A Beginner's Guide To Understanding The Top Five Cryptocurrencies

As more and more people take notice of Bitcoin and the revolutionary potential of blockchain technology there has been increasing interest in the role played by altcoins. “Altcoin” refers to any cryptocurrency (otherwise known as digital assets, tokens, or coins) other than Bitcoin and awareness of their existence leads many investors and enthusiasts to wonder: are these just knockoffs of Bitcoin or do they have some value of their own as well? Where does the value of Bitcoin come from?

In order to understand the importance of Bitcoin, blockchain technology, and altcoins, we're going to take a look at the top ten cryptocurrencies as listed by market capitalization. In cryptocurrency we measure the market capitalization by multiplying the amount of digital tokens in circulation by the average spot price listed on major exchanges. The most popular resource for keeping up with this information is www.CoinMarketCap.com.

1.     Bitcoin

Bitcoin may not have been the first cryptocurrency but since its inception in January 2009 it has remained the most popular digital asset in the world. Released by a mysterious individual or collective under the pseudonym “Satoshi Nakamoto,” the white paper detailing Bitcoin's purpose and technical specifications describes it as "a system for electronic transactions without relying on trust.”

Consider the reasons your keep your money in a bank and perhaps the benefits of a truly peer-to-peer financial system will start to come into focus. Why accept the risks created by the centralized authority that governs traditional currencies through various banks and regulatory agencies when cryptocurrencies offer the same security and even faster global transactions?

Instead of a money supply controlled by the speculation of “experts,” cryptocurrencies like Bitcoin get created according to an algorithm in a process known as “mining,” or a newer system known as “staking.” In exchange for “mining” the system with computer power or “staking” money in your wallet you get rewarded with tokens. The algorithms that govern the creation of digital tokens secure the system by getting the computers on the network to agree on the maintenance of a central ledger that records all of the transactions on the network called the blockchain.

Before Bitcoin, digital currencies faced an obstacle known as the “double-spending problem:” a skilled hacker could send money from an account to pay for one transaction and then send the same money to pay for another transaction before the system could verify that the money had been spent. By having all of the computers on the network maintain a record of transactions on the blockchain users can effectively check each other's work and make sure that everyone keeps the same data and uses it appropriately.

·       https://bitcoin.org/en/

2.     Ethereum

Bitcoin's use of blockchain technology to enable nearly-instantaneous, secure, peer-to-peer transactions represents a fundamental step forward in financial technology. Ethereum takes this technology one step further by providing a platform that allows users to create and issue their own cryptocurrencies with smart contracts that govern the way the currency works. Instead of just using cryptocurrency for peer-to-peer transactions, smart contracts transformed digital assets from simple currency into systems that can account for any conceivable form of value.
Ethereum was proposed by Russian programmer Vitalik Buterin in a white paper published in late 2013 and co-founded with Mihai Alisie, Anthony Di Iorio, and Charles Hoskinson. Developers can use Ethereum to create decentralized applications that transcend jurisdictions and will run for as long as the Ethereum blockchain is maintained. Other prominent smart contract platforms include EOS, Qtum, Counterparty, and Tezos.

A hard fork planned for winter 2017 will upgrade Ethereum from a proof-of-work to a proof-of-stake consensus algorithm and that version will be called “Metropolis.” This means that instead of creating tokens and maintaining the blockchain through mining, users will be able to “stake” money in their account – similar to moving your money into a savings account – and every year as the network grows users will gain tokens based on the proportion of their stake to the
currency staked throughout the entire system.

·       https://www.ethereum.org/

3.     Ripple
Ripple is a global financial settlement solution that facilitates verifiable, real-time, borderless payments with no settlement risk for banks. In other words, they're trying to help banks significantly decrease the amount of time it takes to verify and clear transactions. Instead of waiting days or weeks for large batches of transactions to be processed, banks will be able to get money where it needs to go in a matter of minutes or hours.

Based in San Diego, California, the company was founded by Chris Larsen and Jed McCaleb in 2012 as Opencoin and renamed Ripple in 2015. The Ripple protocol was authored by Arthur Britto, David Schwartz, and Ryan Fugger and the company is led by CEO Brad Garlinghouse. The Ripple network incorporates a real-time gross settlement system enabling currency exchange and remittances.

Ripple's partnership with twenty-four member banks and centralized organizations in general has generated a lot of controversy in the world of cryptocurrency. Many early adoptors of cryptocurrency and blockchain technology tend to have libertarian-leaning opinions and support the decentralization of wealth and power, so watching a company like Ripple place blockchain technology at the feet of big banks has many of these observers crying “sell-out!”

·       https://ripple.com/

4.     Bitcoin Cash
Bitcoin Cash is a newcomer to the world of cryptocurrency that was created on August 1, 2017 when Bitcoin experienced a  hard fork to upgrade its scalability. While most miners continued to maintain the original Bitcoin, a large enough group of miners decided to maintain the older version so that Bitcoin holders could suddenly claim an equivalent amount of Bitcoin Cash. A new currency was born and enough users claimed their Bitcoin Cash to skyrocket the currency into the top five most valuable currencies by market capitalization.

Most Bitcoin miners and users have decided to upgrade Bitcoin with a code called Segregated Witness 2x. Bitcoin Cash removes Segregated Witness in favor of an immediate upgrade to decrease transaction times and fees but without the brand recognition and development support enjoyed by Bitcoin many find it hard to imagine Bitcoin Cash achieving any kind of commercial integration or success.


5.     Litecoin

When Bitcoin began gaining traction it became clear that the system had a weakness: users with access to industrial-grade computing equipment could exploit the mining system to give themselves a massive advantage. Litecoin was founded in 2011 by Charlie Lee as a fork of Bitcoin with tweaks in the code that attempted to create a more democratic system by eliminating this advantage and giving preference to users with consumer-grade hardware.

Since then, Litecoin has evolved into a more technologically-advanced version of Bitcoin. Litecoin successfully activated the Segregated Witness (SegWit) upgrade in May 2017 after Lee convinced a majority of Litecoin miners to support the upgrade, setting the stage for Bitcoin to enable SegWit2x in August of the same year.

Litecoin will also act as the testing ground for the Lightning Network, another upgrade also proposed for use on the Bitcoin network. The Lightning Network will enable atomic transactions, which means that users will be able to instantaneously swap Bitcoins and Litecoins inside their own digital wallets with no third-party risk. This will enable Litecoin to serve as an extension of Bitcoin: if an individual wants to send a large transaction that would take a long time to send on the Bitcoin network, they can instantly swap their currencies, send the transaction, and swap the currency back with no hassle for the user.

·       https://litecoin.org/


The success of Bitcoin has launched a variety of important financial technologies, from blockchain and smart contracts to Segregated Witness and the Lightning Network, each representing a small step closer to decentralized financial services available worldwide. In the future we can expect faster transactions, increasingly comprehensive platforms for creating smart contracts, and the tokenization of nearly any good or service imaginable.

Cryptocurrency allows us to envision a world where relatively small organizations consisting of banks, governments, and other regulatory agencies no longer have even the possibility of standing between free people and our right to transact as citizens of a global marketplace. In other words, the value of cryptocurrencies from Bitcoin to altcoins ultimately comes from what we make of it. 


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