Cryptocurrency Categories - Which Are The Most Popular And What Are They Used For?

Cryptocurrencies today come in many forms and serve different purposes.

While Bitcoin remains the most well-known, there are many other cryptocurrencies with specific functions, which is why they are divided into different categories.

Understanding these differences can help anyone looking to enter the world of crypto – it's easier to see what a certain coin is used for, how it works, and what to consider before buying.

This guide offers a simple overview of the most popular types of cryptocurrencies and what each of them is used for.

What are cryptocurrency categories?

When talking about cryptocurrencies, you’ll often hear them divided into different categories. This is because not all cryptocurrencies serve the same purpose – some are designed to function as digital money, others support the development of applications, while some are used to provide financial services without intermediaries.

That’s why cryptocurrencies are grouped into specific categories based on their main use case.

It’s important to note that a single cryptocurrency can belong to more than one category. For example, a token might be used both as a means of payment and as a governance tool within a decentralized application. That’s why it's essential to look at the bigger picture and understand the full functionality a cryptocurrency offers when doing your research.

Most Popular Cryptocurrency Categories

Currencies (Digital Money)

These are cryptocurrencies primarily created to serve as a means of payment and a store of value. Their main purpose is to enable fast and secure transfers of value without intermediaries such as banks or payment processors.

The most well-known example is Bitcoin (BTC) – the first cryptocurrency in the world, often referred to as “digital gold.”
There’s also Litecoin (LTC), which offers faster transactions and lower fees.

These currencies function similarly to traditional money, but in a digital and decentralized form.

Smart Contract Platforms

Cryptocurrencies in this category serve as the foundation for building decentralized applications (dApps). Through the use of smart contracts — self-executing code that runs when certain conditions are met — they enable new ways of doing business without intermediaries.

The most well-known example is Ethereum (ETH), the first and largest smart contract platform.
Other examples include Cardano (ADA) and Solana (SOL), which offer alternative solutions with different technological approaches.

These platforms go beyond simple payments — they act as the backbone for entire blockchain ecosystems.

Stablecoins

Stablecoins are digital currencies whose value is tied to a stable asset, most commonly the US dollar. Their main goal is to avoid the high price volatility typically seen with other cryptocurrencies.

The most well-known examples are Tether (USDT) and USD Coin (USDC), both of which are designed to maintain a value close to 1 USD.
There’s also Eurite (EURI), a digital version of the euro, and DAI, a decentralized stablecoin that uses smart contracts to maintain its price stability.

Stablecoins are widely used for trading, transferring funds, and preserving value during times of market uncertainty.

Meme Coins

These cryptocurrencies often start as jokes or part of internet culture, but thanks to strong community support and viral popularity, they can reach significant market value.

The most well-known example is Dogecoin (DOGE), which began as a parody of cryptocurrencies but later became a serious player in the market. There’s also Shiba Inu (SHIB), built on a similar concept but with added functionality.

While meme coins often lack a clear utility, their value can grow due to community backing, media attention, or endorsements from well-known public figures.

Also read: What Are Meme Coins and Why Are They So Popular?

DeFi Tokens (Decentralized Finance)

DeFi (Decentralized Finance) tokens are used in applications that provide financial services without the need for banks — such as lending, saving, swapping currencies, and earning interest.

Uniswap (UNI) enables decentralized cryptocurrency exchange without a central authority.

Aave (AAVE) allows users to borrow and lend cryptocurrencies, while Compound (COMP) lets users earn interest on their crypto holdings.

The DeFi sector gives users more control over their finances and introduces new ways of managing money in a fully decentralized environment.

Gaming and Metaverse Tokens

These cryptocurrencies are used within blockchain-based games and virtual worlds. They allow users to purchase digital assets, play games, participate in metaverse economies, and exchange resources.

An example is Axie Infinity (AXS), which powers a game where users can earn tokens through gameplay. Decentraland (MANA) and The Sandbox (SAND) are used in virtual environments where users can buy land, build structures, and interact within 3D spaces.

This category bridges the gap between crypto, the gaming industry, and virtual reality.

Governance Tokens

Governance tokens give holders the ability to participate in decision-making related to the development of a specific project or protocol. Through voting, users can propose and approve changes to the system's code, rules, or operational structure.

For example, Maker (MKR) allows holders to take part in governing the MakerDAO protocol, while Curve DAO (CRV) enables voting on updates to the Curve finance platform.

This category promotes decentralization and empowers the community to shape the future of the projects they support.

Privacy Coins

Unlike most cryptocurrencies where transactions are publicly visible, privacy coins enable fully anonymous and private transfers.

Monero (XMR) uses advanced technologies to hide information about the sender, recipient, and transaction amount. Zcash (ZEC) offers an option for “shielded” transactions that conceal sensitive data.

These coins are often used by individuals who seek an extra layer of privacy in their digital financial activities.

Layer-2 Protocols

To address issues like scalability and high fees on popular blockchain networks such as Ethereum, so-called Layer-2 projects have been developed. These solutions enable faster and cheaper transactions while still relying on the security of the main network.

Layer-2 technologies help expand everyday use of cryptocurrencies by allowing more users to interact with blockchain systems without long wait times or high costs.

Some of the most well-known Layer-2 projects today include:

Arbitrum (ARB)

Optimism (OP)

Base – a Layer-2 network launched by Coinbase

zkSync

Starknet

These protocols play a key role in the mass adoption of crypto by offering a balance between speed, low transaction costs, and strong security.

AI Cryptocurrencies

With the rise of advanced tools like ChatGPT and growing interest in artificial intelligence, the crypto industry has also started developing projects that combine AI and blockchain technology. This combination has become one of the fastest-growing trends in 2024 and 2025.

Some of the most well-known AI-focused projects include:

Artificial Superintelligence Alliance (FET) – utilizes AI agents for automation and decision-making

Render (RENDER) – a decentralized 3D rendering network increasingly used in AI model processing

Bittensor (TAO) – an innovative project that allows users to contribute to AI model development and rewards them for their input

The fusion of AI and blockchain opens up new possibilities in automation, data processing, and security — giving the crypto industry added value and real-world use cases.

Why Is It Important to Know Which Category a Cryptocurrency Belongs To?

In the world of cryptocurrencies, knowing the name of a coin isn’t enough — it’s important to understand what it actually does and which category it belongs to. This information is valuable for several reasons, especially if you’re planning to invest or use crypto in a smart and informed way.
That’s why it’s crucial to do your research before making any investment decisions.

1. Better understanding of risk and potential

Each cryptocurrency category comes with a different risk profile. For example, stablecoins usually have low price volatility, while meme coins tend to be highly volatile and depend on community sentiment and trends. On the other hand, DeFi tokens and smart contract platforms may offer strong growth potential but also come with technical or security risks.
If you understand the purpose of a cryptocurrency, it becomes easier to assess both its potential — and what could go wrong.

2. Helps with smarter investment decisions

Understanding the different types of cryptocurrencies can help you allocate your funds more wisely. Instead of putting everything into one type of asset, you can combine different categories — for example, one coin for long-term saving, another for trading, and a third for using in decentralized apps.
This approach increases resilience to market fluctuations.

3. Different regulations and use cases

Some categories, such as stablecoins, are increasingly under regulatory scrutiny. Privacy coins, on the other hand, often face stricter treatment due to their focus on anonymity.
By understanding a coin’s function, users and investors can better navigate legal frameworks and be aware of possible restrictions in certain jurisdictions.

In this guide, we’ve covered the most important cryptocurrency categories to help you navigate the ever-growing crypto space more easily.

Whether you’re a beginner or already have some experience, it’s essential to research each cryptocurrency before investing. Learn what it’s used for, how it works, and which category it belongs to — that’s a key step toward entering the world of crypto in a smarter and safer way.

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