A guide to the 8 types of cryptocurrency in Canada

Key details

• What are the main types of crypto? Cryptocurrencies can be grouped by their function. Key categories include foundational tokens (like Bitcoin), utility tokens that grant access to a service (like Chainlink), governance tokens for voting, asset-linked tokens that track a real-world price (like stablecoins), and community-driven memecoins.
• Is a "coin" the same as a "token"? While often used interchangeably, "coins" (like Bitcoin) are typically the native asset of their own blockchain. "Tokens" (like Uniswap) are usually built on top of an existing blockchain, like Ethereum.
• Can a crypto fit in multiple categories? Yes. A single cryptocurrency can have multiple functions. For example, Ethereum's ETH is a native coin used for transaction fees, but it's also a utility token that powers smart contracts on its network.
• What are VRCAs? This is the regulatory term used in Canada for what are commonly known as "stablecoins." It stands for Value Referenced Crypto Asset.

An investor's guide to the different types of cryptocurrency

With thousands of different digital assets, each with a passionate community claiming it’s the next big thing, it can be difficult to find a clear signal in the noise.

However, most of these assets can be organized into a handful of distinct categories based on their purpose and technology.

Understanding these categories is the first step to navigating the ecosystem with confidence. This guide provides a clear framework for classifying the different types of tokens that exist and how they are used.

Foundational and application tokens

This first group includes the tokens that form the bedrock of the crypto ecosystem, either by acting as the native currency of a blockchain or by enabling specific applications to run.

Native tokens

Native crypto assets are the foundational coins of their respective blockchains.

Some big examples include: Bitcoin, Litecoin, XRP, and Bitcoin Cash

These tokens are used as a store of value, a medium of exchange (payments) between users, and facilitate transaction fees within the blockchain.

Typically, native tokens share a name with their blockchain, and in cases like Ethereum and Solana, native tokens may also have additional utility which makes them both a native token and a utility token.

Utility tokens

Utility tokens grant users access to a product or service on a blockchain. Think of them as digital keys or passes.

They can be native to a blockchain (like Ethereum's $ETH, used to pay "gas" fees for smart contract execution), but they don’t have to be native and exist on top of a blockchain instead.

For example: Basic Attention Token ($BAT) is used within the Brave browser ecosystem to reward users for viewing ads and to allow advertisers to pay for campaigns.

Similarly, Chainlink ($LINK) is a utility token that rewards network operators for providing reliable real-world data to the blockchain. These operators are also required to stake $LINK as collateral, which incentivizes accuracy and reliability.

Governance tokens

Governance tokens are a specific type of utility tokens which are typically used to create a Decentralized Autonomous Organization (DAO) that ultimately controls a blockchain protocol.

What are DAOs? DAOs are organizations that operate without an appointed leader and instead make decisions through decentralized voting by its membership, which is carried out by smart contract or code.

In most cases, owning a governance token gives the token holder the right to cast one vote for any protocol decisions. Similarly, owning a thousand tokens, gives the token holder the right to cast a thousand votes.

This mechanism ensures that users with a larger financial interest in the protocol (by holding more tokens) have more influence over the changes or decisions that affect that protocol.

Popular governance tokens: Uniswap (UNI), Aave (AAVE), Maker (MKR), Arbitrum (ARB), Lido DAO (LDO), Curve DAO token (CRV), Yearn.finance (YFI), and Compound (COMP) are all popular governance tokens that have spent considerable time within the top 100 ranked coins by market capitalization over the past few years.

How do you become part of a DAO?

Any entity that wants to become part of a DAO can do so by acquiring the governance token for that DAO.

This creates a situation where wealthy entities can acquire a large amount of tokens and centralize a lot of the voting power within a given protocol.

Additionally, many token holders abstain from voting, and choose to own governance tokens only for price speculation, which creates challenges for DAOs by increasing the weight of the votes that do get cast.

Despite these challenges, governance tokens and DAOs are a core component of the crypto ecosystem, with numerous top tokens being governance tokens.

Asset-linked and privacy tokens

This group of tokens derives its function from its relationship to external assets or its ability to obscure data.

Value referenced crypto assets (VRCAs or stablecoins)

VRCAs, widely known as “stablecoins,” are tokens designed to maintain a stable value by pegging their price to another asset, most commonly a fiat currency like the U.S. dollar. There are also stablecoins that peg their price to other underlying assets such as gold (PAXG) or bitcoin (WBTC).

The most common way of maintaining the price peg of a stablecoin is by holding a reserve of the underlying asset(s) that is equal to or greater than the amount of stablecoin that has been issued on-chain.

This reserve ensures that the stablecoin users have confidence that the issuer of the token can facilitate redemption of the coin for the commensurate underlying assets.

For example: Circle, the issuer of USDC publishes their reserves regularly so that users of their stablecoin are confident in their redemption capabilities. Circle has also entered into an undertaking with the Canadian Securities Administrators (CSA) to allow USDC to be bought and sold on registered crypto trading platforms (CTPs) in Canada.

Important: the “stablecoins” moniker can be deceiving.

There is no guarantee that the VRCA will maintain a stable value when traded on secondary markets or that the reserve of assets will be adequate to satisfy all redemptions. Due to the redemption risk for various issuers, a VRCA is not the same as and is riskier than a deposit in a bank or holding cash with the CTP.

Central bank digital currencies (CBDCs)

Central Bank Digital Currencies (CBDCs) are similar to fiat-backed VRCAs because they intend to peg their value to a fiat currency. However, instead of a private issuer CBDCs are issued by central banks that are government agencies that control the money supply of any fiat currency.

Bahamas (Sand Dollar), Jamaica (Jam Dex), and Nigeria (eNaira) are countries that have launched a CBDC as of July 2025. China, India and Russiaand, Russia are believed to be exploring or in the pilot stages of their own CBDCs.

• Benefits of CBDCs: They have the same benefits of blockchain technology, with increased trust of redemption beyond typical stable coins, as the tokens have been issued by the controller of the underlying money supply.
• Why many traders are skeptical: Many crypto users are skeptical about the insights into public spending and transaction data that becomes readily available to government agencies when that government controls the blockchain network or the crypto that is being exchanged.

Privacy tokens

Privacy tokens are a specific type of token that exists on a blockchain that is designed to obscure or completely hide transaction details, like the sending source of a transfer, from public view.

Blockchains like Bitcoin and Ethereum make all transaction details public and searchable, whereas privacy networks and privacy tokens aim to provide increased anonymity for their users.

What are popular privacy tokens?

Monero (XMR) and Z Cash (ZEC) are two of the most popular privacy tokens

Monero: uses a mechanism called Ring Signatures to create privacy around token transfers. When XMR is transferred between two addresses, Monero’s network takes the public key of the sending address and adds other legitimate public keys to the “ring.” Observers can see that one of the public keys in the ring was the sender, but there is no way to tell which one of the keys was the true sender.

Additionally, Monero uses “stealth addresses,” which is where a unique, one-time address is created for the recipient of a transfer. This means that the recipient’s true public key is never shown in the transaction details on-chain.

Z Cash: uses zero-knowledge (“ZK”) proofs, which is a mechanism that allows one party to prove that information is true without divulging any information about why the information is true.

This allows a sender to prove that they have a ZEC balance and the ability to send those assets without revealing the transaction details publicly on-chain.

Community-driven and emerging tokens

This final group includes tokens driven by cultural trends and new, innovative use cases for blockchain technology.

Memecoins

Memecoins are tokens that are created with no real utility or purpose, often on an existing, established network like Ethereum or Solana. Memecoins often follow internet trends or jokes, and intend to allow token holders to participate in those trends through online communities and hype.

• Memecoin’s roots: Dogecoin
  One of the earliest memecoins was Dogecoin (DOGE), which was created as a parody of the crypto craze back in 2013. It is one of the few memecoins that actually is a native token of its own network, and has evolved into a token that is commonly used as a payments mechanism between peers.
  Following the trend of dog-based coins, Shiba Inu (SHIB), Floki Inu (FLOKI), Bonk (BONK), and dogwifhat (WIF) all are popular memecoins that stemmed from an internet joke, ultimately gaining considerable market capitalization.
• A political twist enters the scene
  In early 2025, Donald Trump promoted the Official Trump Coin (TRUMP), a memecoin launched by World Liberty Financial. His promotion saw extremely large trading volume flow into exchanges from individuals looking to purchase TRUMP and participate in the price action.
  The subsequent launch of MELANIA and BARON tokens from World Liberty Financial saw less hype from the public, but the launch of the three tokens reinforced that public participation in memecoin trading is significant.

Real world asset (RWA) tokens

Use cases for crypto and blockchain technology are expanding rapidly, and tokenization of real word assets (RWAs) has become a topic of increasing interest.

RWAs can be based on any existing asset. Some groups have tokenized real estate, allowing token holders to participate in investing in large-scale real estate schemes such as rental buildings or resorts.

Tokenizing artwork is another example of RWAs, allowing token holders to participate in the price action of highly-valued art.

Tokenization of traditional financial products, like stocks and etfs, is another popular use case for RWAs. RWAs based on stocks would allow users around the globe to participate in price action of underlying equities in a 24/7 marketplace.

This technology is driving the democratization and accessibility of finance through blockchain.