In addition to types of cryptocurrencies i.e. coins and tokens, we also have cryptocurrency classifications, namely centralised, decentralised & hybrid. Traditionalists will argue that cryptocurrencies, as a matter of principle, should always remain decentralised. However, due to the ever-evolving crypto landscape, you’ll sooner or later come across cryptocurrencies that position themselves under one of these three classifications.
Let's take a quick look at each of these, beginning with decentralised cryptocurrencies.
Unlike traditional fiat currencies, such as that of the dollar or pound, the supply of decentralised cryptocurrencies, for example, Bitcoin, is not determined by a central authority; the likes of governments or banks, as they instead rely on users of their own network to create new units, a process typically referred to as mining. However, it is important to note that mining is just one means by which cryptocurrencies can come into being, as there are others, for instance, validation. We’ll take a deeper look into the creation of cryptocurrencies in another video.
Centralised cryptocurrencies, on the other hand, are regulated by a single entity, typically private enterprise. Although, we are beginning to see banks and governments explore the notion of distributing their own cryptocurrencies too. An example of a centralised cryptocurrency you may already have heard of is Libra from Facebook.
And then we have the more recent emergence of cryptocurrencies that refer to themselves as hybrid, hybrid cryptocurrencies such as DasCoin claim to take the best of centralised and decentralised currencies while addressing their disadvantages.
In truth, there is an on-going debate as to what makes a cryptocurrency centralized, decentralized or even hybrid, with opinions differing from person to person.