What is a Cryptocurrency?
A cryptocurrency is used as a medium of exchange and is a digital asset. It uses cryptography (hence, the name ‘cryptocurrency’) in order to ensure that transactions made using such currency are completely safe and verified as well as to help regulate its production. It is a decentralized system where the units are not controlled by the central bank or any other government agency.
Crypotcurrency is basically money which has been created using a code. However, unlike normal physical currency that we use in our day-to-day lives, it is not controlled by any government authority; rather it is monitored by a peer-to-peer protocol.
However, like normal currency, cryptocurrency also share a set of common properties. These properties can be divided into monetary and transactional properties. Understanding these properties will help us understand a little more about what exactly a cryptocurrency is.
The transactional properties of a cryptocurrency:
- Payments made using cryptocurrency cannot be Once a transaction has been verified, there is no way to reverse that transaction. Hence, if you transfer your funds to a scammer or a hacker online, the transfer will be irreversible.
- Transactions are anonymous. Transactions or accounts that are associated with cryptocurrency are not connected to any real-world identities of the user. Rather, it is connected only to an address which a random chain of about 30 characters.
- Cryptocurrency is safe and secure. Your crypto funds are secured by using strong cryptography. This is necessary due to the irreversibility of transactions made using this currency. Only an individual that has the access to their own private key will be able to make transactions using that key.
- Since cryptocurrency is free of any authority figure, you do not need any permission to be able to use this currency. You simply have to download software with which you can start using this currency without any hindrance.
The monetary properties of cryptocurrency are:
- Our current system of currency is based on a system of IOU. The numbers that we see on a ledger are simply a representation of debts. Cryptocurrencies, on the other hand, do not represent debts. Rather, they only represent themselves.
- The monetary supply of a country can be controlled by the central bank of the country. Through this policy they can increase or decrease the money supply at any time to give rise to the forces of inflation or deflation. However, all cryptocurrencies have a limited supply. Their supply decreases over time till they reach their limit. Through basic calculation it is easy to find out what the supply of cryptocurrency will be each year.
Now that we are somewhat familiar with the concept of cryptocurrency, it is time find out which cryptocurrencies are taking the lead.
Cryptocurrency is almost synonymous to BitCoin. It is the pioneer of all cryptocurrencies. Its anonymous inventor goes by the pseudonym of Satoshi Nakamoto. All cryptocurrencies are essential a side product of the invention. Satoshi’s aim was not to invent a new currency altogether, but to invent digital cash. The ability to achieve consensus without using any central authority was a major success of Satoshi’s invention. Cryptocurrencies emerged as a by-product of this system.
BitCoin is not only the first but the most famous of all cryptocurrencies. Its value increased from 0 to 650 USD in a matter of 9 years. It serves as a digital standard for all other cryptocurrencies and is part of more than 10,000,000 daily transactions.
It is not just a single currency, but a family of several different currencies. Founded by Vitalik Buterin, this cryptocurrency has quickly climbed the ranks to reach second place. Ethereum is a decentralized system which uses the blockchain technology pioneered by BitCoin to facilitate transactions using cryptocurrencies as well as the use of smart contracts. It allows developers to exchange more than just cryptocurrency and has developed various methods of exchange such as smart contracts and Ethereum Virtual Machine.
This cryptocurrency was created in 2011 by Lee, and is considered to be an alternative to the BitCoin. However, it is designed to be four times faster than the BitCoin. Through Litecoin, users are able to enjoy a markedly reduced transaction verification period as well as the ability to mine coins in an easier way. The idea behind the creation of Litecoin was to enable people to use this currency to make everyday transactions.
Unlike the previously mentioned BitCoin and Litecoin, Monero does not have a limited supply. Although that is not its main appeal. All transactions made through Monero are recorded on a public ledger; however, they cannot be traced. Through Monero, the size of the transaction, the sender as well as the recipient remains anonymous. Consequently, this currency has emerged as the preferred method of payment for many cyber criminals. However, its user base is not just limited to cybercriminals but extends to any individual or company who would like to transfer their funds without making their transactions and balance public.
This cryptocurrency is often compared to Ethereum. They both are similar in the sense that Neo also uses the blockchain technology to develop assets as well as smart contracts. However, NEO aims to develop its platform further in order to meet the demands of the future.
Ripple was founded by BitCoin developers in 2012, and is often considered to be a more sensible and systematic successor to the BitCoin. Ripple not only has its own currency (XRP) but is also a platform where other currencies can be traded such as the BitCoin.
7. BitCoin Cash
This cryptocurrency is still relatively new, created in August 2017. This is a hard fork-essentially a fresh version of BitCoin which is incompatible with the original BitCoin. This cryptocurrency was developed due to the frustration that BitCoin users had with its high fees and long processing times. This cryptocurrency is said to have the capacity to be able to handle a large number of transactions with lower fees as well as faster processing time.