What is a Cryptocurrency?
A blockchain technology based monetary system used for daily transactions. Cryptocurrencies allow you to send and receive funds from anybody in the world — without the need for a bank or centralised systems.
The Bitcoin (BTC) Blockchain was the first to appear and it has been the longest running and most prominent since its creation in 2009 by an unknown individual (or group) using the pseudonym Satoshi Nakamoto. Other cryptocurrencies have been created using similar protocols, such as Ethereum (ETH), Litecoin (LTC), Dash, Ripple (XRP), Monero (XMR) and Zcash (ZEC).
There are hundreds of cryptocurrencies in active use today. Some of them are extremely valuable (Bitcoin, Ethereum), some had their moment in the sun and have since lost almost all of their value (Ripple, Stellar) and some are still relatively obscure to the general public but nevertheless have managed to carve out a niche for themselves (Nano, IOTA).
In this article we will take a look at some of the most important types of cryptocurrencies that currently exist. We’ll explain what they do, why they’re worth paying attention to and where you can buy them.
The Biggest Cryptocurrencies
Before we go into the specifics, let’s make a quick overview of the top cryptocurrencies by market cap:
Bitcoin – The first cryptocurrency ever created with a market cap of over $100 billion. Bitcoin is also the most popular cryptocurrency in the world and is used by millions as digital money or a store of value.
Ethereum – The second biggest cryptocurrency in terms of market cap which has helped to establish smart contracts as an industry standard thanks to its Ethereum Virtual Machine (EVM).
Ripple – A blockchain company focused on making international payments easier through its own cryptocurrency – XRP. Ripple has already established partnerships
The first cryptocurrency was Bitcoin. It was created in 2009 by someone (or someones) who used the alias Satoshi Nakamoto. Transactions are made with no middle men – meaning, no banks! There are no transaction fees and no need to give your real name. More merchants are beginning to accept them: You can buy webhosting services, pizza or even manicures.
Bitcoin is a more well-known cryptocurrency, a form of electronic cash. It is like digital money that you can send over the internet. However, it is quite different from regular money as it uses encryption techniques to control the creation of money and verify transactions on their network.
Other types of cryptocurrencies use blockchain technology to record transactions. For example, Ethereum uses blockchain to track and execute “smart contracts”. Other popular ones include Litecoin, Ripple and Monero.
A cryptocurrency is a digital or virtual currency designed to work as a medium of exchange. It uses cryptography to secure and verify transactions as well as to control the creation of new units of a particular cryptocurrency. Essentially, cryptocurrencies are limited entries in a database that no one can change unless specific conditions are fulfilled.
Cryptocurrencies make it easier to transfer funds between two parties in a transaction; these transfers are facilitated through the use of public and private keys for security purposes. These fund transfers are done with minimal processing fees, allowing users to avoid the steep fees charged by most banks and financial institutions for wire transfers.
Central to the appeal and functionality of Bitcoin and other cryptocurrencies is blockchain technology, which is used to keep an online ledger of all the transactions that have ever been conducted, thus providing a data structure for this ledger that is quite secure and is shared and agreed upon by the entire network of individual node, or computer maintaining a copy of the ledger. Every new block generated must be verified by each node before being confirmed, making it almost impossible to forge transaction histories.
There are three types of cryptocurrency which are categorized based on their utility, use-case and technical implementation.
As we discussed in the article “How does a cryptocurrency work?” all cryptocurrencies are based on the same technology i.e. blockchain. But there is a difference in the implementation of this technology for different use-cases and utilities. This is what makes them different from one another and categorize each type as a separate entity.
The technology behind cryptocurrencies is collected together in a digital ledger called a blockchain. A blockchain is a record of all the transactions made using a cryptocurrency, with each block containing details of a set of transactions that were made at a specific time. Blocks are then added to the chain in chronological order.
There are many different types of cryptocurrency, each with its own set of features.
Bitcoin is the original cryptocurrency, created in 2008 by a person or group using the alias Satoshi Nakamoto. It was designed as open-source software and released in 2009 as a new type of digital currency. Bitcoin transactions are recorded on a public blockchain, showing that a network participant has given a certain number of Bitcoins to another participant. The transaction confirms that the owner does not still have possession of these coins and prevents them from being spent twice.
Bitcoin is currently the most widely used type of cryptocurrency. It is also the first decentralized cryptocurrency – its main control and issuance system is situated within a network consisting of users and miners rather than relying on a central authority.