What are crypto categories

Cryptocurrencies have evolved far beyond just being a means of payment. While many people still associate cryptocurrencies primarily with transactions, they now offer an array of use cases across a wide variety of industries.
To help make sense of this rapidly growing ecosystem, Luno has categorised cryptocurrencies based on their core functions and industry standards, offering clarity on how they fit into the broader and often overwhelming crypto landscape.
For example, certain cryptocurrencies power decentralised finance (DeFi) projects. Chainlink (LINK), for instance, addresses unique needs by securely integrating data into blockchain networks, driving innovation in DeFi. Similarly, The Graph (GRT), which falls under the artificial intelligence (AI) category, plays a key role in indexing and organising blockchain data, making it accessible for AI applications.
Layer-1
Layer-1 refers to the base blockchain networks, such as Bitcoin and Ethereum, which provide the fundamental infrastructure for cryptocurrency transactions. These networks handle all operations directly on the network, including transaction processing and consensus. While essential for establishing and securing the blockchain, Layer-1 networks can face scalability issues as demand grows. They form the backbone of the crypto ecosystem, supporting various applications and protocols built on top of them.
Layer-2
Layer-2 solutions are technologies built on top of Layer-1 blockchains like Bitcoin or Ethereum to improve scalability. They process transactions outside of the layer-1 blockchain to reduce network congestion, speed up transaction time, and lower costs, while still ensuring security and decentralisation. By handling transactions externally and then recording them on the main blockchain, layer-2 solutions make blockchain networks more efficient and practical for a wider range of applications.
NFTs
NFTs, or Non-Fungible Tokens, represent a category focusing on digital ownership and uniqueness. Unlike fungible cryptocurrencies like Bitcoin or Ethereum, NFTs are unique digital assets verified on the blockchain networks, making them ideal for representing exclusive items such digital art, music, and virtual assets. This category has reshaped industries by allowing creators to tokenize their work, ensuring authenticity and providing direct sales opportunities.
In gaming, NFTs grant players true ownership of in-game items, creating new economies for digital goods. Their value often comes from rarity, creator reputation, or utility in unlocking exclusive content and experiences.
Gaming
The Gaming category explores how cryptocurrencies are transforming the gaming industry by powering blockchain-based games and enabling
true ownership of in-game assets and fostering new economic models. Cryptocurrencies in gaming facilitate transactions within virtual worlds, allowing players to buy, sell, and trade assets like characters, items, and virtual real estate.
This innovation supports decentralised economies where value is determined by player interactions rather than centralised authorities such as game developers or publishers. By integrating blockchain technology, gaming cryptocurrencies enhance transparency, security, and player control, fundamentally reshaping how digital entertainment is experienced and valued.
DeFi (Decentralised finance)
Decentralised Finance (DeFi) represents a category of crypto projects that aim to recreate and improve traditional financial services using blockchain technology. Unlike traditional finance, which relies on intermediaries like banks, DeFi operates on decentralised platforms, providing open, permissionless access to financial services such as lending, borrowing, and trading.
By leveraging smart contracts and blockchain networks, DeFi offers greater transparency, lower costs, and increased accessibility, enabling users to manage their financial assets and participate in financial activities without relying on central authorities.
Smart contracts
Smart contracts are self-executing contracts with the terms directly written into code and run on blockchain networks. They automatically enforce and execute agreements when predefined conditions are met, eliminating the need for intermediaries. By using blockchain’s decentralised and immutable ledger technology, smart contracts ensure transparency, security, and efficiency in various applications, from financial transactions to automated business processes.
This technology underpins many decentralised applications (dApps) and services, enabling trustless interactions and streamlining operations across industries.
Artificial intelligence
As two rapidly growing industries, artificial intelligence (AI) and cryptocurrency are converging to transform the digital landscape. AI enhances cryptocurrency projects by integrating advanced algorithms for
tasks like automated trading, predictive analytics, and fraud detection. This improves blockchain efficiency, with AI analysing vast amounts of data to optimise transactions and predict market trends.
AI cryptocurrency projects leverage these capabilities to offer advanced functionality. An example is The Graph, which uses AI to index blockchain data, streamlining blockchain operations.
Stablecoins
Stablecoins are a category of cryptocurrency designed to maintain a stable value by pegging their worth to a reserve asset, like a fiat currency such as the US dollar or a commodity like gold. They aim to provide price stability, making them ideal for everyday transactions and as a safe haven during market fluctuations.
They bridge the gap between traditional finance and the crypto world by combining the benefits of digital currencies with the stability of traditional assets. Examples include USDC and USDT, which are often used for trading, remittances, and as collateral in DeFi applications.
*Investing in cryptocurrency may result in the loss of capital. This information should not be construed as a solicitation to trade. All opinions, news, research, analysis, prices or other information is provided as general market commentary for information purposes only and is not investment advice or recommendation. Luno always advises you to obtain your own independent financial advice before investing or trading in cryptocurrency.