Cryptocurrencies, with a total market valuation of over US$200 billion, have taken the world by storm, with even policymakers and central banks forced to discuss them and their impact on the global financial markets. The sharp increase in the aggregate value of various digital currencies, especially Bitcoin, which has surged tenfold to achieve market capitalisation of more than US$120 million, cannot be ignored.
Introduced as a form of digital money that was not only secure but also anonymous, cryptocurrencies are associated with the Internet, using cryptography to track purchases and transfers. While Bitcoin was the first cryptocurrency to be created, in 2009, many others have since been launched, with more than 900 variants available online today. Here’s a list of the top cryptocurrencies ruling the market as of 2017.
Bitcoin was developed by an anonymous person or team, going by the name Satoshi Nakamoto, whose goal was to create a peer-to-peer cash system that allowed online payments between two parties, without the need for a mediator financial institution. Consequently, a block chain system was developed to verify the various transactions on the basis of a “proof of work” system, avoiding double usage or misuse of this currency.
This king of cryptocurrencies currently accounts for nearly half of the entire digital currency market. A major factor driving the popularity of Bitcoin is the limited availability of these coins, since its creator limited it to a maximum of 21 million units. This means the Bitcoin’s value is likely to continue rising as long as more people buy it, thus encouraging more and more people to hold it for the long term, as opposed to spending it to purchase products.
The second most valuable cryptocurrency after Bitcoin, Ethereum is a programmable blockchain that allows developers to build all sorts of distributed apps and technologies. This platform, first envisaged by a 19-year-old bitcoin programmer, Vitalik Buterin, in 2013, has enabled many companies to raise hundreds of millions of dollars in funding for their Ethereum-based projects, thus enhancing the cryptocurrency’s market cap significantly. Although the currency has faced some scaling issues, developers of this platform are working to resolve this. The currency is likely to adopt a new and more efficient “Proof of Stake” transaction verification system.
Released in 2012, Ripple is different from other digital currencies, since it does not use a block chain to establish consensus for transactions. Instead, it uses an iterative consensus process that is faster than the Bitcoin network. Since Ripple’s structure doesn’t require mining, it reduces the usage of computing power and minimises network latency. But as discovered by another rival network, Stellar Lumens, this can expose the entire network to attacks, making it unsafe. Ripple, however, has found favour with various financial institutions, including Japan’s large banks, to test its blockchain and possibly implement it in the future.
This recently introduced cryptocurrency has become highly popular largely because of the support from the Bitcoin mining giant and manufacturer of Bitcoin mining chips or ASICs, Bitmain. A new and revised version of Bitcoin, Bitcoin Cash aims to do away with the SegWit feature of the former currency, which allows cheaper transactions and does not go in favour of mining companies like Bitmain.
This cryptocurrency is different from others, since it works on “Proof of Importance,” rather than “Proof of Work” or “Proof of Stake” features to verify a transaction. As against these principles, which require miners to use significant processing power to get new coins or own certain amount of coins to get new ones, the PoI algorithm tracks a user’s transactions to determine how important that user is to the overall NEM economy.
To conclude, Bitcoin is not only the standard for all other cryptocurrencies but a market leader in terms of capitalisation, user base and popularity. And as the current trend shows, cryptocurrencies are here to stay, with newer offerings like Ethereum and Ripple being used more for enterprise solutions, and modified versions like Bitcoin Cash being used for specialised applications.
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