Considering that the first cryptocurrency only came into existence about a decade ago, it is amazing to consider how many different types of digital coins are now in the market. It seems like each new day brings another swath of companies and initiatives, each boasting a new coin that they hope will revolutionize the playing field. As a cryptocurrency or investor, it can certainly be difficult to keep track of it all.
In fact, many of these coins will not last very long after their inception. Some will fall due to the fact that the people who created them just didn’t have a solid concept in place. Others will crumble because of the rugged competition in the market, while still others will fall by the wayside due to the fact that those in charge were really only trying to get rich quickly from their new coins.
The world of cryptocurrency is extremely malleable, and at any given time, a new coin can rise to near the top of the charts. But for the most part, the coins we are about to detail have been near the peak of the market in terms of both market capitalization and brand awareness for a long time. It is with these coins that you should start if you are new to cryptocurrencies and are looking for some things to get yourself acclimated.
The Two Generations of Cryptocurrencies
Many coins are now being touted as the so-called “third-generation” of cryptocurrency, which is a boast that still hasn’t been quite backed up to any widespread degree. It is important to note what characterizes the first two generations, as most of the major players in cryptocurrency fall into one of those two categories.
When you hear someone referring to the first generation of cryptocurrency coins, they are generally talking about those coins that are intended to be used as substitutes for traditional currencies. That was the impetus behind the first-ever cryptocurrency, Bitcoin. Many of the most popular coins in the market are attempting to follow in the footsteps of Bitcoin while adding their special touches.
The second generation of cryptocurrency coins is the ones that used the same technology like Bitcoin and its imitators but found different uses for them. Cryptocurrencies like Bitcoin bypass the third parties like banks and credit card companies that are often used by people making simple financial transactions. By contrast, the second generation intends to replace the middlemen who get involved in any aspect of society, broadening the scope of what cryptocurrency can do.
When cryptocurrency was introduced, it had a very limited focus. It was intended to be a monetary system for the people, bypassing the banks, credit card companies, and other financial entities which usually dominate the system. And everything started with Bitcoin.
It is a coin that started the entire cryptocurrency movement. Introduced in 2009, it was an open-source program, meaning that any developer could copy it and use it for their own projects. And its main purpose was to allow people to conduct monetary transactions with each other without needing to employ a financial institution as a middleman.
The blockchain technology that would be at the heart of so many cryptocurrencies to follow allowed Bitcoin to exist. Basically, the blockchain is what permits the people involved in the transaction to trust that everything is done on the up and up. But instead involving some bank or other institution, it is done by a network of computers.
Every time a transaction is made with Bitcoin, the network’s computers compete to solve a mathematical problem that will verify that transaction. The winning “miner” is rewarded with a stash of Bitcoin, which is how the supply of the coins increases. This process gives those who are involved in the transaction assurance that it will be carried out in a secure, transparent manner, as all evidence of the activity is preserved on the blockchain.
Bitcoin started to get popular when people began to understand the advantage they could get out of making such an easy transaction without having to deal with third parties. It also grew as an investment when savvy individuals saw the potential for the coins and began to buy them up with the intent of holding on to them, waiting for a day when they would become much more valuable.
Even as many competitors have lined up against it, Bitcoin still stands as the dominant force in the cryptocurrency market. Many novices actually think it is the only cryptocurrency, and although it ebbs and flows, its market share is often near 50% of all cryptocurrency. As a result, many other coins have targeted Bitcoin with their own initiatives.
2. Bitcoin Cash
As you might be able to tell from the name, Bitcoin Cash is a coin that actually spun off the original Bitcoin. In the Bitcoin community, there was a controversy about how the mining process should take place in terms of the size of the blocks of information that would be added with each new mining effort. The Bitcoin Cash group wanted a change and hence took the open-source Bitcoin specs and created their own coin.
Bitcoin Cash benefits somewhat from having a diverse connection to the original brand. And there are many who swear by its ability to validate transactions on a faster basis than Bitcoin proper. But it has a long way to go to reach Bitcoin’s heights in terms of the value of each coin.
Litecoin is one of the most solid alternatives to Bitcoin as a method of paying for goods and services or receiving payment for them. This altcoin (alternative coins are considered to be any form of cryptocurrency besides Bitcoin) attempts to solve the problems of Bitcoin scalability. Scalability is a word that is meant to represent how many transactions a cryptocurrency can complete in a given amount of time.
If the scalability factor doesn’t improve for cryptocurrency, it is hard to imagine it being a universal currency like its proponents hope it will be. Litecoin, a steady force in the top ten of the cryptocurrency market share charts, is an initiative designed to improve scalability.
Dash has much lower fees than Bitcoin. It can sometimes cost a few dollars to pay for something, which conceivably could be more than the item itself. A Dash transaction will cost the buyer just a couple of cents.
The proponents of Dash also like the way that the currency is being integrated into society with a bit more smoothness compared to other altcoins. For example, many gambling sites are receptive to Dash payments.
This is an interesting Bitcoin branch that tackles the problem of price volatility. Bitcoin and other cryptocurrencies are subject to the whims of supply and demand, which means that the value of the coins can rise and fall at any time. Many think that makes cryptocurrencies far too unstable to act as the dominant currency for everyday people.
Tether attempts to answer that issue. In terms of usage, the coins act much the same as Bitcoin in the way they allow payments from peer to peer. The difference is that the value of the coins is manipulated so that each is “tethered” to the much more stable United States dollar. That is why Tether is the leader in a sub-category of cryptocurrency known as “stablecoins.”
These coins are looking to be more than just payment systems or investment vehicles, although they can be those things. Hopefully, as more people become aware of cryptocurrency, the demand for new ways to use cryptocurrency will spur the market and lead many of these plans to come to fruition
If there is one other cryptocurrency coin that has entered the public consciousness on a widespread level besides Bitcoin, it is Ethereum, with its native coin, Ether. And like Bitcoin, it was in many ways the first of its kind, spawning many imitators in its wake who are trying to improve upon what Ethereum initiated.
The main innovation that Ethereum spawned was the concept of the smart contract. That is a contract that is automatically set into motion by blockchain miners once the terms are met. Those involved can make the terms as distinctive or as simple as they want it to be, knowing that the blockchain will be the officiator without imposing the pricey fees that a lawyer would.
In addition, Ethereum also helped to initiate the concept of decentralized applications, or dApps. These are apps like you might see on a cell phone, created by ambitious programmers. By using it, however, these programmers and creators are able to retain control of their work, instead of having to piggyback on an internet service provider or a cellular provider to bring it to users.
2. Money Transfer Coins
Perhaps the most competitive niche in the world of cryptocurrency is the one that attempts to serve those who are attempting to do business in multiple countries. This process is burdensome and costly for those trying to make this happen in the traditional way. A couple of cryptocurrencies that are on the rise are attempting to be the method by which international money transfer gets much easier.
EOS is attempting to be a smarter and faster version of Ethereum. The concern is that a lot of different entities, all trying to use the blockckain at once could be problematic, causing logjams and slower time of service. That is especially true when you are considering elements as relatively complex as smart contracts that are handled by the Ethereum blockchain.
In terms of Apps, EOS is also trying to become a smoother version for developers. This particular cryptocurrency is dealing with the same issues plaguing those trying to up-end Bitcoin, however, in that Ethereum is already ingrained as the most popular name in the sector.
Powered by its XRP coins, it is a company that is tackling the issue of transferring money between countries. Right now, that usually requires the transferring bank to have an account with some foreign currency in the country to which the money will be going. That requires fees to be paid by the businesses or individuals doing the transferring, and it also takes a while for the whole process to take place.
Thanks to some promising patents and test results from using those patents, Ripple seems to be on the right track to making these transfers relatively hassle-free. Still, Ripple causes some controversy in the cryptocurrency world. This is because they are in charge of most of their XRP coins, calling into question whether theirs is a decentralized network.
This cryptocurrency offering, with its proprietary coin Lumen, is also honed in on solving the problems of transferring money across country lines with relative ease. Obviously, they claim their own technology. Perhaps the biggest difference between Stellar and Ripple, besides the nature of the ownership of the coins, is their clientele.
Ripple seems focused on grabbing established companies and cultivating relationships with them. By contrast, Stellar, for the most part, has been trying to corner markets that are less-developed.
As of right now, the cryptocurrency offerings that are mentioned here seem a cut above the rest in terms of both stability and potential. One thing about the cryptocurrency industry you should know, however, is that the landscape can change on a dime.