Mention the word cryptocurrency and most people will instantly think about Bitcoin. For some, cryptocurrency is an alternative name for Bitcoin. This is because Bitcoin was the trendsetter, the leader amongst a growing wave of cryptocurrencies based on a decentralized P2P network. However, there is more to cryptocurrencies than just Bitcoin. So far, there are over 4000 different types of cryptocurrencies. Many more are being introduced into the world every single day. With Bitcoin having identified itself as the leader in the world of cryptographic currencies, the other cryptocurrencies are known as ‘altcoins’, which simply means that they are alternatives to Bitcoin. Most of these altcoins were inspired by Bitcoin. Many use a variation of the Bitcoin protocol, with some changes made to reflect their core objective. However, not all altcoins are variants of Bitcoin. Some developers have built their altcoins from scratch, with their own distinctive core framework.
Despite the existence of thousands of cryptocurrencies, only a handful have any relevance. Of these, even less have managed to achieve a market capitalization of over $1 million. Now, we will take a look at some of the most relevant cryptocurrencies.
Bitcoin (BTC)
This is the world’s first and most known modern-day cryptocurrency. Even though most people might not understand much about it, almost everyone has heard about Bitcoin. Bitcoin is a peer-to-peer (p2p) digital payment system that facilitates instant transactions without having to go through an intermediary. Bitcoin was first introduced into the world in October 2008, when someone using the pseudonym Satoshi Nakamoto published a white paper outlining the architecture and working method of the cryptocurrency. In January 2009, Nakamoto mined the first Bitcoin Block (referred to as the Genesis block), thereby creating the first Bitcoins. By developing Bitcoin, Nakamoto’s objective was to transfer the control of money from banks and governments to the people, in the same way, that the internet transferred control over information to the people.
New Bitcoins are created as a reward for mining, which is what keeps the Bitcoin protocol running. The Bitcoin protocol is configured in a way that keeps the rate of production of new Bitcoins around a certain average. If more processing power is deployed to mine for new Bitcoins, mining becomes harder. If some processing power is taken from the network, the difficulty of mining for new Bitcoins decreases. The protocol was created with a limit of 21 million Bitcoins, after which no more Bitcoins will be released.
Bitcoin was developed to be a payment system, therefore people can use Bitcoin to buy goods and services both on the internet and offline. Currently, there are hundreds of thousands of businesses that accept Bitcoin payments. Apart from using Bitcoin to pay for goods and services, Bitcoin can also be traded against other currencies or held as an investment. Holding Bitcoin as an investment asset has become very popular, which saw the price of one Bitcoin around $57,000 as of now.
Bitcoin can be divided into smaller units known as millibitcoins, microbitcoins, and satoshis. The smallest unit of Bitcoin is the Satoshi (0.00000001), which was named in honor of Bitcoin’s mysterious inventor. As the first-ever modern cryptocurrency, Bitcoin is the easiest to get and enjoys the widest acceptance. Bitcoin is also the largest, with a market capitalization of over $300 billion, which exceeds the combined market cap of the altcoins in this list.
Ethereum (ETH)
Ethereum comes second to Bitcoin in terms of popularity and market capitalization. Just like Bitcoin, Ethereum is an open-source, decentralized platform that is based on blockchain technology. Unlike Bitcoin, however, Ethereum is not a payment platform. Instead, it is a platform that allows developers to build and deploy various kinds of blockchain-based decentralized applications, which are referred to as DApps. The tokens or coins of the Ethereum protocol are known as Ether. One of the most outstanding features of Ethereum is ‘smart contracts, which are lines of code that allow the transfer of value with zero risks of fraud or interference. This means that apart from money, smart contracts can be used on the Ethereum platform to transfer other valuables such as shares, land titles, and car ownership, to mention a few. Ethereum was created and launched in 2015 by Vitalik Buterin, a young Russian-Canadian programmer.
In the long run, Ethereum holds much more promise than Bitcoin. While the two competing cryptocurrencies both rely on blockchain technology, they have major differences in terms of objective and capability. Bitcoin is strictly a payment system, which is only one application of blockchain technology. Instead of focusing on one use as Bitcoin did, Ethereum allows developers to build all kinds of decentralized apps. This means that Ethereum has the capability of revolutionizing all services and sectors that are currently centralized. Just like Bitcoin, the value of Ethereum has grown exponentially for many years. The price of one Ether is around $4000 as of now.
Today, Ethereum has a market capitalization of about $397 billion. Today, there are two parallel Ethereum blockchains, Ethereum (ETH) and Ethereum Classic (ETC). Ethereum Classic was introduced after a split that came following the hacking of the Ethereum based DAO project in September of 2016, where about $50 million worth of Ether was stolen.
Litecoin (LTC)
Litecoin is among the first cryptocurrencies to be launched following the emergence of Bitcoin. Unsatisfied with the long wait times of Bitcoin transactions, a Google software engineer named Charles Lee decided to create his own alternative to Bitcoin, which he launched in 2011 and named Litecoin. By launching Litecoin, Lee’s objective was to make small but effective changes that would improve the efficiency of Bitcoin and other cryptocurrencies that relied on the proof of work (POW) verification system.
One of the major changes that Lee made was the cryptographic hash function used by Litecoin. Unlike Bitcoin which uses the SHA256 hash, Lee introduced ‘scrypt’ in Litecoin. Switching to ‘scrypt’ allowed Litecoin to process and confirm transactions faster. Litecoin transactions are verified in about two minutes, while Bitcoin might take up to 10 minutes to verify transactions. Another advantage of using ‘scrypt’ is that it allowed users with consumer-grade CPUs to mine for coins, unlike Bitcoin which requires miners to have CPUs that are specialized for mining.
Lee maintained the built-in scarcity that is characteristic of Bitcoin. However, Litecoin has a limit of 84 million coins as opposed to Bitcoin’s 21 million. By doing so, Lee gave Litecoin more liquidity, since there are more coins available for purchase, preventing the hoarding that has become so common with Bitcoin buyers. Another major difference between Litecoin and Bitcoin is that Litecoin uses a slightly different mining protocol, which allows a fairer distribution of mined coins. Litecoin also allows for faster testing and implementation of new technology. For instance, Litecoin pioneered and implemented SegWit (Segregated Witness) technology way before Bitcoin. All in all, Litecoin is a strong cryptocurrency with a good reputation and solid economic principles. Litecoin currently has a market capitalization of about $27 billion.
Read: Litecoin Comparison with Bitcoin and Ethereum
IOTA (IOT)
The developers of IOTA built it with the objective of making it the backbone for the Internet of Things (IOT). The Internet of Things refers to the network of internet-enabled day-to-day physical objects which use embedded sensors to collect and transmit data. IOT includes things like internet-enabled cars, computers, kitchen appliances, microchips, home automation devices, hospital devices, and so on. By being the backbone of IOT, IOTA aims to achieve its call of being the ‘Ledger of Everything’.
Apart from simply being the backbone of IOT, IOTA was also developed to solve some of the challenges faced by Bitcoin, including issues of scalability, speed, and transaction fees. IOTA has one key difference between it and other cryptocurrencies like Bitcoin. Whereas Bitcoin and most other cryptocurrencies are based on blockchain technology, IOTA is based on something known as the ‘Tangle’. The Tangle is a Directed Acyclic Graph (DAG), a different kind of distributed ledger whose protocol is different from the blockchain protocol.
With blockchain-based cryptocurrencies, the network of computers needs to verify a transaction before it is completed. With the Tangle, verification does not rely on the network. Instead, the Tangle relies on a system that requires the sender to perform some proof of work before they can make their transaction. By doing so, the sender approves two transactions, thereby combining the transaction and its verification. Since it is up to the sender to provide the proof of work, there is no need for miners.
This has two benefits. First, by eliminating miners, the Tangle makes IOTA fully decentralized. Instead of having players who have an effect on the network without actually using it (miners simply enable the network, but they are not using it), the IOTA network is maintained solely by the ‘users’ who are actually making transactions. Second, by having the sender approve two transactions before they can make their transaction, this system makes the IOTA protocol faster.
It also means that an increase in the number of users leads to a faster validation speed. This is unlike what normally happens with other cryptocurrencies like Bitcoin, where an increase in the number of users slows down the validation time. Since there are no miners, users do not have to pay any fees for maintaining the network either. IOTA has seen positive growth in the last year, with its market capitalization of $5.95 Billion as of now.
Ripple (XRP)
Ripple is a platform that was designed to enable real-time global settlements as well as to act as a currency exchange and remittance network. The Ripple tokens are not meant to be used as a means of paying for goods and services. Instead, the network was designed with the objective of allowing instant conversions between different fiat currencies without having to rely on a central exchange. Since its release in 2012, a number of banks have adopted Ripple as a cost-effective way of processing international payments.
Unlike many cryptocurrencies out there, Ripple was not built as a variant of Bitcoin. Instead, its developers built it from scratch and incorporated some major changes in its architecture. Unlike most cryptocurrencies which use a proof of stake or proof of work system to verify transactions, Ripple uses a unique consensus system where the computers in the network keep monitoring any changes. Once the majority of the computers in the network observe a transaction, it is added to the public ledger. The consensus system has a number of advantages over the proof of work or proof of stake systems. Transactions verified under the consensus system are validated faster and require less processing power. While it might seem possible for hackers to compromise the consensus system, it is designed in such a way that any unreliable results are rejected by the network.
Since the Ripple network is meant to facilitate cross-currency conversions, Ripples can be exchanged for a wide range of fiat currencies and altcoins. Some businesses also allow customers to exchange Ripples for air miles and reward points. Unlike altcoins like Ether and Litecoin which are sold on cryptocurrency exchanges, you have to go through Gateways to buy Ripples. The Gateways work in the same way PayPal works. Ripple currently has a market capitalization of about $53 billion.
Dash (Dash)
Dash is a cryptocurrency that was developed by Evan Duffield and Kyle Hagan. Launched in 2014, it was originally known as Darkcoin. After a year in existence, it rebranded to Dash, which is the shortened version of Digital Cash. By developing Dash, Kyle and Evan wanted to create a cryptocurrency that is totally secret and anonymous. Most cryptocurrencies are not totally anonymous. Though addresses are not linked to personally identifiable information, the network knows the number of coins within each address and anyone can keep track of coins as they move from one address to another. This makes it possible for someone to know the identity of users who do not take measures to protect their identity. To keep users anonymous, Dash uses a decentralized mastercode network which makes Dash transactions practically impossible to trace.
The high level of anonymity offered by Dash is enabled by a system known as Darksend. With this system, specialized computers known as mastercodes collect several transactions and execute them simultaneously, thereby keeping the transaction untraceable. It becomes impossible to track the source and destination of the coins. To make your transactions even more anonymous, you can choose to have the mastercodes mix your transaction for multiple rounds before completing the transaction. To maintain this anonymity, the Dash ledger is not publicly accessible. The high level of anonymity has also prevented wide acceptance by businesses.
Another distinguishing feature of Dash is its hashing algorithm. Instead of using the SHA256 or scrypt hash, Dash uses a unique X11 hash which requires less processing power, allowing users with consumer-grade CPUs to mine for Dash coins. Other notable advantages of Dash include its fast transaction verification of about 4 seconds and low transaction fees. However, the fees are likely to rise once more people join the network. Dash also has a voting system in place to allow the quick implementation of important changes. Capped at around $4 billion, Dash also has an exceptionally high price per coin for altcoins.
Monero (XMR)
Monero is another cryptocurrency that, just like Dash, is focused on privacy and anonymity. Monero was launched in 2014 by a team of 7 programmers, 5 of whom chose to remain anonymous. Due to its anonymity features, it quickly gained popularity with cryptocurrency enthusiasts. Like most other cryptocurrencies, Monero is totally open source. The development of the platform is driven by the community and donations. Monero is based on a particularly strong cryptography protocol known as ‘CryptoNote’. It also uses a unique hash known as ‘CryptoNight’.
To ensure complete anonymity and privacy, Monero uses the ‘ring signatures’ technique. This technique is a digital version of group signatures. Each transaction on the Monero network is enshrouded by a group of cryptographic signatures. This way, it is impossible to pinpoint the actual sender or recipient in the transaction. Even with a person’s wallet address, it is impossible to see the number of coins in the wallet or keep track of where they are spent. This means that it is impossible for Monero coins to become tainted as a result of previous dubious transactions.
Monero transactions are verified using the same proof of work system that Bitcoin uses. However, a major difference between Bitcoin and Monero is that whereas Bitcoin block sizes are limited at 2MB, there is no limitation on Monero block sizes. The lack of limited block sizes presents the risk of malicious miners using disproportionately huge blocks to clog up the system. To ensure this does not happen, the system has an inbuilt block reward penalty system. This means that whenever a miner mines a new block that exceeds the median size of the last 100 blocks, their block reward is reduced depending on how much the new block exceeds the median size of the last 100 blocks. The current market cap of Monero is $8.65 billion.
Neo (NEO)
Neo is a Chinese cryptocurrency that was founded by Erik Zhang and Da Hongfei. Neo is designed to be a smart economy platform, much like Ethereum. It has even been referred to as ‘China’s Ethereum’. Neo was first launched under the name Antshares. In August 2017, it rebranded to NEO Smart Contract Economy. NEO’s objective is very similar to that of Ethereum. NEO provides a platform where developers can develop decentralized applications and deploy smart contracts. Unlike Ethereum, which only supports its Solidity programming language, NEO can be used with common programming languages such as C#, Python, and Java.
One of the key differences between NEO and Ethereum lies in the verification system used by each of them. Whereas Ethereum uses a combination of proof of stake or proof of work verification, NEO relies on a consensus system referred to as a Delegated Byzantine Fault Tolerance (dBFT). In this system, instead of having all the computers in the system participate in verification, certain nodes are designated as bookkeepers. It is up to these bookkeepers to verify blocks before they are added to the blockchain. If two-thirds or more of the computers on the network are in agreement with the bookkeeper’s version, the consensus is achieved and the new block is validated and written to the blockchain. If consensus cannot be achieved, another bookkeeper is called up and the whole process is repeated.
Since consensus under the dBFT system only needs to be achieved by a subset of the network, this system requires less processing power and allows the network to handle a higher transaction volume. NEO claims that it is capable of handling over 1000 transactions per second, whereas Ethereum only handles 15 transactions per second. The dBFT system also eliminates the possibility of a hard fork, which makes NEO a great option for digitizing real-world financial assets. The current market capitalization of NEO is about $8 billion.
OmiseGO (OMG)
OmiseGO is a cryptocurrency that has gained a lot of popularity from cryptocurrency enthusiasts lately. Launched in 2013, it is an interesting yet very ambitious project whose aim is to use Ethereum based financial technology to un-bank the banked. OmiseGO is currently built on the Ethereum platform as an ERC20 token, though it will eventually launch its own blockchain. OmiseGO’s vision is to become the leading p2p cryptocurrency exchange platform. Instead of being just altcoins, OmiseGO is built to act as a financial platform with the aim of disrupting the financial sector as we currently know it.
OmiseGO aims to solve a challenge that most cryptocurrency exchanges have failed to address. To purchase a cryptocurrency in most cryptocurrency exchanges, you have to start with a fiat currency. To exchange one altcoin for another, you have to convert the altcoins to fiat or Bitcoin and then convert the fiat/Bitcoin back to your desired altcoins. Throughout this process, the exchange charges fees for each transaction. This means that you will pay fees to convert the first altcoins to fiat/Bitcoin and pay the fees again to convert the fiat/Bitcoin to the second altcoins.
OmiseGO plans to solve this problem by linking all existing cryptocurrency wallets to a central OmiseGO blockchain. This way, users can easily exchange altcoins for other altcoins without having to convert them to fiat or Bitcoin. This means that instead of multiple fees, users will only pay one tiny fee.
OmiseGO also aims to bring decentralization to cryptocurrency exchanges. Currently, most exchanges are centralized operations. The records of all transactions as well as data about different users are stored in databases that are stored on the company’s servers. OmiseGO aims to decentralize the exchange functionality by having all the transaction info and user data stored on the blockchain. This way, the data is more secure since a hacker would then need to perform a 51% attack (gaining control over 51% of the computers in the network) in order to breach the blockchain, which is virtually impossible. OmiseGO currently has a market capitalization of about $1.6 billion.
NEM (XEM)
NEM is a revolutionary cryptocurrency that was launched in March 2015. Unlike many other cryptocurrencies which were created as variants of existing projects, NEM was built from the ground up, with its own unique source code. NEM derived its name from the New Economic Movement, the group which came up with cryptocurrency. NEM is designed as a blockchain-based technology that can be customized to fit different business purposes. At the core of NEM’s protocol is what is known as the ‘Smart Asset System’.
Since NEM can be customized to fit multiple use cases, it has unlimited potential uses. It can be used as a central ledger in the banking sector, a means of keeping secure records, a blockchain-based voting system, an escrow service, as a means of rewarding points in loyalty programs, crowdfunding, stock ownership, and so on. This shows how much potential NEM holds.
Unlike most cryptocurrency platforms, NEM has a messaging platform. It also has a reward system and supports multisig transactions. One of the key differences between NEM and other cryptocurrencies is the verification method. Instead of proof of work or proof of stake, NEM relies on a unique proof of importance system where block calculation chances are allocated based on the contribution of a user to the development and distribution of the platform. Users who make a lot of contributions get rewarded with more chances. This allows a fair distribution of mining chances among users.
The NEM network is fast, with a transaction verification wait time of about one minute. This means that you can rely on NEM to make instant global money transfers. With the proof of importance system, users don’t need expensive hardware to mine NEM coins. The market capitalization of NEM currently stands at about $3 billion.
