Cryptocurrencies have been around for over a decade, with a massive multi-trillion-dollar market presence and penetration across several industries, including retail banking, remittance, payments, corporate finance, real estate, and more.
Here is a detailed explanation of cryptocurrencies, their history, and the different types.
Definition
A cryptocurrency is a digital token that can be spent like real money to buy goods and services. It is issued on a blockchain and used via a crypto wallet. Anyone can buy them from exchanges or other users.
History
Cryptocurrencies were first conceived during the 1980s as a form of digital currency. Some early contenders were eCash and DigiCash, both founded by David Chaum.
During the 1990s, the concept of Digital Gold became more popular as a decentralised form of currency. Nick Szabo designed BitGold, and Wei Dai conceived b-money. However, these currencies still lacked a solution to the double-spending problem, meaning they could be copied indefinitely, resulting in hyperinflation.
The first successful cryptocurrency that could not be copied and used indefinitely was Bitcoin. It was developed by Satoshi Nakamoto from 2007 to 2009 and was launched on 3 Jan 2009. It featured a peer-to-peer network where multiple participants verified transactions in real time, eliminating the need for a centralised overview. Ripple Coin (later XRP) followed soon in 2013.
A few years later, stablecoins made it into the markets with Tether’s USD (then RealCoin) being the first one.
The later generations of cryptocurrencies included Ethereum, which was DeFi-capable, meaning that it could be used in banking operations such as borrowing, lending, staking, etc., in an automated way without human interference.
Types of Cryptocurrencies
There are several types of cryptocurrencies based on their underlying technology, utility, and usage. We have listed a few top ones for your easy understanding.
Tokens and Coins
These are the oldest and the most common types of cryptocurrencies. Their price fluctuates according to the demand they have in the market.
Examples: Bitcoin (BTC), Ethereum (ETH), Solana (SOL), BNB Coin (BNB), and others.
Stablecoins
These are cryptocurrencies whose value remains fixed because they act as a representation of fiat currencies on the blockchain. Usually, people first buy these cryptocurrencies and then use them to trade in crypto markets.
Examples: Tether USD (USDT), Circle USD (USDC), USD1, Frankencoin(ZCHF), and others
Yield Tokens
Yield tokens are basically cryptocurrencies that have inbuilt yield mechanisms associated with them. These cryptocurrencies are basically bought by users who simply hold them and get the yield rewards (interest).
Examples: Binance’s BFUSD
Liquidity Provider (LP) Tokens
These are cryptocurrencies that you get when you deposit your assets (crypto) in any liquidity pool to earn some interest. LP tokens act as proof that you have deposited some money into a pool. When you return them, you get your initial crypto back.
Top 3 Cryptocurrencies
1. Bitcoin (BTC)
Bitcoin was the first successful cryptocurrency created in 2009 by the mysterious cryptographer Satoshi Nakamoto. Previous cryptocurrencies could not solve the double-spending problem, which meant a crypto token before Bitcoin could be copied and spent indefinitely, resulting in hyperinflation.
2. Ethereum (ETH)
Ethereum was created in response to Bitcoin as a faster and technologically superior alternative in 2015 by cryptographer Vitalik Buterin, Gavin Wood, Charles Hoskinson, Joseph Lubin, Anthony di Iorio and Mihai Alisie. It featured smart contracts, which were used to automate transactions like swapping one crypto for another, creating exchanges, etc., all of which gave birth to a multi-billion DeFi ecosystem years later.
3. Tether USD (USDT)
Tether USD (initially called Realcoin) is the largest stablecoin in crypto markets. It was created in 2013 as Realcoin, meant to be on the Bitcoin blockchain, but soon transferred to Ethereum as an ERC-20 token.
USDT survived the May 2022 stablecoin crisis, where we saw it survive a brutal crypto shorting regime that sank Terra USD and many smaller stablecoins.
How to Buy and Sell?
Crypto Exchanges
P2P Platforms
DeFi Platforms
F2F Trading
Safety and Security
Please note that your crypto never leaves its blockchain. Wallets are used to store the keys that are used to assess these blockchain addresses.
Crypto Wallets
Self-owned (self-custody) crypto wallets are one of the most common ways of keeping your cryptocurrencies safe because they offer full control in situations like exchange hacks, exploits, arbitrary bans, regulatory actions, and more. They ensure that even in the worst scenarios, your crypto remains under your control.
Hot Wallets
Hot wallets are software that can be installed on your desktop, phones, and even browsers. These wallets keep your crypto keys safe, which are used to log in to your blockchain addresses and transact with them.
Cold Wallets
Cold wallets are hardware devices that keep your private keys safe. They are preferred because when they are not in use, they go offline, preventing any hack from online sources.
Exchange Accounts
All exchanges offer a free crypto wallet with your account. These wallets allow you to buy and store crypto without having to go through complex wallet storage systems. You can also transfer crypto within the exchange (i.e., to other users) for free.
However, exchanges do suffer from liquidity issues, like in the case of FTX, or can be hacked and have funds drained, like in the Bybit hack in 2024 and the Binance hack in 2026. Also, exchanges can ban your account, seize your funds, or stop you from accessing your crypto, based on their security protocols, regulatory pressure and other reasons.
We experienced this issue in June 2026 when Coinbase arbitrarily froze one of our clients’ funds for 15 days.
Side note: Proof of Reserves
Before storing funds in an exchange account, ensure exchanges follow a strict proof-of-reserves system that tracks all funds in an on-chain tracker. The information can be used to verify whether the exchange has sufficient funds to cover user deposits and withdrawals.
Crypto Custodians
Crypto Custodians are established institutions that handle your cryptocurrencies in return for a small fee. They are managed by expert blockchain developers and asset managers to give you the maximum security. All the crypto ETFs are partnered with an asset manager, Coinbase Custody in most cases.
Frequently Asked Questions
1. Are cryptocurrencies legal?
Yes, they are legal in most countries across the world except a few jurisdictions like Iran, China, Bangladesh, Nepal, etc.
