Top Crypto Categories by Market Cap: Layer 1, Stablecoins, DeFi & More!

Introduction to Crypto Categories

The world of cryptos is vast and constantly evolving, with new coins and categories emerging all the time. For those looking to invest in digital assets, it can be overwhelming to navigate the ever-changing landscape of the crypto market. One way to simplify the process is by focusing on the top crypto categories by market cap.

Market capitalization is a common metric used to measure the size and value of a particular crypto asset. It is calculated by multiplying the price of a coin by its circulating supply. By examining the market cap of different crypto categories, investors can gain insight into the overall health and potential of the industry.

In this article, we will explore the top crypto categories by market cap that every investor should be aware of. We will examine the strengths and weaknesses of each category, as well as the potential risks and opportunities they present. Whether you’re a seasoned crypto investor or just starting to dip your toes in the market, understanding these categories can help you make informed decisions about your investments.

Values as on May 15, 2023.

Category 1: Layer 1 (L1s)

Layer 1 is the biggest crypto category by market capitalization, encompassing the most popular and widely used crypto assets in the market today. These include Bitcoin, Ethereum, and several others. Layer 1 refers to the underlying blockchain technology that powers these cryptos, with each having its own unique set of features and characteristics.

Key Features of Layer 1s:

1. Security: Layer 1 blockchains are designed to be secure, with high levels of encryption and consensus mechanisms that ensure transactions are valid and tamper-proof.
2. Decentralization: Layer 1 blockchains aim to be highly decentralized, with no central authority or single point of failure. This reduces the risk of censorship or interference from outside parties.
3. Scalability: Layer 1 blockchains aim to be scalable, with the ability to process a high volume of transactions quickly and efficiently.
4. Flexibility: Layer 1 blockchains are designed to be flexible, allowing for the development of a wide range of decentralized applications (dApps) and use cases (apart from the likes of Bitcoin).

However, Layer 1 also has its weaknesses and potential risks. One of the biggest concerns is scalability, with many Layer 1 blockchains struggling to handle high transaction volumes without slowing down or becoming congested. Another potential risk is centralization, with some Layer 1 blockchain being controlled by a small group of miners or validators. Despite these challenges, Layer 1 presents many opportunities for investors. With the growing adoption of cryptos and blockchain technology, Layer 1 blockchains are likely to see increased usage and value over time. Additionally, the development of new Layer 1 technologies, such as Ethereum’s upcoming 2.0 upgrade, could lead to improved scalability and efficiency.

This crypto category accounts for about $900 billion worth of market capitalization out of the total crypto market cap of $1.2 trillion as of writing this article, making it the single largest and most valuable category by far. Some major networks in this category include Bitcoin, Ethereum, Cardano, Solana, Polkadot, and the like.

Read more: Top Crypto Projects to Watch Out for in 2023

Category 2: Smart Contract Platforms

Smart contract platforms are the second-largest category by market capitalization in the crypto world. These platforms provide developers with the ability to build decentralized applications (dApps) on top of their networks using smart contracts, which are self-executing agreements with the terms of the contract directly written into code.

Key Features of Smart Contract Platforms:

1. Programmability: Smart contract platforms allow developers to create and execute complex, decentralized applications with custom rules and logic.
2. Interoperability: Many smart contract platforms are designed to be interoperable with each other, making it easier for developers to build applications that work across different blockchains.
3. Decentralization: Smart contract platforms are decentralized, meaning there is no central authority controlling the platform. This ensures the security, transparency, and immutability of the data and applications built on the platform.
4. Tokenization: Smart contract platforms typically have their own native crypto or token, which can be used to pay for transaction fees and incentivize network participants.
5. Governance: Smart contract platforms typically have a governance system that allows token holders to vote on changes to the platform, including protocol upgrades, fee structures, and network parameters.

However, smart contract platforms are not without their weaknesses. One of the biggest concerns is the potential for bugs or vulnerabilities in the code, which can lead to serious consequences such as theft or loss of funds. Additionally, there are concerns around scalability, as some platforms have struggled to handle large amounts of traffic. Some of the most prominent smart contract platforms include Ethereum, which is the largest by market capitalization, as well as other platforms such as Cardano, Binance Smart Chain, and Solana. As the use cases for smart contract platforms continue to expand, there is a growing opportunity for investment and innovation in this category.

This crypto category accounts for about $370 billion worth of market capitalization out of the total crypto market cap of $1.2 trillion as of writing this article, making it the second largest category in this list.

Category 3: Stablecoins

Stablecoins are another significant crypto category by market capitalization. As the name suggests, these cryptos offer a stable value, making them less volatile than other digital assets. Stability is typically achieved by pegging the value of the stablecoin to a traditional currency or commodity like the US dollar, gold, or even oil – the most common one being the US dollar.

Key Features of Stablecoins:

1. Stability: As the name suggests, stablecoins offer stability by maintaining a peg to a stable asset such as the US dollar or gold. This helps to mitigate volatility risks that are associated with other cryptos.
2. Liquidity: Stablecoins offer high liquidity due to their stable value, making them a popular choice for traders and investors who need to move in and out of crypto trading positions quickly.
3. Security: Stablecoins are usually backed by a reserve of the underlying stable asset, providing a sense of security to users. Additionally, many stablecoins operate on a blockchain which offers transparency, immutability, and resistance to hacking.
4. Low costs: Stablecoins are designed to be efficient and inexpensive to use. Transactions can be processed quickly and without the high fees associated with traditional financial systems.
5. Global accessibility: Stablecoins can be accessed from anywhere in the world with an internet connection. This makes them a useful tool for cross-border transactions, remittances, and other international payments.
6. Interoperability: Many stablecoins can be used across multiple blockchain platforms, making them versatile and useful for a range of different applications.

However, stablecoins are not without their weaknesses and risks. One potential weakness is their reliance on a centralized authority to manage the reserve that backs the stablecoin’s value. This creates a single point of failure and can be vulnerable to fraud or other risks. Another significant risk is the potential for a “black swan” event, such as the May 2022 crash of Terra’s UST, which was caused by a liquidity crisis. If too many holders try to sell their stablecoins at the same time, the central authority may not have enough reserves to back all the stablecoins in circulation, leading to a crash in value. Despite these risks, stablecoins have continued to grow in popularity and market capitalization. Examples of stablecoins include Tether (USDT), USD Coin (USDC), Dai (DAI), and more recently Curve Finance’s crvUSD, which was released on the testnet.

This crypto category accounts for about $131 billion worth of market capitalization out of the total crypto market cap of $1.2 trillion as of writing this article, making it the third largest category in this list.

Additional Read: Top Stablecoin List

Category 4: Decentralized Finance (DeFi) Platforms

Decentralized finance (DeFi) is one of the fastest-growing categories in the crypto space, currently ranking fourth by market capitalization (excluding centralized exchange tokens and exchange tokens). DeFi is a new financial system built on decentralized networks that operate independently of central authorities, offering users more control over their assets and greater access to financial services.

Key Features of Decentralized Finance Platforms:

1. Open access: Decentralized finance networks are open to anyone with an internet connection and do not require permission to join or participate.
2. Decentralized Governance: Decentralized finance networks are governed by a decentralized group of stakeholders who vote on decisions and proposals, allowing for a more democratic and transparent system.
3. Smart contracts: Decentralized finance networks use smart contracts to automate financial transactions and enforce rules and regulations, eliminating the need for intermediaries and reducing costs.
4. Transparent and immutable: All transactions on decentralized finance networks are transparent and usually stored on a public ledger, making them immutable and resistant to fraud and manipulation.
5. Programmability: Decentralized finance networks are programmable, allowing developers to build decentralized applications (dApps) that can perform complex financial functions without the need for intermediaries.

However, DeFi has its own weaknesses. One of the most significant challenges facing DeFi is its susceptibility to smart contract bugs and security vulnerabilities. These can lead to severe financial losses for users, as seen in high-profile incidents such as the 2021 Poly Network hack. Another challenge is the lack of regulation and oversight, which has led to concerns about the potential for fraud and money laundering. Despite these challenges, DeFi continues to present significant opportunities for growth and innovation in the financial industry. Some of the most popular DeFi projects include Uniswap, Aave, and Compound. As the DeFi space continues to mature, we can expect to see increased adoption and the emergence of new DeFi applications that offer even more advanced financial services.

This crypto category accounts for about $50 billion worth of market capitalization out of the total crypto market cap of $1.2 trillion as of writing this article, making it the fourth largest category in this list (excluding centralized exchange tokens and exchange tokens).

Additional read: Top 5 DeFi Tokens to Watch Out For(by Market Cap)

Category 5: Memecoins!

“Memecoins” is a relatively new category in the crypto space that has gained immense popularity in recent years. These coins are built around the idea of memes and have become a major force in the crypto market, attracting a large number of retail investors. As of May 2023, the total market capitalization of memecoins is over $19 billion, making it one of the top categories by market cap.

Key Features of Memecoins:

1. Community-driven: Memecoins are heavily driven by community participation and engagement. The community is usually active on social media platforms, where they discuss and promote the coin.
2. Viral marketing: Memecoins rely heavily on viral marketing to spread the word about their coin. This often involves creating memes, videos, and other forms of content that can go viral on social media.
3. Volatility: Memecoins are highly volatile and are subject to sudden price swings. This can be both an advantage and a disadvantage for investors, as it can result in high returns but can also lead to significant losses.
4. Low entry barriers: Memecoins are often easy to buy and sell, with low entry barriers. This makes them accessible to a wide range of investors, including those with limited financial resources.

However, the memecoin category is not without its weaknesses and potential risks. Due to their popularity and hype, memecoins are often subject to extreme volatility and sudden price movements, making them a high-risk investment. Moreover, the lack of regulation in the memecoin market can lead to fraudulent activities and scams. Some popular examples of memecoins include Dogecoin, Shiba Inu, and Pepe. PEPE is one of the most recent memecoins in the market, which is based on the meme of a green-colored frog, and it says that it is the “most memorable memecoin”. While these coins have gained a significant following, investors should exercise caution when investing in memecoins and do their due diligence to avoid potential pitfalls.

This crypto category accounts for about $19 billion worth of market capitalization out of the total crypto market cap of $1.2 trillion as of writing this article, making it the fifth largest category in this list.

Read more: Top Meme Coins to Keep an Eye on in 2023 

Category 6: Governance Tokens

Governance tokens are cryptographic tokens designed to enable participation and decision-making within decentralized networks. They provide a mechanism for token holders to have a say in the project’s future development, protocol upgrades, funding allocation, and more. These tokens are often distributed to community members, early investors, or users who actively contribute to the project.

Key Features of Governance Tokens:

1. Ownership and Voting Rights: Granting token holders the power to influence governance decisions – thus making it a community-driven effort and not run by a few individuals.
2. Proposal and Voting Mechanism: Enabling holders to propose and vote on protocol upgrades and changes, also adding further power to the community-driven idea.
3. Incentivized Participation: Rewarding active engagement with additional tokens or other incentives.
4. Decentralized Decision-Making: Governance tokens essentially enable a democratic approach to project governance by bringing about the above-mentioned points like ownership and incentivization.

One of the key features of governance tokens is their ability to grant voting rights. Token holders can use their voting power to propose and vote on various initiatives, such as protocol upgrades, treasury management, or changes to consensus mechanisms. This democratic approach allows the community to collectively shape the project’s direction, fostering a sense of ownership and decentralization.

Several prominent projects have implemented governance tokens with thriving communities and active governance processes. For instance, platforms like Compound (COMP), Aave (AAVE), and Uniswap (UNI) have introduced governance tokens that allow users to influence lending protocols, decentralized exchanges, and other crucial aspects of their respective ecosystems.

Know more about Top 6 Governance Tokens

Category 7: Liquid Staking Tokens

Last but not least is the category of liquid staking tokens. As blockchain networks continue to evolve, new innovations emerge to optimize the utility of cryptos. One such advancement is the concept of liquid staking tokens, which revolutionizes the traditional staking process. Liquid staking tokens enable token holders to maintain liquidity while simultaneously participating in the staking ecosystem. Let’s explore the world of liquid staking and delve into its key features.

Key Features of Liquid Staking Cryptos:

1. Staking Liquidity: Liquid staking tokens allow users to maintain the liquidity of their assets while staking them. This eliminates the usual lock-up period associated with staking.
2. Flexible Asset Utilization: Holders of liquid staking tokens can utilize their staked assets as collateral or in other DeFi protocols, unlocking additional opportunities for earning yield or accessing liquidity.
3. Staking Rewards: Similar to traditional staking, liquid staking token holders can earn staking rewards, providing an incentive to participate in the staking ecosystem.
4. Market Exposure: Liquid staking tokens provide holders with exposure to both the staked asset and the underlying network’s growth potential, allowing them to benefit from potential price appreciation.
5. Risk Management: By maintaining liquidity, liquid staking tokens provide users with the flexibility to manage their risk exposure more effectively and swiftly react to changing market conditions.

Liquid staking tokens offer a unique opportunity for crypto holders to participate in staking while maintaining the benefits of liquidity and flexibility. By combining the rewards and benefits of staking with the ability to utilize assets in other financial applications, these tokens open up new avenues for maximizing the potential returns of staked assets. As the crypto ecosystem continues to evolve, liquid staking is poised to play a significant role in shaping the future of staking and DeFi.

Read more: Top Liquid Staking Crypto Tokens in 2023

So, how can you invest in these various tokens?

Today investing in crypto assets is extremely simple with the CoinDCX App! Just download the CoinDCX crypto investing app, enter the details required, and wait for your profile to get verified. Once done, fund your wallet and you can now invest in any token of your choice!