On a project I had to create a custom folder content type. I added it to a document library as a content type (as shown in the figure below).
The default folder content type cannot be removed. Unlike a document, it cannot be removed as other document content types. However, there is an option in Advanced Document Library settings which allows you to turn it off.
Unfortunately, turning it off, leads to a new set of problems, as shown below. Once you turn off folders, everything in a document library will be reordered alphabetically, mixing folders and documents as if they were entities of the same type.
To find more about solution check the full article here.