Basics on Bitcoin & Cryptocurrency Alternatives
With all the hype surrounding Bitcoin, it’s hard to resist the urge to know more about these cryptocurrencies and the technology behind them.
If you want to jump into trading or investing cryptocurrencies, take a quick look first at what Bitcoin is about and the alternatives available to you.
What is Bitcoin?
Bitcoin is a digital currency that’s currently used as an electronic payment system to complete transactions around the globe. The platform is decentralized, meaning there’s no one entity that holds complete control over the system. Instead, transactions are recorded in a ledger called the ‘blockchain’ which is verified through a peer-to-peer network. The whole community does its own check and balance to maintain the integrity of the system.
A bitcoin unit can be obtained through the usual buy and sell process, similar to how you get money when you sell merchandise to others. Another way to earn a bitcoin is through mining where you’re rewarded for verifying transactions processed on the blockchain.
The current price of a single coin is more than $10,000. This value is too high for many investors interested to jump in the cryptocurrency craze. This is why many digital currency alternatives keep on sprouting, enticing new investors to speculate and buy early on what may be the next Bitcoin.
If you feel that the price of Bitcoin is already too high for your appetite, there are alternative cryptocurrencies you can trade.
Here are the most popular cryptocurrencies according to their market capitalization:
- Ethereum (ETH)
This is one of the largest cryptocurrencies next to Bitcoin. Ethereum focuses on managing complex financial tools like mortgages and related contracts in a decentralized manner. It differs from Bitcoin in a way that it’s not a digital currency that can be used in payment transactions.
It uses ‘ether’ to pay for the computation executed by the machines processing smart contracts. It is also a form of incentive given to developers who write applications for the blockchain with exemplary quality. Ether is also awarded to miners who maintain the integrity of the system.
- Ripple (XRP)
Ripple was established in 2012 by a company under the same name. Its goal is to utilize the blockchain technology to enable faster and more cost-effective means of transferring money across the globe. Ripple offers 3 different solutions to customers and businesses who wish to use their platform: xCurrent, xRapid, and xVia.
Compared to Ethereum and Bitcoin, Ripple can settle payments in a matter of seconds. Its value lies in cross-border payments and currency exchange. It acts as a bridge currency that helps the conversion between fiat currencies.
According to its creators, their platform is being used by over a hundred financial institutions worldwide, including Western Union.
- Litecoin (LTC)
Litecoin is the faster counterpart of Bitcoin. It has similar wallet encryption and mining mechanism as Bitcoin but it’s made for lighter transactions. It’s hailed as the ‘silver’ of the cryptocurrency world where Bitcoin is gold.
Litecoin boasts a more efficient mining algorithm and a larger stash of circulated tokens. It can also handle a higher volume of transactions compared to Bitcoin. Miners are also rewarded with more coins for each block of transaction they complete.
Litecoin is way cheaper than Bitcoin which is the reason it’s being traded with considerable volume. Some people are hoarding LTCs in the advent that Bitcoin crashes.
- Monero (XMR)
Monero introduces a revolutionary privacy feature which popular cryptocurrencies like Bitcoin don’t have.
Many cryptos are transparent in their transactions, meaning anyone can trace the money trail. Monero patches this by allowing users to send and receive money anonymously. Using ring signatures, they devised a way to shield addresses and transaction amounts from being seen by anyone in the network.
It gained popularity when it was accepted in transactions occurring in the darknet in 2016. This resulted in an increase in its value.
- IOTA (IOTA)
IOTA is a different kind of beast. It doesn’t use the same blockchain technology other cryptocurrencies are utilizing. Instead, it has the “Tangle” which is based on a Directed Acyclic Graph or DAG ledger system. This structure enables the system to manage transactions without fees, miners, or blocks.
IOTA still uses the concept of hashcash and distributed consensus in verifying transactions, similar to what other cryptos use. However, it boasts offline capabilities, quantum security, and infinite scalability which far exceed the features offered by their crypto peers.
We’re seeing a surge in the number of digital currencies appearing in the market. There are many legitimate ones that aim to add value to the blockchain technology by introducing new features and capabilities more advanced than what other cryptocurrencies offer.
However, there are also a lot of start-ups doing their own initial coin offering (ICO) to lure the public into buying something that doesn’t have value at all. It’s a simple money-making scheme for them to raise cash for their own purposes. Whichever the case is, make sure you check that what you’re buying has substance.
Bitcoin is easily transferable and is accepted in many countries worldwide. There’s also an increase in the number of companies that accept Bitcoin as payment for real-world products and services. This can be considered a sign that cryptocurrencies like Bitcoin are here to stay for years to come.