Introduction in Bitcoin: 6 popular cryptocurrencies and how they work!

The very first question you might ask yourself is what are cryptocurrencies and how do they compare to the real-life currencies or fiat currencies as we call them?  Well, the basic difference is that the fiat currency is a centralized, monitored, controlled across borders and manipulated money. Its value is due to the backing of a state and its endeavours with some of the value associated with the asset of the country. The rest related to liquidity (amount of cash floating in the market) and the policies of the country. A cryptocurrency on the other hand is an entirely different thing. It is decentralized, deregulated, anonymous and follows an initial plan of action on a technology called blockchain rather than being increased or decreased at will. Due to the many difficulties and headaches associated with the transactions of a fiat currency including unjust taxes, regulation, scrutiny, lack of privacy and hacking, many people are now turning over to cryptocurrencies. They are using cryptocurrencies for their day-to-day operations, savings and even regular shopping like groceries and such.  These altcoins are becoming more and more acceptable around the world and over 100,000 companies, retail stores and other entities are now accepting payment through bitcoins or any other popular cryptocurrencies. Microsoft, Dish Network, Paypal and other big companies have been very receptive of cryptocurrencies especially bitcoin and deal in it openly.  The value of the crypto exchange market has increased several fold in recent years with a total market capitalization of over $100 billion! All in all, this currency market has performed better than the stock exchange, tech industry and manufacturing when it comes to growth and profitability. So, stats don’t lie and you will be missing out on the revolution of this century if you don’t invest in a futuristic thing like this.  Bitcoin is the biggest altcoin in the world right now followed by Ethereum, Ripple, Iota, Dash, Monero and the rest of the pack. Bitcoin was the first currency in the market and continues to dominate it.  While normally traders purchase coins just like stock exchange and aim to make profit within a few hours margin. While this has increased the trading volume of the bitcoin and other altcoins, many consider a long-term investment is the safest bet you can make while dealing with cryptocurrency because they can be VERY volatile in short-term and it might make you jump ship at the wrong time. You can look at the graph of bitcoin since its inception.

So, the graph almost speaks for itself. You need to be able to hold on to your altcoin for longer period of time to make a good profit out of it when you sell it. Also, you might not even need to sell it. You can use them for purchase directly these days. Their worth keeps getting more and more while fiat currencies’ worth is designed to decrease over time to keep the system alive.

Here are some of the biggest altcoins in the market and how they operate:

1. Bitcoin

Bitcoin was first theorized by an anonymous person/team going by the alias Satoshi Nakamoto. He initially had this paper published about a new type of currency called bitcoin that was based on a decentralized ledger called the blockchain on which all of the transactions were recorded and updated continuously. The blockchain cannot be hacked or tampered by anyone since each transaction is confirmed and unanimously agreed upon by bitcoin miners.

Now who are the miners?

The bitcoin miners are individuals or groups of people working round the clock on the blockchain. They record transactions and confirm them, after which they become a part of the new system.  They also apply any updates to the system based on unanimous agreement and they also look for a new bitcoins based on a process called bitcoin mining. Most cryptocurrencies are mined but bitcoin mining is really different from the rest of the pack as it makes things more competitive as more and more people try to look for new coins.  As a result, the bitcoin’s worth increases as more and more people attempt to mine it.

Bitcoin mining takes actually resources and a few years before it was pretty easy to do mining and get your reward. People did on their own PCs. Now it has become so competitive that whole mining pools with people working on dozens of computers are working round the clock on it.  The worth of bitcoin has increased from multiple bitcoins for each dollar to over $3400 per bitcoin right now. While it seems shocking and almost artificially jacked up, the truth is that such a currency solves many problems of the world and that is why its price is so much today. It is part of the future and everyone is trying to become a part of it by purchasing little bit that they can.

2. Ethereum

Ethereum is not just a cryptocurrency as currency is only a small application of the vast world that Ethereum founders have built on stellar technology. Its coin is called Ether and is valued around $270 right now. It was started in 2013 and it also had really humble beginnings. Its mining doesn’t require as much resources as bitcoin but it is more chance based rather than grueling work due to the nature of the mining process set by the founders.  Ethereum’s market cap is almost half of the bitcoin but it clearly takes the lead in other matters especially the application of the blockchain. Nowadays more and more coins are being released and most of them are being released via an amazing feature of Ethereum called smart contract. A smart contract allows automatic fulfillment of contracts it has been signed. So, this new dawn of decentralized apps has started that will be a different ballgame for Ethereum but it has almost nothing to do with its coin except PR and proving its blockchain works really well. Ether is considered more volatile than even bitcoin but it has also exhibited a strong performance over the year. It is definitely a great investment for the long-term too.

3. IOTA

As Ethereum put forward the idea of blockchain in smart contracts, the IOTA coin envisages an Internet of Things (IOT) approach that ensures Machine to Machine payment that involves no fees and disregards borders and other conundrums. In many ways IOTA isn’t just a cryptocurrency, it is a whole ecosystem for the IOT in the future.  Anyway IOTA coin (MIOTA) is also performing good in the long run. Do check it out.

4. Ripple (XRP)

Ripple in many ways is the most unique cryptocurrency philosophy in the market right now. Their coin is called Ripple XRP and was part of a massive coin sale by the Ripple team a few years back. It is one of the cheaper coins on a per-unit price basis and quite volatile like the rest of the pack.  Now Ripple’s original technology long before cryptocurrency became a thing was to challenge the fiat currency system by introducing a trust-based currency exchange ecosystem. They applied the same concept to the blockchain they later developed to host the Ripple XRP. It is now one of the top three coins in the world right now along with Ether and bitcoin itself.  Ripple XRP is a great investment for the future. Its worth has experienced massive surges since its inception.

5. Monero (XMR)

Monero is another cryptocurrency that is decentralized and uses blockchain technology. It is focused on scalability and privacy among other things. It has some fundamental differences in the core technology to other cryptocurrencies in the market but just like bitcoin, it uses a proof-of-work approach that takes a lot of resources and time for mining purposes. Most other currencies don’t use a proof-of-work approach and the coins created there are more related to guesswork, etc.

Monero continues to experience somewhat slow but stable growth. You can invest in Monero for the future.

6. Dash

The next cryptocurrency is called Dash. The Dash is an open-source decentralized cryptocurrency that offers advanced features to that of bitcoin in addition to some similar features. The upgraded features include instant transactions, a decentralized coin governance and a new approach called decentralized autonomous organization.  It has changed names twice. First it was called X coin and then Darkcoin as well but both were associated with something negative so eventually they have named it Dash coin, short for Digital Cash.  Its new approach to management may have broken the barriers for future as it became the first likelihood of a decentralized autonomous organization. Now many other coins are aiming to mimic its approach but this time through Ethereum smart contracts.

7. Bitcoin Fork and Bitcoin Cash

A fork in cryptocurrency is that when an identical blockchain is made and it separates from the original one. Now there are two currencies that have had the same blockchain or transactions of the past but the future will be different.

Forks have generally not been successful over the years. An Ethereum fork is valued at around $5 compared to the $260+ value we see on the graphs these days. Bitcoin also had a fork in last week resulting in an identical blockchain and currency called Bitcoin Cash (BCC) in the currency circles. Now bitcoin cash was created when the original bitcoin went an upgrade on which most developers and miners agreed. The bitcoin cash creators on the other hand thought this shift from the old system to the new one will be an opportunity to create a division in the currency and thus get more money for each bitcoin. The bitcoin upgraded and the bitcoin cash was created separately. Right now it is worth theoretically at $400 but there is no liquidity so we don’t know it’s real price yet. Many coin exchanges like coinbase don’t trade in it right now. As trading opens, we will get to know more about the BCC’s true value. Right now, it is only arbitrary.

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