A cryptocurrency refers to a decentralized payment system that allows people to send currency over the web without the necessity for a trusted third party. These transactions are always cheap and free in most cases. It is considered to be virtual or digital and has its security enhanced through the use of cryptography. This security feature makes the currency difficult to counterfeit. It is not issued by a central authority. It is therefore immune to government manipulation or interference. Nowadays there are thousands of cryptocurrencies functioning.
Bitcoin was the first such currency to capture the public imagination and was launched in 2009. Bitcoin’s success brought about the cryptocurrency boom we now see today. Other similar and at times competing currencies such as Litecoin, Ether and Monero offer different advantages to their users. These projects built upon the principles of cryptocurrency, and morphed into highly sophisticated tools that serve as more than just a means of exchange.
Types of Cryptocurrency
Bitcoin, the original cryptocurrency is based on an algorithm called SHA-256. This was originally created by the NSA to overcome a weakness in the first generation of SHA-1 algorithms. Today there are many coins using SHA-256 as well as other types of algorithms that each offer an “improvement” on Bitcoin’s code like scrypt, scrypt-jane and prime algo.
Total decentralization is the main feature of most cryptocurrencies. As a result, there is no specified central point of authority. This is possible since everyone taking part in the transaction has a full copy of the required transactions. This creates a resilient network that cannot be changed or reversed by any policy in the transaction. Governments and banks are now trying to incorporate the technology, effectively aiming to create loosely centralized cryptocurrencies for their own purposes.
High level of anonymity
All Bitcoin transactions can be traced. It is one of the features of the blockchain, although tracing these transactions might be impractical in many cases. Bitcoin offers its users a degree of pseudonymity, which serves to protect the identities of the people who make transactions over its blockchain. Some newer cryptocurrencies have various mechanisms to afford their users complete anonymity. These new systems could be exploited by criminals since it involves borderless, anonymous transactions. It is difficult to report and trace criminal activities within such cryptocurrencies. Bitcoin is now widely monitored by law enforcement, making it an unlikely tool for criminal use.
Cryptocurrencies have made the transfer of funds between different parties much easier and faster. The transfers are facilitated through the use of private and public keys that enhance security. Fund transfers using cryptocurrencies involve minimal processing fees. As a result, users can avoid the steep fees that most financial institutions and banks charge for wire transfers. Regardless of its benefit to the user, this form of fund transfers has a major drawback. It is virtual and does not have a central repository. Therefore, the digital cryptocurrency balance of the user can be easily wiped out whenever the computer crashes. This is why the users need to have a back-up copy of all the transactions they take part in. Additionally, the prices of cryptocurrency rely on demand and supply. Therefore, the rate at which they can be exchanged with another currency can fluctuate widely.
Below are guides to the most interesting cryptocurrencies and altcoins around today.
Bitcoin, or BTC, was created in 2009, and is the most expensive cryptocurrency in the world. It is already accepted by thousands of merchants worldwide. It is entirely electronic and independent of any government or banks.
Litecoin was designed to provide its users with an alternative cryptocurrency that is mined on a similar protocol to that of Bitcoin. It is easier to mine, has four times the maximum coin supply as compared to bitcoin – with 84 million coins to be mined – and can be attained easily by the consumer. It does not compete with Bitcoin but rather complements it.
Ethereum, or Ether, is a revolutionary blockchain that goes beyond simply enabling P2P transactions. The Ethereum blockchain allows anyone to program smart contracts on it, that is self executing contracts. The cryptocurrency that powers Ethereum is called Ether.
The Ripple network has been used severally to exchange any type of currency whether cryptocurrency or traditional country currency. Ripples XRP serves as a bridge that allows for exchanges to take place on this network. This is because users are required to spend a small amount of it in order to complete a transaction.
Monero was developed to give its users complete anonymity, surpassing bitcoin’s pseudonymous nature. It effectively protects the identity of people who make transactions with it, making it very difficult for law enforcement to trace users and transactions. As a result, it became the cryptocurrency of choice in the dark web, but it is not alone.
IOTA is a publicly distributed ledger, making use of the revolutionary ‘Tangle’ protocol. Originally based on a concept called Directed Acyclic Graph (DAG), Tangle is a data structure which does not rely on structured blocks, miners or chains.
Dash is a cryptocurrency that was previously known as Darkcoin or XCoin. It has certain characteristics that resemble Bitcoin to a certain extent, together with some features that somehow solve some of the problems that bitcoin faces right now.
Bitcoin Cash (BCH)
One of the most controversial cryptocurrencies in the space, Bitcoin Cash shares almost every single characteristic with Bitcoin. In fact, they are so similar that supporters of each fight over which of them is the ‘real’ Bitcoin.
The Cardano blockchain is the first decentralized project of its kind, to be built and fully backed by scientific and academic research. Moreover, the platform uses a bespoke programming language called Haskell, allowing an exceptionally high-level of fault tolerance.
Launched in the end of 2013, Dogecoin aimed to differentiate itself technically from Bitcoin, to achieve the goal of reaching wider demographics. Therefore, Dogecoin’s supply, algorithm and other characteristics were tinkered with to make it as fundamentally different.
Peercoin is a cryptocurrency launched in 2012 that aims to mix some of the characteristics of Bitcoin with a parallel Proof of Stake and Proof of Work mechanism.
Feathercoin is an innovative PoW cryptocurrency based on the development of the NeoScrypt algorithm. There are characteristics of Feathercoin that have helped it forge a niche market for itself.
Private Instant Verified Transaction, or PIVX, is an anonymous coin which was launched in 2016 from a fork of Dash. One of its unique selling points is that anyone can stake fully anonymously.
Ethereum ERC-20 Token
An ERC20 token is a token based on a protocol that establishes a standard for the behavior of tokens on Ethereum, but can be adapted to other networks.