Overview
Cryptocurrency is virtual or digital money in the form of tokens or intangible coins. Those coins that are not Bitcoin are known as “altcoins” and most have a common claim of decentralization although some are actually centralized. Altcoins try to present themselves as improved or modified versions of bitcoin and issues of greater risk due to lesser liquidity, acceptance, and value retention. Some altcoins are to bitcoin as apples are to oranges – both are fruit. For example, Ripple’s XRP and Bitcoin are both digital assets that experience price volatility and speculative investment, but that is where the similarity ends. Bitcoin and XRP have two very different purposes.
Some cryptocurrencies have gained popularity based on factors other than purpose. When a cryptocurrency startup wants to raise funding to further development of their coin, they release some of the coins (often called tokens) to traders. This is called an ICO (Initial Coin Offering) and traders buy the tokens in hopes the project succeeds and the coins gain value. ICOs are unregulated for the most part and careful research should be conducted before investing. Many tout themselves as being “the next Bitcoin” and uninformed investors fail to realize that Bitcoin did not happen overnight, and neither will most altcoins.
That said, this article looks at some of the current popular altcoins with the caveat that the list could change at any moment. There are more than 1,700 cryptocurrencies in existence and quite a few are popular in terms of market cap.
Litecoin (LTC): 2011
Created by Charlie Lee, MIT graduate and former Google engineer, is an open source global payment, decentralized network. Litecoin uses “scrypt” as a proof of work instead of SHA-256 like Bitcoin and has a faster block generation rate for quicker transaction confirmation. While faster, this speed also makes its blockchain larger and more prone to producing orphaned blocks. Often called the “silver to bitcoin’s gold,” it is one of the standard cryptocurrencies investors can buy on popular exchanges and is more widely accepted by the same merchants who take bitcoin.
Ethereum Ether (ETH): 2015
Ushered in the age of the ICO by launching a pre-sale for ETH tokens in 2014, Ethereum is a decentralized software platform that enables smart contracts and DApps (Distributed Applications) to be built and run with downtime, fraud, control, or interference from a third party. The Ether (ETH) token is used to run the platform and by developers looking to create and run Ethereum applications. Where Bitcoin is a disruptive payment system, Ethereum can be viewed as a disrupter of Internet third parties. It seeks to replace those that store data online and return control to the owners of the data, or authors of the intellectual properties.
Ripple (XRP): 2012
Ripple enables banks to settle cross-border payments in real time. with end-to-end transparency, at lower costs and XRP is the digital asset for those payments. XRP is built for enterprise use, offering banks and payment providers an on-demand option to source liquidity for cross-border payments. XRP is not mined, and will be distributed primarily “through business development deals, incentives to liquidity providers who offer tighter spreads for payments, and selling XRP to institutional buyers interested in investing in XRP.” It remains one of the most enticing digital currencies among traditional financial institutions looking for ways to revolutionize cross-border payments and cut costs.
What is a stable coin?
Stable coins are cryptocurrencies that are pegged to another stable asset, such as the U.S. dollar or gold. It is a global currency, but not one tied to any central bank, with low volatility. For this reason, stable coins can be used for practical everyday purchases and are believed to represent what could be a catalyst for mainstream adoption. Short-term stability is critical for transactions and long-term for holding. It is believed that stable coins will possess the traits necessary to become widely used which are: price stability, privacy, scalability, and decentralization.
Conclusion
Some believe bitcoin and altcoins will bring about a new global economy where people transact peer-to-peer without being governed by third parties. Developers around the world have taken up the baton passed by Nakamoto’s creation of bitcoin and only time will tell what the future holds as to what role cryptocurrency will play.