2017 was a big year for cryptocurrencies. In January 2018, there were 1384 cryptocurrencies available in the digital world and the number is only growing. While many of us are wondering what cryptocurrencies are all about, how do they work and how are they beneficial for us? Should we invest in the cryptocurrency market?
The financial world is in turmoil. Some experts consider cryptocurrencies as the currency of the future; while some feel that it is a volatile bubble about to burst and the investors are doomed to failure. But the fact is that the world is acknowledging cryptocurrencies, banks are taking notice, individuals, as well as businesses, are investing in it, and slowly the whole system is becoming more stable. If you are new to the world of cryptocurrencies, here are some quick facts to get you started.
What are Cryptocurrencies?
Cryptocurrency or digital currency is a digital asset designed to work as a medium of exchange that uses cryptography to secure, control, and verify the transactions. The decentralized control of each cryptocurrency works through a blockchain, which is a public transaction database functioning as a distributed ledger. In simple terms, it is a virtual currency that has no physical form and each transaction is just numbers moving from one digital wallet to another. Instead of a central bank or authority maintaining the ledger of transactions, an algorithm keeps track of all the transactions in a public ledger known as the blockchain.
How is Cryptocurrency Different?
Here are some of the key features of cryptocurrencies that make it quite different from other currencies -
Cryptocurrency has no physical form, it is a virtual currency held in digital wallets and transferred digitally
Cryptocurrencies work on a decentralized control model as opposed to centralized banking systems
Cryptocurrencies are transferred within a huge peer-to-peer network and the transactions are recorded in a blockchain or a digital ledger
Each cryptocurrency transaction is confirmed in a public ledger via mining. The process of mining creates new coins/currency
Cryptocurrencies leverage cryptography to keep a check on coin creation as well as for transaction verification
Cryptocurrencies are open source and anybody can join in for free
Cryptocurrencies offer pseudonymity to the users. The cryptocurrency accounts are encrypted and they have no connection to the person's real identity
The value of cryptocurrency is determined based on supply and demand. The cryptocurrency values fluctuate along with the market forces
Top Cryptocurrencies to Watch Out for in 2018
Here are some of the top cryptocurrencies which will rule the roost in 2018 and in the coming years as well -
All cryptocurrency charts point to only one leader and that is Bitcoin. The name Bitcoin is synonymous with cryptocurrencies and today 1 bitcoin is worth almost 10,000 USD. Bitcoin came into existence in January 2009 and since then it has grown exponentially. According to a Research by the University of Cambridge, in 2017, there were 2.9 to 5.8 million unique users using bitcoin. But due to the increasing popularity of other cryptocurrencies, Bitcoin is losing its shine. In January 2018, Bitcoin tumbled by 28% but is still the top choice for people planning to leverage cryptocurrencies.
Ethereum is the next biggest contender and many individuals now prefer Ethereum over Bitcoin. Although Ethereum is also a cryptocurrency, it differs from Bitcoin in terms of its purpose, its capability, and its technology. One big difference between the two is that in the Ethereum blockchain, miners work to earn Ether which is a type of crypto token that powers the network, while in Bitcoin, miners work to earn coins. Ethereum allows the use of blockchain for any purpose and its Smart Contracts can be used for not only currencies but also for exchanging shares, property, content, or other valuable things.
Ripple is creating ripples in the world of cryptocurrencies indeed. As defined by the Ripple website, "Ripple connects banks, payment providers, digital asset exchanges and corporates via RippleNet to provide one frictionless experience to send money globally." Ripple is not just a currency, but also a platform for trading the currency. Since Ripple has licensed its blockchain technology to over 100 banks, it is quickly gaining credibility among users.
In August 2017, the Bitcoin team had a disagreement about the future of Bitcoin and a few of the members forked out to start Bitcoin Cash. In Bitcoin's blockchain, the number of transactions per block is limited and as Bitcoin grew in popularity, this became a challenge as each transaction took a longer time to complete. Bitcoin Cash solved this issue by increasing the size of each block and making the architecture more scalable. This makes each transaction faster & cheaper.
Litecoin was launched in October 2011. Although it is quite similar to Bitcoin in terms of technology, it is somewhat faster and cheaper. Litecoin comes with widespread support from the industry and is among the top currency of choice when it comes to making digital payment. Litecoin enjoys the support of money exchanges, online and offline merchants, ATMs, Internet-based casinos, and a loyal developer community.
Cardano runs the ADA cryptocurrency. As described by the owners, "Cardano is the industry's first platform that utilizes academically peer-reviewed open source code." Cardano's platform is split into two layers - one for transactions and the other for Smart Contracts. It uses Proof of Stake system known as Ouroboros. Cardano believes that cryptocurrencies have a huge impact on the society and hence all the code generated should be extensively tested and scrutinized by the top researchers and scientists. Due to the peer-review methodology, Cardano may be considered more reliable.
NEO, or Chinese Ethereum, is another cryptocurrency, which allows the creation of Smart Contracts. Its mechanism can support up to 10,000 transactions per second. This China-based cryptocurrency is turning out to be the strongest one of 2018 as it is the first project to achieve the A-investment rating from The Weiss Ratings agency. NEO is trying to offer more than Ethereum and is also making a move to work with the government. NEO wants to be the pioneer in the "smart economy".
Just like Ripple, Stellar also aims to connect the world of cryptocurrencies with banks and financial institutions to make the process of money transfer faster, cheaper, and reliable. But while Stellar is an open source platform, Ripple is a closed one. Over the past one year, Stellar has been the fastest growing cryptocurrency in the market, and last year it partnered with some renowned businesses like IBM. Estimates suggest that in 2018, Stellar will grow by over 1000%.
EOS is a cryptocurrency that is quite similar to Ethereum. However, the EOS platform holds a lot of potential as it is easy-to-use and highly scalable. It has a decentralized operating system that allows developers to build applications. It might be the platform that takes the blockchain technology into the mainstream by being quicker and more efficient. Due to horizontal scaling, EOS can conduct up to 50,000 transactions per second. EOS brings in the best features of all the other Smart Contracts technologies.
Bitcoin is often considered to be tremendously slow in terms of transaction time. Dash, although a decentralized, peer-to-peer cryptocurrency, like Bitcoin, aims to reduce the transaction time significantly. For instance, each transaction in Dash is completed within 4 seconds or less, while on Bitcoin, the same transaction may take 10 minutes or more. The transaction fee on Dash is significantly less than what users pay on Bitcoin. Moreover, Dash is a completely private currency and there is no way to find out the identity of the users.
Released in April 2014, Monero started out with an image of being a black-market currency that kept the users' identities safe. In 2017 this cryptocurrency entered the mainstream market and became more valuable. Monero goes a step ahead in keeping the identity of its users a secret. It not only creates "stealth addresses" but also groups each transaction with hundreds of others so that it becomes impossible to trace each transaction or the value of that transaction.
In November 2015, IOTA came up with its own cryptocurrency technology other than the popular blockchain. The biggest challenge faced by blockchain technology based currencies is that the speed of transaction is slow and the size of blocks keeps increasing over time. IOTA uses a different mechanism for storing transactions called Directed Acyclic Graph, which they call as "Tangle". IOTA is completely free to use as it does not have Miners. IOTA is built especially to work with connected devices in the Internet of Things.
Launched in March 2015, NEM aims to create a more advanced blockchain with new features like multi-signature accounts, proof of importance algorithm, encrypted messaging, and reputation system. NEM was picked up by the commercial Blockchain called Mijin which made it popular in the cryptocurrency market. Instead of Mining, NEM works on Harvesting, which is a different process and pays the users based on how much they are invested in the NEM project. NEM has improved upon the features of Bitcoin and Ethereum and is much faster than both of them.
After the hacker attack on DAO, the Ethereum community was in a conflict about changes to be made in the system. One group decided to create a hard-fork version, while the other suggested soft-fork changes. Ethereum Classic is the unforked version of Ethereum. Ethereum Classic has almost the same features and capabilities as Ethereum. Although Ethereum Classic remains underpriced, it has a strong community and will retain its position in 2018 as well.
TRON aims to cut the middlemen for content providers by decentralizing content sharing. YouTube, Amazon, Google Play Store, and other such applications have long been the middlemen for content sharing. TRON will allow content creators to reach the users directly and get rewarded for their work. Some other important aspects of TRON are that it offers complete data liberty (no censorship), a personal ICO option, and is completely decentralized. TRON is a non-mineable currency and there's a fixed supply of units.
Partner with the Best in the Software Development Industry
Flatworld Solutions has been a leading provider of software development services and a host of other services to global clients for over 16 years now. Our team comprises of some of the most talented and brilliant minds who are well-versed with the latest happenings in the industry including artificial intelligence, machine learning, cryptocurrencies, cloud, etc. to name a few. We have multiple delivery centers spread across the globe which enables us to deliver the results within a quick turnaround time.