The Guide to the 5 Main Cryptocurrencies
Bitcoin is currently the largest, most famous and most valuable cryptocurrency. It was also the first to be launched by the still anonymous “Satoshi Nakamoto” in 2009. Its market capitalization on September 1, 2017 was more than 77,000 million dollars, when there were approximately 3 million individual Bitcoin holders. It is accepted in more retail outlets than any other cryptocurrency. Bitcoin is the obvious choice for most investors, speculators and traders, since it is the most liquid cryptocurrency and can be bought, sold or traded through more platforms than any alternative. Bitcoins are created through mining, which used to be within the capacity of laptops and desktops, but it is not so easy to do. At current mining rates, 12 are created,
This creation rate will be gradually reduced, until the total number of bitcoins in existence reaches the maximum of 21 million, which is expected to occur around the year 2140. All transactions, including the creation of new bitcoins, the price of bitcoin and All sales and transfers with Bitcoins are recorded in a ledger. Transactions must be accepted by most nodes in blockchain technology of Bitcoin and, given that Bitcoin is relatively broadly owned, transactions take at least 10 minutes to complete completely. Bitcoin miners act as nodes within the blockchain, managing the system effectively and processing all transactions. Once the 21 million bitcoins have been extracted, miners will have a greater need to charge commissions per transaction to maintain profitability. For this reason, traders are worried that the cryptocurrency may face a big problem in the future. It is worth noting, however, that the purchase of assets or even a currency change also incurs a transaction fee, so Bitcoin is not necessarily disadvantaged compared to other marketable assets. Miners can already charge transaction fees if they wish and choose which outstanding transactions to prioritize if they generate a commission. This means that if you are in a hurry, you can pay a little more for your transaction to be processed faster.
Read: How To Buy Bitcoins For The First Time, Step By Step- for Noobs
The transactions and ownership of Bitcoins are effectively private, since, although the general ledger of the blockchain is public and contains a record of every transaction that has been made, the owners are identified by digital credentials (“keys”) and not by its name or other identifying elements. Holders can store and protect their keys using a variety of methods, all of which will be discussed in more detail later.
In addition to being the largest and most famous cryptocurrency, Bitcoin has a pioneering and rebellious image, as it is not backed by large corporations, and is seen as a bold intrusion. In other words, Bitcoin can be the Wikileaks of cryptocurrencies!
Ethereum
Ethereum is second by size compared to Bitcoin. It was released in 2015 and was developed by a Bitcoin programmer who was disenchanted with the functionality of Bitcoin.Its market capitalization on September 1, 2017 was more than 36,000 million dollars, a little less than half that of Bitcoin and there are approximately 750,000 individual owners of Ether (as the currency is technically known). As a means of payment, it is accepted by very few points of sale or any commercial organization. The essence of Ethereum is that it is a blockchain technology designed to make “smart contracts”, which are computer protocols designed to facilitate, verify or enforce the negotiation or fulfillment of a contract. The way of thinking in the Ethereum is like a currency for commercial contracts through the Internet, unlike Bitcoin, which pretends to be more a reserve of value and means of generalized exchange.
Read: Bitcoin: What Is It, and Is It Right for Your Business?
In other aspects, Ethereum is functionally similar to Bitcoin. It is also subject to mining, but the rules that govern its extraction in the future are less clear than the rules of Bitcoin. Ethereum has a more corporate image and was brought to the market by a Swiss company. Ethereum has had some negative publicity since its ledger has been successfully pirated and has suffered several hard forks, the first one destined to recover stolen assets after the attack of hackers. However, some cryptocurrency analysts see in Ethereum the potential to outperform Bitcoin in stock market capitalization at some point in the future. Even so, in recent months the capitalization of Bitcoin has grown proportionally faster than that of Ethereum.
Bitcoin Cash (Bitcoin Cash)
Bitcoin Cash or Bitcoin En Efectivo is a branch of Bitcoin, created on August 1, 2017 as a result of a fork or hard fork in the chain of Bitcoin blocks . This hard bifurcation was the result of the differences that arose between those who prioritized Bitcoin as a store of value ( that is, an investment) on a medium of exchange (that is, cash to make transactions). Some Bitcoin miners wanted the limits removed, which would increase the speed of transaction times. The result was that Bitcoin split to form a new cryptocurrency with a faster transaction time, called Bitcoin En Efectivo. It is extracted and works in the same way as Bitcoin. Its market capitalization as of September 1, 2017 was more than 9800 million dollars, approximately one eighth of the traditional Bitcoin. Bitcoin Cash is generally more useful for people who need to derive their income streams from the cryptocurrency, or make many quick business transactions. It can be seen as an investment vehicle, since it has a niche market and, from the fork,
Ripple
Ripple is the fourth largest cryptocurrency in the world. Its stock market capitalization as of September 1, 2017 was just under $ 9,000 million.It was launched in 2012, but had been in development for 8 years. Ripple is quite different from Bitcoin and Ethereum, as it has a more corporate image and backing, and is actually a decentralized transaction network verified by consensus instead of a cryptocurrency. It was developed as a real-time, fast and cheap gross settlement system and can verify transactions in a few seconds, much faster than any other cryptocurrency. It is already used by several major banks, which consider it a safer system than Bitcoin and other cryptocurrencies. Its native currency is Ripple, but it can accept any unit of value, be it fiat currency like the US dollar or even flight miles and the like. This flexibility, as well as its adoption by banks, It attracts some investors who feel that Ripple’s technology will dominate the market and eventually overtake Bitcoin and Ethereum in stock market capitalization. However, it must be taken into account that its value has increased much more slowly in the second and third quarters of 2017 than the value of other important cryptocurrencies
Litecoin
Litecoin is the fifth largest cryptocurrency. Its market capitalization as of September 1, 2017, was of 3,400 million dollars. It was launched in 2011 and was a Bitcoin fork, that is, a branch of Bitcoin. Its operation is almost identical to Bitcoin in every way, except that it has always had a much faster processing speed and can now process transactions approximately four times faster than Bitcoin.
Overview of the 5 Main Cryptocurrency
From an investment or trading perspective, it is important to know the differences and similarities between each of the main cryptocurrencies as a starting point. In this way, you can make sure you do not buy too much of the same type of asset. So, let’s see the characteristics of each of the cryptocurrencies. The main elements that differentiate them and that probably influence their future prospects are their functionality, stock market capitalization, image, popularity, security and processing speeds, as detailed below:
|
Bitcoin
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Ethereum
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Bitcoin Cash
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Ripple
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Litecoin
|
|
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Launching
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2009
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2015
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2017
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2012
|
2012
|
|
Market capitalization (USD)
|
77,000 million
|
36,000 million
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10 billion
|
9000 million
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3000 million
|
|
Currency or Network?
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Coin
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Coin
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Coin
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Net
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Coin
|
|
Registry Security
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Good
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Questionable
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Good
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Excellent
|
Good
|
|
Famous?
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A lot
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Something
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Something
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Little bit
|
Little bit
|
|
Transaction Rate
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Slow
|
Slow
|
Quick
|
Very fast
|
Quick
|
|
Corporate Support?
|
Do not
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JPMorgan Chase, Microsoft, CME Group, BNY Mellon
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Do not
|
Google Ventures, Standard Chartered, Accenture, Santander, InnoVentures
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Do not
|
|
Image
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Alternative
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Corporate
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Alternative
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Very Corporate
|
Alternative
|
|
Link with Bitcoin?
|
N / A
|
Do not
|
Yes – hard fork
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Do not
|
Yes – fork
|
The remarkable atypical asset is Ripple: it is very corporate and a network instead of just one currency. In the future, it may become the matrix through which all, or almost all, cryptocurrency transactions are executed.
In addition to Ripple, the main rivalry is between Bitcoin and Ethereum and the latter expects to soon surpass Bitcoin as a leader in stock market capitalization.
Bitcoin Cash and Litecoin can be grouped as coins that are designed to be optimized for exchange rather than savings/investment.
For these fundamental reasons, it may make sense to divide the five crypts into 3 groups:
- Ripple
- Bitcoin and Ethereum
- Bitcoin Cash and Litecoin
When it comes to a technical analysis of market prices, the story is more complex.
While all cryptocurrencies have gained a lot during this period, keep in mind that Ripple is still well below the highest price reached on May 17, while the other “true” cryptocurrencies continued to rise during the summer of 2017. Bitcoin and Ethereum have continued to record new historical highs, while Litecoin is still far from its maximum, as can be seen more easily in the following graph:
The price movements of the last 6 months seem to suggest that there is validity in our categorization by groups. Also note that cryptocurrencies with lower market capitalization appear to show stronger volatility, which is not surprising either, since illiquid assets are usually more volatile.
Minor Cryptocurrencies
If you are considering becoming an investor in long-term cryptocurrencies, it is worth thinking about buying a quantity of lesser-known currencies that may become larger. When investing in very risky portfolios, the best profits are often obtained from spectacular gains in only one or two instruments. Therefore, a portfolio of small investments in smaller cryptocurrencies could have a high potential return.
If you decide to invest in lesser-known cryptocurrencies, it is very important that you do your own research. You can see a list of the top 100 cryptocurrencies by capitalization here. In the meantime, we would like to list some of these smaller alternatives that we believe could end up standing out from the crowd.
Golem, based on a network where anyone can earn money by renting their computing capacity not used in the cloud. Now it is the twenty-seventh largest cryptocurrency by market capitalization.
Monero: announced as virtually non-pirateable and with an unprecedented level of security. Now it is the eighth largest cryptocurrency by market capitalization.
Storj : the currency of a cloud storage system based on the blockchain system, where the currency is issued in exchange for a provision of storage space.