What are the three categories of cryptocurrencies?

Cryptocurrencies are often broadly categorized to help distinguish their functionalities, use-cases, and technological infrastructure. Three primary categories typically include store of value cryptocurrencies, utility tokens, and stablecoins.

Store of Value Cryptocurrencies

Store of value cryptocurrencies are akin to digital gold. Their primary purpose is to hold value over time, making them an investment asset. The most prominent example of this type is Bitcoin (BTC). Created in 2009 by an anonymous entity known as Satoshi Nakamoto, Bitcoin offers a decentralized alternative to traditional fiat currencies. With a limited supply capped at 21 million coins, its scarcity is part of what drives its value – much like gold.

Another notable cryptocurrency in this category is Litecoin (LTC). Often referred to as the silver to Bitcoin’s gold, Litecoin presents itself as a lighter and faster alternative to Bitcoin but serves a similar purpose in terms of being a store of value.

Utility Tokens

Utility tokens are designed to provide users with access to a specific product or service provided by a company. Unlike store of value cryptocurrencies, these are not meant to be investments; instead, they serve a functional role within their respective ecosystems.

The Ethereum platform’s native token, Ether (ETH), is a prime example of a utility token. It powers transactions and smart contracts on the Ethereum network, acting as both fuel for transaction processing and a medium for accessing the platform’s features.

Another significant utility token is Filecoin (FIL), which incentivizes computer network participants to provide file storage for others. By doing so, it aims to create a more efficient and less centralized web infrastructure.


Finally, stablecoins aim to bridge the gap between the benefits of cryptocurrency and the relative stability of fiat currency. They are pegged to a stable asset, like the US dollar or gold, to maintain a consistent value. This is in contrast to other cryptocurrencies, which can be highly volatile.

Tether (USDT) is perhaps the most recognized stablecoin, maintaining a 1:1 value ratio with the US dollar. It provides the advantages of cryptocurrency, such as fast transactions and anonymity while aiming to avoid the price fluctuations associated with assets like Bitcoin.

Another noteworthy stablecoin is Dai (DAI), which is soft-pegged to the US dollar but operates on a decentralized platform. It maintains its value without central control through a system of smart contracts on the Ethereum blockchain.


  • Do thorough research to understand the differences between the categories.
  • When considering investment, assess your risk tolerance and investment goals to determine which type of cryptocurrency best suits your needs.
  • Be aware of regulatory changes as they can significantly impact different categories of cryptocurrencies in terms of usage and value.

Combining all three types of cryptocurrencies in your portfolio could potentially diversify risk and exposure to the volatile crypto markets, but it is important to stay informed and be cautious when navigating such a complex investment landscape.