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Unless you’ve bot hiding under a rock, you’re most likely aware that wij’re ter the middle of a cryptocurrency explosion. Te one year, the value of all currencies enhanced a staggering 1,466% – and newer coins like Ethereum have even joined Bitcoin te gaining some mainstream acceptance.
And while people like Jamie Dimon of J.P. Morgan and famed value investor Howard Marks have bot utterly critical of cryptocurrencies spil of late, many other investors are continuing to rail the wave. Spil wij’ve noted te the past, the possible effects of the blockchain cannot be understated, and it could even switch the backbone of how financial markets work.
However, even with the excitement and activity that comes with the space, a major problem still exists for the layman: it’s truly challenging to decipher the differences inbetween cryptocurrencies like Bitcoin, Ethereum, Ethereum Classic, Litecoin, Ripple, and Dash.
For this reason, wij worked with social trading network eToro to come up with an infographic that cracks down the major differences inbetween thesis coins all ter one place.
A Description of Major Coins
Here are descriptions of the major cryptocurrencies, which make up 84% of the coin universe.
Bitcoin is the original cryptocurrency, and wasgoed released spil open-source software ter 2009. Using a fresh distributed ledger known spil the blockchain, the Bitcoin protocol permits for users to make peer-to-peer transactions using digital currency while avoiding the “double spending” problem.
No central authority or server verifies transactions, and instead the legitimacy of a payment is determined by the decentralized network itself.
Bottom Line: Bitcoin is the original cryptocurrency with the most liquidity and significant network effects. It also has brand name recognition around the world, with an eight-year track record.
Litecoin wasgoed launched te 2011 spil an early alternative to Bitcoin. Around this time, increasingly specialized and expensive hardware wasgoed needed to mine bitcoins, making it hard for regular people to get ter on the act. Litecoin’s algorithm wasgoed an attempt to even the playing field so that anyone with a regular rekentuig could take part ter the network.
Bottom Line: Other altcoins have taken away some of Litecoin’s market share, but it still has an early mover advantage and some strong network effects.
Ripple is considerably different from Bitcoin. That’s because Ripple is essentially a global settlement network for other currencies such spil USD, Bitcoin, EUR, GBP, or any other units of value (i.e. frequent flier miles, commodities).
To make any such a settlement, however, a lil’ toverfee voorwaarde be paid ter XRP (Ripple’s native tokens) – and thesis are what trade on cryptocurrency markets.
Bottom Line: Ripple runs on many of the same principles of Bitcoin, but for a different purpose: to serve spil the middleman for all global FX transactions. If it can successfully capture that market, the potential is high.
Ethereum is an open software podium based on blockchain technology that enables developers to build and deploy decentralized applications.
Te the Ethereum blockchain, instead of mining for bitcoin, miners work to earn ether, a type of crypto token that fuels the network. Beyond a tradeable cryptocurrency, ether is also used by application developers to pay for transaction fees and services on the Ethereum network.
Bottom Line: Ethereum serves a different purpose than other cryptocurrencies, but it has quickly grown to displace all but Bitcoin te value. Some experts are so bullish on Ethereum that they even see it becoming the world’s top cryptocurrency te just a brief span of time – but only time will tell.
Te 2016, the Ethereum community faced a difficult decision: The DAO, a venture capital hard built on top of the Ethereum podium, had $50 million te ether stolen from it through a security vulnerability.
The majority of the Ethereum community determined to help The DAO by “hard forking” the currency, and then switching the blockchain to terugwedstrijd the stolen proceeds back to The DAO. The minority thought this idea violated the key foundation of immutability that the blockchain wasgoed designed around, and kept the original Ethereum blockchain the way it wasgoed. Hence, the “Classic” label.
Bottom Line: Spil time goes on, Ethereum Classic has bot carving out a separate identity from its thicker sibling. With similar capabilities and a different set of principles, Ethereum Classic could still have upside.
Dash is an attempt to improve on Bitcoin ter two main areas: speed of transactions, and anonymity. To do this, it has a two-tier architecture with miners and also “masternodes” that help the network perform advanced functions such spil near-instant transactions and coin-mixing to provide extra privacy.
Bottom Line: The innovations behind Dash are interesting, and could help to make the coin more consumer-friendly than other alternatives.
Premie: Bitcoin Specie
Albeit not included ter the graphic, wij also dreamed to add a quick word on Bitcoin Specie. This fresh currency “hard forked” from Bitcoin about a month ago, spil a result of miner disagreements about the future of Bitcoin. Here’s a detailed summary of the announcement.