What is a Cryptocurrency?
Cryptocurrencies are basically an electronic form of money which is utilized in sending and receiving payments online in a safer method. These are sent and processed through an open-source, decentralized network, which is known as the blockchain. This system stores the data of its users, sellers and clients alike, on a number of servers which provides enhanced security.
Breaking into this network is a challenge in itself, but attempting to reach anyone’s personal details can prove to be practically impossible due to the level of encryption.
Altcoins vs. Tokens
In addition, cryptocurrencies usually belong to one of two camps, altcoins and tokens. The first camp is made of coins which operate as closely as possible to the Bitcoin. Each coin follows the original protocol along with changes to the underlying codes. They further function as variants of the first cryptocurrency. Tokens, contrarily, represent a utility or asset, and exist on top of a blockchain. They could stand for anything from loyalty points to other virtual currencies. In order to create a new token, all the developer has to do is follow the standard template, and forge his own coin.
Similar to fiat currencies such as the US dollar, euro, or Japanese yen, these coins also serve as assets that you can invest in online. In fact, they are highly sought after due to their high volatility. Some individuals, who never considered trading online before, are now opening their first trades on these instruments.
Bitcoin was the first virtual currency, and it launched in 2009. This crypto currency set the stage for the others that followed it, and it is still the biggest virtual coin on the crypto market. Its arrival also served as the first time the blockchain technology was introduced and utilized online.
While this alternative coin definitely has had its ups and downs over the years, crypto investors are often attracted to it due to its rather high value per unit.
In January 2018, the Bitcoin recorded an all-time high when it reached the exceptional market price of $19,665.39. Shortly after, it went into a dark phase where its price mostly fluctuated between $6000-$8000. Market experts and analysts say that the best is yet to come, and many expect it to rise to $60,000 or even $250,000 in value.
Bitcoin Cash was the product of a disagreement among the developers of the Bitcoin’s core team. The idea that caused a rift between the two camps was whether to keep all the data available on the blockchain itself, or move it onto a second layer. That would mean that Bitcoin could keep its storage units small and the network would maintain its speed.
The renegades decided against this notion, and went on to split from the original blockchain.
On August 1, 2017, that separation took the form of a hard fork. Bitcoin Cash now features blocks (said storage units) that are 8 times larger than its predecessor’s, and its network is even quicker. At the time of the fork, many Bitcoin owners switched teams which made the latter’s market price soar. Bitcoin, on the other hand, dropped quite a bit but not enough to lose its balance.
Yet another important player is Ethereum, which was launched back on July 30, 2015. The thing that makes this cryptocurrency such a big influencer on the crypto community is its smart contracts. Ethereum basically made it easier to create new virtual currencies by following the standard template. You could say that this crypto’s contribution to the market is the fintech equivalent of Jimi Hendrix to rock music.
Ethereum also had a fork in the road, but it was quite a different story. It all started with a DAO (Distributed Autonomous Organization), which was a prominent ether related project which managed to raise $150 million worth of this cryptocurrency. Unfortunately, the project fell victim to a cyber-attack, and the investors who funded it lost their invested capital.
The ether community held a vote, and many of the participants decided to create a fork that would lead them away from the security breach. A small number of Ethereum loyal clients decided to create a parallel renamed the original blockchain as Ethereum Classic.
Launched in 2011, this crypto coin is nearly identical to the Bitcoin in technical terms. Litecoin was created by Charlie Lee, a former Google employee. Lee had also served as the Engineering Director at Coinbase, which is a well-known online crypto exchange.
Litecoin is yet another fork on the Bitcoin Core client, but the main attributes that set these two altcoins apart is that Litecoin has a speedier block generation, a larger maximum amount of units, and an entirely different hashing algorithm by the name of Scrypt. Nowadays, this cryptocurrency is incredibly popular in Asia, and is often used as legal tender. South Korea appears to be its biggest fan, where people can use this altcoin in a large number of businesses, ATMs, and more. This country is especially fond of the crypto market, and is home to three of the largest crypto exchanges around the world.
This crypto asset is a unique one, as its market price is kept low due to its purpose. Ripple, unlike many of its peers, is utilized by major banks, exchanges, corporations, payment processors, and other financial institutions. Its value usually ranges under the $1, though there had been times where it was worth as much as $3 during the past year .
While the Ripple may not be a trader’s favorite instrument, it makes for a rather stable cryptocurrency. Newbie investors may favor it for the low risk tied to it in comparison to other altcoins and tokens. Some of the companies that use Ripple include UBS, MoneyGram, Western Union, mercury, Selly, and Bichip.
This altcoin is a relatively new one, as it had launched in April 2014. Monero has an obfuscated public ledger, which allows any user to send transactions while remaining completely hidden to observers in regards to the source, destination, and amount.
This coin further issues new units via a proof of work mechanism and miners to verify transactions and maintain the security of the network. This network allows Monero clients to enjoy a better sense of anonymity online. Due to its heightened privacy measures, the network has experienced instances where people bought or sold illicit substances. For reference, Bitcoin has similar issues with drug, weapons, and human trafficking.
Formerly known as Xcoin and Darkcoin, Dash is the 14th largest virtual currency on the market. This crypto asset launched in January 2014, and its ability to host instant transactions make it a popular option for sellers and merchants alike. In addition, Dash users further get to enjoy private transactions with a self-governed and funded organisational structure. Dash DAO also funds several projects and other companies, and as of August 2018 the company had granted about $33 million in Dash. Within that amount about $2.3 million are allocated to projects in developing countries around the world. one of Dash’s protégés is none other than Venezuela, which quickly adopted cryptocurrencies after being hit with hyperinflation.