Cryptocurrencies are one of the trending topics around the world nowadays. Since the bitcoin started to capture the market attention many people are going behind it every day. So what are they exactly? In simple terms, it is just another medium of exchange like many other currencies around the world. But the major difference is that it exists in digital form i.e there is no tangible money, only some program snippets.
More importantly, the currency is self-controlled and there, is no middlemen like central banks or governments to control the currency. Its security is warranted by sophisticated cryptographic algorithms. If there is no one to issue and control the currency then how new currency does is created? New units of cryptocurrencies are created through a process called mining. The first know cryptocurrency was bitcoin, invented in 2009 by a mysterious person 'Satoshi Nakamoto'.
In April 2011 another currency known as 'Namecoin' was created. Then onwards many other cryptocurrencies have emerged and many of them became popular. In this blog, I will be explaining about top ten cryptocurrencies circulating around the web. Before that it would be worth examining the benefits of cryptocurrencies in a broader context.
- Cryptocurrencies are global currencies i.e.no single country controls it. They are accessible to everyone and can be transferred to anyone around the world.
- Cryptocurrencies are devoid of a middleman like banks. So there is no middlemen fee for transactions and transactions are usually done faster.
- It is a more secure asset than traditional currencies. The sophisticated cryptography guarantee that only the sender and receiver can access the data.
- It is a more transparent monetary system that any existing. The transaction history and data are stored in public ledger and is viewable to all stakeholders.
There are about 1000+ cryptocurrencies available now. A new cryptocurrency can be invented at any time. Like any other assets, the value of cryptocurrency can also raise and fall quickly.
The Bitcoin (BTC) is the first and most famous cryptocurrency. It is invented by Satoshi Nakamoto. The details of the founder is still a mystery and nobody is sure about his existence. Bitcoin uses peer to peer network for its existence and the transaction conducted are verified by miners. Mining means solving a complex mathematical problem to verify a transaction and it needs a high amount of computing power. By verifying a transaction, miners get a fixed amount of bitcoin as a reward and the newly created coin also become the part of the network. However, there are a finite number of bitcoins say 21 million. And according to miners the rest of the coins will be added to the network by 2024.
The hashing algorithm(hashing technology) used in bitcoin is SHA-256 (Secured Hashing Algorithm-256). And POW algorithm is used by the network to decide the next block to be added to the Blockchain.
Basically, mining means searching for a new block to add in the Blockchain. When a new block arrives, all the contents of the block is hashed first. Then this hashed output is concatenated with the nonce and is hashed again. The resulting hash is compared with the difficulty target. If it is less than difficulty level the block is added, else the nonce changed and the process is repeated till it meets the requirement.
Whenever a transaction happens in a bitcoin network, the user pushes it to the network. The transaction is hence verified by some participants in the network called miners. The process is as follows. When a new block arrives, all the contents of the block is hashed first. Then this hashed output is concatenated with a random string called 'nonce' and is hashed again. The resulting hash is compared with the difficulty target. If it is less than difficulty level then block is added, else the nonce is changed and the process is repeated till it meets the requirement. This process of verifying the transaction is known as mining.
Ether is another type cryptocurrency which is used in the distributed application platform Ethereum.
Ethereum is another type of decentralized blockchain network which is specifically designed to develop and run smart contracts and decentralized apps. Ether is the fuel of Ethereum and it was launched in 2015 by Vitalik Buterin. The total supply of Ethereum is estimated to 60 million.
Like in bitcoin Ether mining also indicate the verification of a transaction conducted in Ethereum network. In Ethereum network a new block is added in every 15 seconds and presently the reward for adding a new block is 3 Ether coins.
Litecoin was launched in October 2011 by Charles Lee. It is an open-source peer-to-peer network that is fully decentralized without any centralized authority. It has a market cap of around $180 million.
LiteCoin little bit complex than previous two. Though the working principles are similar. There are some differences too. Open source Cryptographic protocol is the base of LiteCoin. A new block is processed in every 2.5 minutes and it uses 'Scrypt' for mining process. Since the mining is a little bit harder in LiteCoin the miner gets 25 LiteCoins for every new block.
Ripple is used as both cryptocurrency and open payment network where the currency is transferred. It was released in 2012 and was invented by Chris Larsen and Jed McCaleb. Ripple coin is labeled as 'XRP'. The current market of Ripple coin is $243 million. The ripple coin is mainly known for its strong focus on the banking market and real-time settlement.
Ripple uses a medium known as Gateway that enables any person or organization to put into or take money out of the Ripple pool. Maybe the gateway mechanism is similar to the present banking system but the shared open ledger makes the difference.
Ripple is slowly becoming popular. Companies like Santander, UniCredit, UBS have already adopted it and Payment networks and Banks are increasingly attracted towards it.
Name Coin is another cryptocurrency which has many similarities with Bitcoin. In fact, it uses the same code of Bitcoin. And just like Bitcoin it also uses the Proof-of-work algorithm and SHA-256 Hash algorithm. The total supply of the Namecoin is limited to 21 million. Namecoin technology solves the problem of Zooko's triangle, where anyone can register arbitrary human-readable names in a decentralized and secure way. These names can be used to create online identities. Namecoin was invented in April 2011 by Vinced. NameID was launched in June 2013.
Swiftcoin is also another type of cryptocurrency. Like other cryptocurrencies transaction made in Swiftcoins are encrypted and anonymous. And of course, there is no central authority to control the transactions or users. Swiftcoin is the first digital currency in Cuba created by Team Daniel Bruno.
Monero is a cryptocurrency that mainly focuses on privacy using signature technology. It is estimated that Monero has a market cap of about $138 million. The privacy of Monero transactions is strengthened using 'Confidential Transaction' algorithm which hides the amounts being transacted.
Dogecoins are released in December 2013 by Billy Markus as a funny meme on the internet. By the mid of 2015, there were 100 billion Dogecoins has been mined also 5.256 billion coins are mined every year thereafter.
Dash is open source peer-to-peer cryptocurrency which strongly focuses on speed of transaction and security. Dash uses anonymization technology for improving security. The estimated market cap of Dash is $77 million. In January 2014 Dash coin was released in the name of 'Xcoin'. Later in February, the name was changed into 'Darkcoin' and on March it was rebranded as Dash. The founder of Dash was Evan Duffield and Kyle Hagan.
Lisk is a modular cryptocurrency which utilizes Sidechains. 'Slidechain' are some additional chains attached to the main blockchain in order to avoid bloated network. When there are many bad transactions the blocks are created faster and it slows down the network. This is called a bloated network. Sidechains can be attached to the main blockchain and can serve as a place to pull high volume transaction without interfering with the main blockchain. As a result, it will ensure a fast network all day. Lisk has a market cap of $45 million.