What Is Bitcoin?
Bitcoin, or “the cryptocurrency” as we often call it, has evolved so much over the years that many people have a hard time fathoming its true origins: first introduced by Satoshi Nakamoto on a cryptography mailing list in 2008; then released for sale in 2009; eventually becoming popular enough to become an online currency. Nowadays, anyone with access to a computer can purchase, hold, and trade cryptocurrencies like bitcoin, Ethereum, and litecoin—and make them go up. But those who are interested in their investment can mine and store their coins (or exchange them for other currencies) by investing directly in mining rigs (the process of converting bitcoin into computer-readable data or “blocks), processing power, hardware, storage equipment, software, energy (mining), and more. For example, miners can earn rewards from both processing computing tasks (mining) and selling coins at prices higher than the current market price of each coin. The result of this system is an ever-growing money supply that allows investors to receive returns from the assets they put in. Since 2014, since the creation of digital tokens, cryptocurrency coins have been minted to represent specific goods (e.g., Amazon Web Services). Digital tokens do not have any physical or tangible form; instead, they are represented by strings of code on computers that help verify transactions—this type of virtual money exists only electronically. In 2019, there were approximately 1,000,000 bitcoins in circulation. You can buy bitcoins using special payment systems such as PayPal and Stripe. You can also use your debit card, credit card, or bank account to pay for or purchase bitcoins. For example, you could send a payment request to your bank account or PayPal, which would be added automatically to your cryptocurrency wallet balance. If you received bitcoin payments via cash, email, check, or another electronic method, these coins will be converted to dollars before being sent to your wallet. Note that if you use Bitcoin, it is best to remain vigilant about its volatility and keep an eye on all the latest news regarding changes in this asset class so that you don't get overwhelmed by events that may affect its value. Most importantly, it's important to understand how cryptocurrencies function to avoid getting scammed or manipulated. Before trading anything, always consult your financial advisers.
What Are Examples Of Cryptocurrencies?
Bitcoin is not the only cryptocurrency out there—the world boasts dozens of options known as “digital currencies”. Some, such as Ripple and Litecoin, allow users to create digital versions of traditional fiat currencies such as dollars and euros, and convert the values into different forms across many platforms. Others, called altcoins or "altcoins", exist in alternative forms rather than as cryptocurrencies, but their monetary values tend to be lower than those offered by central banks. These alternative cryptocurrencies typically differ from mainstream ones such as bitcoin because they serve a purpose beyond facilitating the growth of capital markets or providing payment services. To make things clear, let us look at several examples of popular cryptocurrencies:
1. Ether: This is one of the most widely used cryptocurrencies. Created by programmers for entrepreneurs and technologists in 2008, ether is a medium of exchange that exists primarily as digital tokens that can be bought and sold electronically on centralized exchanges. Every time someone sells their coin, the seller pays back the seller’s transaction costs in ether (the same way a stockbroker would sell shares of stocks on the New York Stock Exchange). However, unlike shares of equity, cryptocurrency values are highly volatile. The main downside of ether is that it is virtually impossible to spend bitcoins, making them very difficult to trade or invest in. Another big disadvantage is that no matter how difficult it is for anybody else to purchase ether since it is completely decentralized it doesn't appear on the government's official currency list, thus preventing it from circulating freely. However, this problem could soon be solved thanks to new security measures that Ethereum developers are working on. Because of its recent development, some analysts believe that Ethereum could become the next major global platform, enabling trillions of dollars worth of value to circulate worldwide.
2. DogeCoin: Created back in 2013, Dogecoin is similar to other well-known cryptos such as bitcoin and Ethereum, though its design is slightly different—it uses shiba inu dog-themed characters that it calls "Ether" to identify itself while also playing off the company name of Blockbuster, Inc. Unlike Ethereum, where smart contracts and distributed ledgers keep track of transactions, Dogecoin relies on cryptographic hash functions to record transactions. Therefore, when you spend DOGE you're spending a piece of NFT representing ownership of a real-world dog breed (unless you've already owned one). That being said, none of the DOGE coins ever went through the blockchain validation process in any meaningful way because it was never meant to replace an actual dollar but had to comply with certain rules to stay within compliance. Also because Dogecoin does not have a legal status and is considered a novelty by many regulators worldwide, it may be subject to greater regulation than most others. Regardless, Dogecoin remains a fun token that everyone loves to hate.
3. XRP: With a long history as one of the first cross-border cryptocurrency networks, XRP was created by Swiss IT developer Marcel Winklevitz in 2011. As an answer to issues such as excessive chargebacks, user fees, and lack of privacy, Winklevitz wanted to make a secure, fast, and inexpensive manner possible to spend XRP. He created XRP, which is simply a token representing the network fee required to transact between two peers or people in different countries. Users purchase a fixed amount of XRP and use them to pay gas (the cost of sending the crypto to another party) on internet exchanges. Instead of having to rely on governments like the British Banknote or the U.S. Federal Reserve to maintain stability and control the economy, XRP removes fees entirely, allowing its value to increase or decrease depending on its demand. Though its popularity skyrocketed in 2021 after Elon Musk tweeted his support for a project under the XRP coin code name, which represents $1 trillion in bitcoin, most retail investors do not know it exists. Today, there is no legal status to claim XRP as a currency. Investors should take care with understanding regulations because XRP holders do not currently have voting rights in Switzerland or anywhere else except Canada.
4. EOS: The second-largest cryptocurrency by market cap, Ethereum is used in applications ranging from gaming and social media to finance and even non-fungible tokens (NFTs). By far, its biggest use has come as a marketplace where buyers and sellers can interact on the open Ethereum Blockchain. EOS operates as a public ledger that records every transaction made across the entire chain—the transactions, aka blocks, that include transactions made by buyers and sellers. When these transactions occur, their addresses are recorded in a ledger that the blockchain maintains. There is no third party involved in the recording of transactions. Rather, the whole system runs on proof-of-work ledgers, creating a record of every action made across the entire network. Despite its relatively brief existence, Ethereum did not receive proper recognition from the Federal Government or European Union lawmakers and remained largely anonymous. A lawsuit filed against Tesla by JPMorgan Chase Securities in 2017 sought damages for losses incurred due to poor customer service provided by its self-proclaimed subsidiary, MicroStrategy Holdings Corporation ("MicroStrategy"). Under federal law, companies must provide safe and efficient workplaces for their employees and consumers—but unfortunately, Ethereum failed miserably in that regard. After numerous appeals and court cases, the Supreme Court ruled 4–3 against Ethereum in 2018, stating it didn't meet the standard for workplace safety. Even after dropping the case, the US Justice Department and Treasury Secretary Janet Yellen refused to recognize it on grounds that it breached antitrust laws.
5. Solana: Originally developed by a team from Google called Node Labs to build on top of the Ethereum platform, Solana (also spelled'sol'an') is a Layer 2 blockchain built on top of the Ethereum protocol called Avalanche. Launched in 2015 and rebranded on May 6th, 2016, Solana was intended to offer a faster and cheaper means of hosting and managing Ethereum-based blockchains. Unlike Ethereum, however, which runs on proof-of-work, Solana runs on Proof-of-Stake consensus systems to run its operations more efficiently. According to the Ethereum Foundation, staking is required to validate the authenticity of transactions on Solana. Its native coin, SOL, is a deflationary token that gives zero utility in the short term. In fact, according to the official website, SOL is used only in governance features and processes such as electing treasury members, approving upgrades, and setting limits on withdrawal amounts, among others. While Solana has been heralded as a technological leap forward by tech giants such as Facebook, Twitter, and Spotify, it has faced criticism about low accessibility, slow speeds, high gas fees, unreliable performance, and questionable security. Currently valued at around $5 billion, the coin is extremely volatile and could fall drastically in the future.
6. Stellar Lumens: Based on the OpenZeppelin framework and powered by Stellar, Stellar provides the infrastructure needed to facilitate the transfer of bitcoin transactions between two parties, as well as transfers from one country to another. From here, it integrates seamlessly with the existing DeFi tools using SDK integrations. Like Binance Smart Chain, Stellar is designed to act as an intermediary between exchanges and users. Through a combination of technology and engineering expertise, it makes everything possible since it is supported by large pools of computing power, large and small batch processing facilities, and scalable storage to handle heavy processing workloads. The unique properties that enable it to integrate
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