What is Cryptocurrency
A cryptocurrency is a digital wallet acting as a medium of exchange. Ownership records are stored in a computerised database in form of ledgers. Strong cryptography is used
- To secure records
- Control coin production
- Verify transactions and transfer of ownership
There is no central authority to monitor the exchange, meaning, it is a decentralised type of currency exchange with no central control or regulations like in the banking sector. It works through a distributed ledger technology that serves as a database
According to Jan Lansky, a cryptocurrency is a system that meets six conditions
- The system does not require a central authority.
- The system keeps an overview of the ownership and cryptocurrency units.
- The system defines whether new cryptocurrency units can be created. If new cryptocurrency units can be created, the system defines the circumstances of their origin and how to determine the ownership of these new units.
- Ownership of cryptocurrency units can be proved exclusively cryptographically.
- The system allows transactions to be performed in which ownership of the cryptographic units is changed. A transaction statement can only be issued by an entity proving the current ownership of these units.
- If two different instructions for changing the ownership of the same cryptographic units are simultaneously entered, the system performs at most one of them. https://medium.com/@Shardix/jan-lanskys-six-cryptocurrency-requirements-adaed5058f7f
Some cryptocurrency terms explained
Blockchain. These are basically records or blocks which are linked to the previous block with time stamps and the data pertaining to the transaction. It cannot be modified easily and records transactions in a verifiable and is permanent in nature. One the block chain records are completed it cannot be altered without affecting other blocks. As it is not controlled by any agency and is of a public nature the transactions are protected. Of course, attacks by hackers and cyber crime experts make them vulnerable like anyone else.
Time stamping. Various time stamping schemes are added to prove the validity of the complete transactions. These add to the authenticity value of the transactions which can be easily verified. Some popular methods are based on SHA 256 and scrypt, crypto night, Blake and SHA 3.
Cryptocurrency Mining. It is basically a validation of transactions. This results in new cryptocurrency for the miners as a reward. Of course this needed large investments of capital for the machinery and high performance ASICS and the algorithms. These produced extreme heats and the cooling facilities do not come cheap. (Mining at full throttle, Bitcoin draws about 220 watts. That’s 716 BTUs of heat per hour or 17,184 BTUs per day). Ref (https://medium.com/swlh/heating-my-home-with-crypto-mining-137d2a29b62a)
The top cryptocurrencies in the world based on market capitalisation.
Bitcoin (BTC) $128bn
Ethereum (ETH) $19.4bn
XRP (XRP) $8.22bn
Tether (USDT) $6.4bn
Bitcoin Cash (BCH) $4.1bn
Bitcoin SV (BSV) $3.4bn
Litecoin (LTC) $2.6bn
EOS (EOS) $2.4bn
Binance Coin (BNB) $2.4bn
Tezos (XTZ) $1.5bn
Top cryptocurrencies explained.
The following paragraphs will explain the top three cryptocurrencies.
Bitcoin has been the most discussed cryptocurrency. It has had major upswings and downswings bringing extreme joy and disappointments based on the trend. the cryptocurrency skyrocketed up to roughly $20,000 per coin in 2017, but as of 07 Oct 2020, more than three years later, is currency trading at $10626, a little more than half of the rate. It is the first totally decentralised peer to peer payment network. The users are the masters and there is no central authority or middlemen. Bitcoin was conceptualised and invented by an anonymous person called Satoshi Nakamota in 2009 who after publishing the specification and conceptualisation of Bitcoin preferred to leave the project in 2010. He has remained in anonymity since.
Bitcoin has ultimate control with the users. There is no centralised agency to control the same.
Use of Bitcoin
It is used by number of businesses like law firms, restaurants and online services. Its usage is expected to multiply rapidly as the governments across the world come to grips with the phenomenon and decide the modalities of usage, transaction usage, security and taxation of the same. As of May 2018, the total value of all existing bitcoins exceeded 100 billion US dollars, with millions of dollars worth of bitcoins exchanged daily. (https://bitcoin.org/en/)
The second largest cryptocurrency platform based on market capitalisation after Bitcoin. Ethereum is the second-largest cryptocurrency platform by market capitalisation. Ethereum serves as the platform for over 1,900 different cryptocurrencies and tokens. It is currently trading at $337. It is also based on blockchain technology.
Bitcoin and Ethereum compared
Being the frontrunners of the digital currency, it is prudent to compare the two cryptocurrencies.
Bitcoin is considered money but Ethereum is a platform which aims to run applications
The Bitcoin block time is 10 minutes but Ethereum is of 13 seconds.
The transaction fees for Bitcoin depends on the size of the transaction but Ethereum depends on computational complexity.
Bitcoin pricing is based on speculation but Ethereum is not speculation based.
It is a digital money built for payments. It is based on open source, permissionless and decentralised blockchain technology which can settle transactions in 3 to 5 seconds. It can be sent directly without needing a central intermediary making it a convenient instrument in transactions by bridging two different currencies quickly and efficiently.
(https://ripple.com/xrp/). It is currently traded at $0.24.
It is originally the name of the company that is responsible for creating and transferring global payments using XRP. This system offers to break free all the walled gardens which the financial network makes with currency exchanges, processing delays and fee structure. Ripple platform is created to provide the users to transfer amount from different currencies in a fraction of minutes, from anywhere around the globe. Current methods which are used for sending money to different countries internationally has been outdated. Besides, Ripple solves this problem and plans for a collaboration with financial systems throughout the world and offers a solution via blockchain. By following Ripple’s global network, financial institutions process the user’s payments from anywhere in the world cost-effectively, reliably and instantly. (https://www.meldium.com/what-is-ripple-cryptocurrency-and-how-does-ripple-work/)
There are many Bitcoin supporters who believe that digital currency is the future. Many of those who endorse Bitcoin believe that it facilitates a much faster, low-fee payment system for transactions across the globe.
The main issue with Bitcoins and cryptocurrency is the lack of government approval and clarity in transactional matters. Further, these are subject to hacking and cybercriminal activity. There are also apprehensions about its usage in terrorist activities. However, it is felt that the governments have to accept the legality of the same in future and regulations for taxation etc will be put in place soon so that it becomes legal tender across the world.https://prasat9.com/earn-online-through-cryptocurrency/