Cryptocurrencies are a development of what was once an arcane field of study; cryptography. To protect privacy in the electronic age, cypherpunks in the 90s hit upon the desire for anonymity in cash settlements. This approach to transactions would allow people and systems to divulge their identity when they chose to.
This movement led to David Chaum’s DigiCash, Wei Dai’s B money, and Nick Szabo’s BitGold projects. When Satoshi Nakamoto, Bitcoin’s supposed legendary visionary leaped into the cryptography scene, he first turned to the cypherpunks.
His invention would solve some teething problems that the movement’s novel transaction systems had. He had a solution for double-spending, offering a working cryptocurrency platform ready for use.
This is the origin of bitcoin and its altcoins. This humble but revolutionary background gives all digital currencies their use case, advantages, and drawbacks.
BTC, LTC, ETH, XMR, XRP in a Table
Before we go to some details, let’s start with an overview in a table.
|Asset1||Algorithm||Proof Type||Start Date||Max Supply||Current Supply2|
|Bitcoin (BTC)||SHA-256||Proof of Work||2009-01-03||20,999,999.98||18,555,525.00|
|Ethereum (ETH)||Ethash||Proof of Work3||2015-07-30||N/A||113,596,756.25|
|Monero (XMR)||CryptoNight-V7||Proof of Work||2014-01-18||N/A||17,769,566.73|
1 Links: Details on Coinmarketcap.com.
2 Current Supply: As of 27/11/2020.
3 ETH PoW: Ethereum is moving to Proof of Stake (PoS) from Proof of Work (PoW).
4 Scrypt: Litecoin uses Scrypt in its Proof of Work algorithm.
Some of Bitcoin’s most outstanding characteristics rise from Wei Dai’s 1998 B-money proposal. In his plan, Dai foresaw the management of Proof of Work agreements, Bitcoin’s consensus protocol. His paper also speaks of proof of stake enforcement of agreements. Here, a stakeholder’s incentive to honesty is the money that they wager with.
Hal Finney’s 2004 release of the reusable Proof of Work system and Nick Szabo’s 2005, bit gold gave more bones to Nakamoto’s Bitcoin. The person or entity that is Satoshi set off to satisfy the cypherpunks’ desire for privacy, by anonymizing public keys.
So what is Bitcoin? Bitcoin is a finite digital currency. Its code only allows the mining of 21 million tokens. Close to 4 million of the 18 million mined is lost forever to the perils of encryption. The next century will see 3 million more come out of the code’s digital bowels. You can distribute Bitcoin or BTC tokens electronically.
The decentralized network launch coincides with the late 2000s catastrophic global economic crunch. It is in this setting that Satoshi mined the first BTC block in 2009 and sent the first 10BTC to Hal Finney. Laszlo Hanyecz bought his two pizzas with 10,000 BTC and the rest as they say is history.
Today, Bitcoin is the world’s most popular digital currency, with its all-time high of $20,089, reached on December 17, 2017. The digital currency is also one of the most valuable cryptocurrencies on the market. Its only competition at its price range is the valueless DeFi token Yearn.finance (YFI) and the ERC-20 token Wrapped Bitcoin (WBTC). So what features set Bitcoin apart from the other blockchain currencies?
The Bitcoin Advantage
Bitcoin is the first successful digital currency. Unlike many of the altcoins set up after it, the Bitcoin blockchain is beautifully decentralized. Admittedly, competition amongst its miners has sent its centralization feature downwards. That said, no mining pool is in charge of over 20% of its hash rate at one time.
The bitcoin blockchain is therefore immune to a 51% attack. Achieving this level of distribution means Bitcoin is free from interference by governing powers, corporations, and banks. Bitcoin can run parallel to the current monetary system and stay above its flaws and shortcomings.
While cypherpunks set off to enhance privacy online, Bitcoin’s transactions are very transparent. So did Bitcoin fail Eric Hughes and his peers? The early cryptography adopters‘ wish was such that every stakeholder in a transaction could only access information, which directly affects that exchange.
Bitcoin fulfills this need. It is anonymous; limiting access to personal information. The blockchain’s transactions are transparent and immutable. A public wallet displays the number of digital currencies held within it. It is however nearly impossible to be able to identify the entity behind any Bitcoin address.
- Bitcoin is the gold standard of decentralization in the crypto circles. It is also finite and therefore is highly on-demand in the market. For this reason, BTC has more liquidity than other digital currencies. You will keep the value of your BTC should you convert your fiat money. This makes bitcoin a medium of exchange, just as paper money is.
- Bitcoin is also achieving mass adoption faster than other digital currencies are. You can purchase goods and services using your BTC. It is therefore a recognizable measure of value.
- Bitcoin transactions are borderless, meaning that you can send your tokens across international borders easily, because of their popularity. BTC transactions have fewer charges than other legacy payment methods.
- Bitcoin is a scarce commodity which makes it a formidable store of value. Some altcoins do not have any measures to ward off inflation. BTC is digital gold. In contrast, the value of traditional currencies is shallow because of excessive quantitative easing by the central banks of the world.
- Bitcoin is the most liquid digital currency in the market, but it also has some of the wildest price swings. Its volatility makes it a perfect speculative trade item but it can cause massive losses in a short period of time.
- Traditional currencies may offer chargebacks on transactions, but Bitcoin’s transactions are immutable to ensure trust. You will not have a reprieve from fraud because an arbitration process doesn’t exist for such occurrences.
- Bitcoin may be king, but cryptography and blockchain technology is on the move. There are many altcoins bred to be ‚bitcoin killers‘ but none have succeeded yet. Technological advancement might raise a potent and superior cryptocurrency, which might adversely affect BTC’s value.
- Bitcoin’s Proof of Work algorithm requires mining, a process that spends a massive amount of energy, further degrading the fragile blockchain ecosystem.
As Bitcoin mining and purchase gained traction in the crypto world, the world’s first alternative token, Namecoin emerged. Bitcoin enthusiasts then watched as the BTC code base gave rise to thousands of altcoins.
Some came to outpace the leader, while others increased compatibility. Vitalik Buterin felt blockchain currencies could do much more than just payments. Launching Ethereum in 2013, he now runs the world’s second most popular cryptocurrency.
The Ethereum Advantage
Vitalik’s project attracted massive attention from developers because unlike Bitcoin’s current payments use case, Ethereum is "Blockchain 2.0". The Ethereum blockchain is the nerve center of smart contracts and decentralized applications.
Smart contracting does away with third party enhancing operations. Through Solidity, developers on the Ethereum blockchain can build robust dApps with smart contract capability. Ether, the Ethereum blockchain currency is the gas that runs the transactions on the dApp network and is extremely liquid.
Unlike bitcoin’s manual transactions, Ethereum’s are programmable via smart contracts, enhancing trust. Additionally, the blockchain has made upgrades and hard forks to enhance the speed, security, and scalability of its network.
- Besides Bitcoin’s rise, Ethereum and its large decentralized applications are the top assets of the year. The Ethereum blockchain has over 178 projects. Some of its finance projects such as DAI, Maker, and Compound are garnering a massive amount of users, investment, and attention.
- If you are looking for a blockchain network with a massive use case, then Ethereum is the place to be.
- Ethereum’s block times are shorter than Bitcoin’s making its transactions a bit faster and cheaper
- The Ethereum blockchain is moving to Proof of Stake structure that eliminates block rewards. It is less energy-intensive and cheaper than the Proof of Work algorithm.
- Unlike Satoshi’s secret identity, Vitalik Buterin has maintained a powerful presence. He has helped the Ethereum network overcome some of its toughest challenges. Ethereum is a cohesive force with a clear vision that keeps growing and strategizing for the future.
- Like Bitcoin, Ethereum has low transaction speeds if you compare it to standard digital payment systems such as Visa. While the Ethereum blockchain can handle 15 transactions per second, Visa can actualize 45,000 of them each second. That said, Ethereum is developing private variants of its blockchain that should be much faster and more scalable.
- Ethereum is moving to a consensus mechanism called Proof of Stake (PoS) from Proof of Work (PoW) which is viewed negatively by some crypto enthusiasts.
- The dApps ecosystem now has faster and scalable blockchains that could eventually outdo Ethereum’s enterprise adoption angle.
- Unlike Bitcoin that has finite tokens, Ethereum releases an amount of Ether every year to encourage development. Ethereum is also a crowd-funded operation, so half of its tokens will be in the hands of its miners.
Litecoin (LTC) is one of the original altcoins. It has been among the top ten by market capitalization for years. The brainchild of Charlie Lee, Litecoin has been selling since 2011, trudging on as many other altcoins of its generation seep through the cracks.
So what is Litecoin’s secret? LTC heavily borrows from the Bitcoin blockchain, only making low-key modifications to the code. For this reason, LTC is the digital silver to BTC’s digital gold status.
The Litecoin Advantage
Litecoin’s fundamental idea was a swifter and low-cost alternative to BTC. Fortunately, Lee was an excellent marketer, building a large LTC community that has kept the Litecoin blockchain on fire.
The digital currency has had bull runs and has been a test grid for the Bitcoin network. It has provided pilot study grounds for the Lightning Network, SegWit, and Atomic Swaps.
- Its network is four times faster than Bitcoin’s.
- Its transaction charges are lower as well.
- Its performance closely interacts with that of Bitcoin, following its cycles and rising when BTC rises.
- Its blockchain lacks a unique selling proposition.
- Its creator Charlie Lee has sold off his holdings in LTC, raising questions about the future success of Litecoin.
Monero (XMR) is a rock star cryptocurrency and with good reason. Its core purpose is to deliver privacy in digital currency transactions, and it has made good on its premise. Monero meets the cypherpunks‘ need for privacy.
It allows crypto users the freedom to reveal their identities to the public only when they choose to. Monero is a hard fork of the bytecoin blockchain and is run by a team of seven developers.
The Monero Advantage
XMR is not a cheap knock off BTC but has its unique selling point. No one can identify Monero transaction players or the amounts traded, thanks to the blockchain’s state-of-the-art cryptography. Monero is therefore not just popular in Dark Web payments or sanction rife states like North Korea.
XMR has become incredibly comforting in a surveillance heavy world. Monero’s blockchain gives its users total control of their identity and money, meaning that no XMR can be marked as tainted. All XMR is fungible because the blockchain does not record a transaction trail.
This blockchain also has the advantages of dynamic scalability and is ASIC resistant, in that its Cryptonight base is GPU and CPU friendly to squash the creation of mining pools.
- Highly scalable.
- One of the most successful privacy blockchains.
- Has a robust and dedicated development team.
- Monero allows selective transparency.
- Some wallets do not support XMR.
- Its transaction charges are higher than that of BTC because of massive encryption processes.
- It is a tad technical for beginners.
XRP is the third-largest cryptocurrency by market cap and is currently at the $27,754,093,328 mark. Of the largest three digital currencies by market capitalization, XRP has the most tokens in the market. While bitcoin has 18,552,756 and Ethereum has 113,556,750 tokens in the market, XRP currently has 45,348,221,180 in circulation.
For this reason, XRP is inexpensive going for as little as $0.52, compared to ETH’s $597.40 or BTC’s $19,236. XRP or Ripple, as some crypto users may call it, was first a payments company bereft of any blockchain development.
Ripple was in existence before Bitcoin came calling. A product of Ryan Fugger, Ripplepay has been in operation since 2004, giving its users secure monetary transaction tools. Mt. Gox’s Jed McCaleb and his associates David Schwartz and Arthur Britto took over Ripplepay in 2012.
On the Ripplepay code, they built OpenCoin and its payment network that would support ledger processes. In 2013, OpenCoin became Ripple Labs Inc after McCaleb left and then became Ripple in 2015.
The XRP Advantage
Ripple has several products in its pocket for the financial industry. XRP is but the open-source code Ripple runs its xRapid product on. The firm’s premise is to give the current financial payment systems a run for their money, beginning with the SWIFT network.
Ripple works alongside the current banking system enhancing dated infrastructure via its xCurrent enterprise solution. Having said that, xCurrent does not need XRP. On xRapid, XRP only provides quick access to liquidity for payments.
- Ripple’s formidable relationships with banking institutions could turn XRP into a to-have asset. The firm’s use case as a solution to scalability and speed within the banking system makes it a cross-border payments champion that could take over from SWIFT.
- XRP sells and is affordable, and is perfect for any crypto enthusiast that finds ETH and BTC overpriced.
- All XRP has been mined, and 40% of it is in the market. The firm owns the rest of it, making XRP centralized.
- XRP’s success hinges on Ripple’s ability to outmaneuver the banking industry’s payment standard.
Bitcoin and Altcoins Making Massive Wins
In their manifesto, chief cypherpunk Eric Hughes said only cryptography would enable privacy. The team then set off to build free code that would undermine governed cryptographic development. Since then, the crypto war between the governments and tech tinkers has been raging.
Bitcoin and the altcoins are making massive wins in this skirmish. They will soon influence the world of finance for the benefit of humanity.