Cryptocurrencies have been dominating talks in the financial sector and beyond. This newest class of assets is loved and loathed in equal measures. To most people, it is a disruption to the existing financial systems. To others, it is the solutions to most of the problems plaguing the financial systems. Still, no one really knows exactly what cryptocurrencies are or why they were conceived.
A cryptocurrency is a form of digital money. It is virtual meaning that it does not exist in any shape or form. At its core, cryptocurrency is nothing more than a ledger of transactions. Supposing you are a holder of a certain cryptocurrency, your account on this ledger will begin with the supposed amount of this cryptocurrency you have. This figure will be subtracted or added to each transaction that takes place.
The origin and purpose of cryptocurrency
To most people, Satoshi Nakamoto, the mysterious founder of Bitcoin, is the father of cryptocurrency. This is not true – Nakamoto is better suited as the person who made the idea of cryptocurrencies work. Cryptocurrencies were first proposed in the 90s. The very first notable cryptocurrencies were Beenz and DigiCash, but these did not survive for long owing to complications with issuance and distribution. The first successful cryptocurrency, Bitcoin, was made possible by a decentralized, peer-to-peer network.
The main idea behind cryptocurrency is simple: providing a better alternative to fiat currencies. Interestingly, the caption on the first block of Bitcoin ever created back in 2009 referred to something about the governments planning to bail out rogue banks – this came shortly after the 2008 global financial crisis.
Modern cryptocurrencies taking on the world
Satoshi Nakamoto opened a whole new world of opportunities when he cracked the underlying problem to earlier cryptocurrencies. Thousands of other cryptocurrencies have sprung up around the concept of Blockchain technology and each proposes to have something unique to offer. Five of the largest and most popular cryptocurrencies are backed by ambitious goals.
Here is an insight into the ideas behind five of the biggest cryptocurrencies.
Bitcoin, the first cryptocurrency, is the most ambitious of all. As mentioned, its creator envisioned it as the ideal alternative to fiat currencies. It was made with the purpose of providing a better means of payment than existing fiat currencies. Its creator hinted to be in disagreement with the current financial systems.
Interestingly, Bitcoin functions more than just a means of payment today. In fact, it is more suitable as an investment security vehicle considering people’s perspective of it. BTC’s rapid appreciation in value has seen it rank as the most lucrative investment vehicle of modern times. Its value appreciated a thousand times over in less than a decade, moving from as little as USD 0.3 to as much as USD 19,000 at its pick in December 2017. Nevertheless, Bitcoin is still settling into its intended role – it is currently accepted by thousands of merchants across the world and many more and getting onboard.
Ether the token is hardly ever mentioned as the Ethereum network, the platform behind the token, steals the entire spotlight. However, there are other reasons for this.
Unlike Bitcoin, Ether is a simple utility token whose use is limited to the Ethereum platform. The minds behind the Ethereum network intended it to be free but still had to include some barriers to entry for organizational purposes. To this end, they created Ether as fuel for the platform. Ethereum’s users need Ether tokens to access certain features on the platform. Consequently, Ether represents the vision of Ethereum.
The Ethereum network was developed with the intention of enabling everyone to develop decentralized apps (dApps) seeking to leverage the new concept of decentralization. In fact, the Ethereum network is the reason behind the influx of new cryptocurrency platforms.
Ether may be a utility token but its monetary value fluctuates just like Bitcoin’s. To this end, it also qualified as a security investment vehicle.
The idea for ripple dates back to 2004, long before Bitcoin came to the spotlight. Like Ether and Ethereum, XRP is powered entirely by the Ripple network’s activities and achievements.
The Ripple network was developed with the goal of overcoming the complications plaguing international money transfer. It enables its users to transfer large amounts of money to anywhere in the world (or, at least, in countries where cryptocurrencies are legal). Transactions are as quick, unlike most existing systems; they take mere minutes or seconds. What’s more, transactions are exceedingly cheap: USD 0.0001 to be precise.
There is only one catch to Ripple’s network – all transfers are made using the XRP token. As such, users have to convert their money to XRP to send – recipients then convert this money to their desired crypto or fiat currencies. To this end, XRP qualifies as both a means of payment and utility token.
EOS works exactly like Ether. The EOS network is Ethereum network’s biggest competitor in terms of activity and clients. The platform itself raised over USD 150 million during its ICO. It proposes to offer its clients all the resources they need to develop decentralized applications without the inconveniences associated with the Ethereum network – Ethereum is currently plagued by complex scalability problems that threaten to limit its expansion.
EOS users require EOS tokens to access certain features on the platform, thus making it a utility token. However, EOS also qualifies as a security investment token considering that millions of people around the world invested in its ICO with the hopes of generating good ROI.
Bitcoin Cash (BCH)
Bitcoin Cash is an offshoot of Bitcoin. It came to be following a hard fork prompted by some of bitcoin’s weaknesses as well as its rapid growth and expansion. Like BTC, BCH assumed the role of a means of payment. In fact, it is touted as a better means of payment as it was able to overcome some of the complications associated with Bitcoin. For instance, BCH supports larger transfers in shorter periods.
It should also be noted that BCH has also since undergone a hard fork itself and given rise to yet another offshoot of Bitcoin. BCH also qualifies as a security investment token.