic fund transfer and do it for cheaper than solutions utilizing, say, Swift Network.
There are two subsectors of the digital cash. The first are stable coins. These are coins that are backed by an asset and meant to be pegged against a stable currency such as the US dollar. The most known is Tether or USDT. The second subsector is privacy coins. These are coins that mask the identities of the parties involved allowing for such transactions to take place outside the purview of the law. Now not all privacy coins are created equally. And some have had issues of breaches of anonymity. But for all intents and purposes, privacy coins can provide the services that they advertise. Good examples of privacy coins include Monero, ZCash, ZenCash, NetCoin, and Dash.
The platforms are another sector worth discussing. Cryptocurrency today is the era of smart contracts. While Bitcoin has shown us that the payment system can exist in a decentralized peer-to-peer environment, which was certainly groundbreaking, it was the advent of Ethereum that really moved the whole space forward and closer to mainstream acceptance and adoption.
Ethereum ushered in the era of the second-generation blockchain, as people saw the true potential of DApps and smart contracts. For those unaware, smart contracts were a huge leap forward over what Bitcoin introduced us to, because smart contracts helped you to exchange not only money, but also property, shares, or really anything of value. Importantly, it does so in a transparent, conflict-free way, while avoiding the services and fees of a middleman.
Another big piece of the platforms like Ethereum is that they facilitate the building of DApps. This is where the term ICO comes from. As a lot of ICOs are built on top of platforms like Ethereum, the greater implication of this is that now people don’t have to reinvent the wheel when it comes to the complicated technology of blockchain. They can utilize the benefits of a distributed ledger without having to explicitly code it. Good examples of these platforms as Cardano, Neo, and EOS. The thing with these platforms is that user adoption is a key.
The finance sector deals with the operations of the money outside simple peer-to-peer transfer like we saw with digital cash. Overall, this is the biggest sector in crypto. But if you look at it closer, it’s just comprised of six large subsectors.
The first subsector is payments. And this is for anything that deals with processing merchant services, remittance, payment cards, connecting banks, etc. The next finance subsector is exchanges which allow you to quickly change, say, BTC to USD PayPal and perform other exchange transactions. The two big types that dominate this subsector are dividend coins like Binance coin and decentralized exchange coins like Loopring coin. The investing subsector includes the coins (Polymath, Crypto20) that help facilitate some aspect of investing through the use of the blockchain. After investing, we have the lending subsector, which facilitates lending between parties without having to use a middleman or high-interest lender. And here we should mention the Ripio Credit Network that makes it possible to lend money in a trustless fashion and for significantly smaller fees. Finally, there is a funding subsector, which peer-to-peer crowdfunding without large overhead fees, and insurance, which deals with decentralized insurance payments.
Now that you know so much about the sectors cryptocurrencies operate in, you may make the right investment decision or take your crypto business to the next level.