Cryptocurrency Types: The 3 Digital Currencies to Know

By Tibor Moes / Updated: June 2023

Cryptocurrency Types: The 3 Digital Currencies to Know<br />

Cryptocurrency Types

Picture this – a bank, but without the physical building, the long queues, or even the human touch. Instead, it’s all digital, right there in your smartphone or computer. This isn’t a sci-fi movie plot but a glimpse into the world of cryptocurrencies.


Cryptocurrencies are digital or virtual currencies that use cryptography for security. They operate independently of a central bank and offer a decentralized way to conduct transactions on the internet.

Type 1 – Bitcoin (BTC): The first-ever and most well-known cryptocurrency, Bitcoin was created in 2009 by an anonymous figure known as Satoshi Nakamoto. Its decentralized nature, security, and potential for growth make it a fascinating topic.

Type 2 –Ethereum (ETH): More than just a cryptocurrency, Ethereum also enables smart contracts and distributed applications to be built and run on its platform. Its coin, known as Ether, is used within the Ethereum ecosystem, making it both a cryptocurrency and a functional blockchain platform.

Type 3 –Monero (XMR): Monero stands out for its strong focus on privacy. Unlike many other cryptocurrencies, Monero’s transactions are completely untraceable, offering anonymity to its users. This emphasis on security and privacy makes Monero a unique player in the cryptocurrency world.

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Cryptocurrency Types In-depth

Bitcoin (BTC)

You’re at a fun fair, the lights are bright, the music is playing, and everyone is having a good time. You want to ride the Ferris wheel, but you can’t pay with cash or card. Instead, you exchange your money for tokens, which operate as the currency of the fair. In the broadest sense, this is how Bitcoin works.

Bitcoin is like the tokens you buy at the fun fair, but instead of being used for rides, you can use it to buy goods or services (provided the seller accepts Bitcoin, of course), or you can keep it, hoping it’ll increase in value over time. It’s a bit like buying a rare comic book, hoping it’ll be worth more in the future.

Created in 2009 by a mysterious figure using the pseudonym Satoshi Nakamoto, Bitcoin is often considered the granddaddy of all cryptocurrencies. It was a revolutionary idea, like the first airplane taking off. This wasn’t just another form of money; it was a completely new way of thinking about currency. Nakamoto wanted to create a system that didn’t require trust in central authorities, like banks or governments.

Instead, Bitcoin is decentralized. Think of a group project where everyone is in charge, instead of having one person tell everyone what to do. No central bank can control Bitcoin, and there’s a limited amount of it, like a limited supply of gold in the world. This digital currency is made by a process called “mining,” which involves solving complex math problems. It’s a bit like a gold rush, but instead of digging in the dirt, you’re digging through algorithms.

As of now, Bitcoin is widely recognized and accepted by a growing number of businesses worldwide, from small mom-and-pop stores to big corporations. It’s as if our fun fair tokens started being accepted at other amusement parks too!

One last thing to note is that Bitcoin transactions are stored in a public ledger called the blockchain, kind of like a communal diary where everyone can see what you’ve spent but not who spent it. This provides a level of transparency and security that is one of the key features of Bitcoin.

Remember, Bitcoin, like any investment, comes with risks. The value can go up and down, a bit like a rollercoaster ride. It’s exciting, but it’s essential to know what you’re getting into before you hop on the ride. But isn’t that the fun of a fair?

In our everyday life, Bitcoin might not have replaced coins and banknotes, but in the digital world, it’s a currency that holds significant power and potential. Like the internet in its early days, we might just be seeing the start of something transformative with Bitcoin.

Ethereum (ETH)

Imagine you’re playing a video game where you can build anything you want: castles, houses, even entire cities. This game gives you a platform and the tools, and the rest is up to your creativity. Ethereum is like that, but instead of creating virtual buildings, you’re creating applications, contracts, and systems.

Ethereum, often called the “world computer,” is like a giant global machine. Anyone can use it to build their projects or perform a transaction. Just like you might pay for a coffee with a card, people can pay for these applications and services using Ethereum’s cryptocurrency, known as Ether (ETH).

Created by a team led by Vitalik Buterin in 2015, Ethereum took the revolutionary concept of Bitcoin and said, “We can do even more.” It’s like inventing electricity and then inventing the lightbulb – it’s a whole new way of using the technology.

Ethereum introduced the concept of “smart contracts” into the crypto-verse. These are like vending machines: you put in a coin, choose your snack, and the machine automatically gives you what you asked for. In Ethereum’s case, the machine is the blockchain, the coin is Ether, and the snack is whatever service you’re paying for.

These smart contracts are self-executing contracts with the terms directly written into lines of code. It’s a bit like writing a to-do list, and as soon as you’ve completed a task, it checks itself off. These smart contracts run without any possibility of downtime, censorship, fraud, or third-party interference. It’s a robust, reliable system that operates exactly as programmed, as long as the rules and guidelines are met.

Ethereum is also a platform for Decentralized Applications (DApps), which are applications that run on a P2P network of computers rather than a single computer. It’s like a game being run on multiple consoles at the same time instead of just one. This ensures they are always online and are resistant to any central point of failure.

Like Bitcoin, Ethereum comes with its share of risks. It’s like sailing in uncharted waters. You might discover a new continent, or you could face storms and pirates. Ethereum’s future seems promising, but as with any cryptocurrency, it’s crucial to do your research and understand the landscape before embarking on the journey.

From enabling developers to build and deploy smart contracts and DApps to introducing its own currency (Ether), Ethereum has made significant strides in the crypto and blockchain world. It might just be the building blocks of a new, decentralized internet, echoing the sentiments of its nickname, “Web 3.0.”

Monero (XMR)

Imagine you’re sending a letter to a friend. You write your message, seal it in an envelope, and drop it in the mailbox. Anyone can see that an envelope was sent, but nobody can peek inside to read your message. That’s Monero in a nutshell. It’s like Bitcoin with a privacy filter.

Monero, which means “coin” in Esperanto, is a digital currency that was launched in 2014. If Bitcoin is like writing a check, where your name and the amount are visible to everyone, Monero is more like handing over a folded bill in a closed fist. You know the transaction happened, but you don’t know who it was with or how much it was worth.

The key feature of Monero, and what sets it apart from many other cryptocurrencies, is its focus on privacy and anonymity. You might think of it as the incognito mode of cryptocurrencies. Every transaction you make is concealed, so while people can see that a transaction took place, they can’t see who was involved or how much was transferred.

How does it achieve this? Through some clever technology called ring signatures and stealth addresses. It’s like being in a room full of mirrors; you can see that someone is there, but you can’t tell who it is or what they’re doing. Ring signatures mix your transaction with others, making it extremely difficult to establish a link to you. Stealth addresses add an extra layer of security by creating a one-time address for each transaction. It’s like changing your phone number every time you make a call.

It’s important to note, though, that while Monero offers more privacy than most cryptocurrencies, it isn’t entirely anonymous. Think of it like a very good disguise, rather than an invisibility cloak. In certain circumstances, such as sophisticated network analysis or off-chain data leaks, user information might still be traced.

Using Monero, like other cryptocurrencies, comes with its risks. It’s like using a coded language: it can keep your secrets, but if you’re not careful, you can get lost in translation. Ensure you understand how it works before diving in, and always practice safe online habits.

From its inception, Monero has attracted users who value privacy, providing a digital currency that combines the benefits of cryptocurrency with an extra layer of security. For those seeking to navigate the digital world with a little more discretion, Monero offers an interesting, although complex, option. As with any adventure, tread carefully and enjoy the journey!


Navigating through the world of cryptocurrencies can often feel like trying to find your way through a labyrinth. From the pioneering Bitcoin, offering a decentralized method of conducting transactions, to Ethereum’s revolution of adding smart contracts to the mix, and finally, to Monero’s emphasis on privacy and untraceability, each cryptocurrency brings its unique touch to the financial world. It’s a bit like stepping into a global carnival, each ride providing a different experience. But with careful consideration and informed choices, this carnival can offer an exhilarating journey into the future of finance.

How to stay safe online:

  • Practice Strong Password Hygiene: Use a unique and complex password for each account. A password manager can help generate and store them. In addition, enable two-factor authentication (2FA) whenever available.
  • Invest in Your Safety: Buying the best antivirus for Windows 11 is key for your online security. A high-quality antivirus like Norton, McAfee, or Bitdefender will safeguard your PC from various online threats, including malware, ransomware, and spyware.
  • Be Wary of Phishing Attempts: Be cautious when receiving suspicious communications that ask for personal information. Legitimate businesses will never ask for sensitive details via email or text. Before clicking on any links, ensure the sender's authenticity.
  • Stay Informed. We cover a wide range of cybersecurity topics on our blog. And there are several credible sources offering threat reports and recommendations, such as NIST, CISA, FBI, ENISA, Symantec, Verizon, Cisco, Crowdstrike, and many more.

Happy surfing!

Frequently Asked Questions

Below are the most frequently asked questions.

Are cryptocurrencies legal?

The legality of cryptocurrencies varies from country to country. In some countries, like the US and Canada, cryptocurrencies are perfectly legal and regulated, whereas in others, like China and Morocco, they are banned. Always check your local regulations before investing in or using cryptocurrencies.

Are cryptocurrencies safe to use?

Cryptocurrencies employ secure technologies like cryptography, making them difficult to counterfeit. However, they are not immune to hacking and should be used with care. It’s a good idea to keep your cryptocurrencies in a secure digital wallet and be aware of phishing scams and other online threats.

What can I buy with cryptocurrencies?

A growing number of businesses, both online and offline, accept cryptocurrencies like Bitcoin for payment. You can buy anything from pizzas to property, depending on the seller’s acceptance. Some people also hold onto their cryptocurrencies as an investment, much like you might hold onto gold or stocks.

Author: Tibor Moes

Author: Tibor Moes

Founder & Chief Editor at SoftwareLab

Tibor is a Dutch engineer and entrepreneur. He has tested security software since 2014.

Over the years, he has tested most of the best antivirus software for Windows, Mac, Android, and iOS, as well as many VPN providers.

He uses Norton to protect his devices, CyberGhost for his privacy, and Dashlane for his passwords.

This website is hosted on a Digital Ocean server via Cloudways and is built with DIVI on WordPress.

You can find him on LinkedIn or contact him here.

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