Cryptocurrency is the new kid on the block investment. It’s got Generation Z written all over it, but what exactly is a cryptocurrency and what are the big currencies to look out for.
Currency is defined as a “system of money in general use in a particular country”, so what is cryptocurrency.
A cryptocurrency is a form of currency that can only be solely online, you can exchange Cryptocurrency for goods and services much like normal currency. It works using a technology called the blockchain.
The blockchain is a decentralized database that oversees and records transactions. The blockchain allows for what’s known as peer-to-peer lending, this is where lenders are able to take part in a loan agreement without the necessity for an intermediary.
The main advantage is it allows the agreement process to go through much faster. The main advantage of Blockchain technology is that it is extremely secure and transparent.
Over the past decade especially cryptocurrencies have taken off with there now being more than 10,000 cryptocurrencies traded publicly. So, let’s pick out the top three and explain how each of them works.
Cryptocurrency by Creation Date
|Ripple||Chris Larsen &|
|Dash||Evan Duffield &|
|NEO||Da Hongfei & Erik Zhang|
|MazaCoin||BTC Oyate Initiative|
|Monero||Monero Core Team|
|Titcoin||Edward Mansfield & Richard Allen|
|Ethereum Classic||Vitalik Buterin, Gavin Wood|
|Tether||Jan Ludovicus van der Velde|
|Bitcoin Cash||Craig Wright|
|Dogecoin||DOGE, XDG, Ð|
Common Types of Cryptocurrency
- Bitcoin Cash
Bitcoin is the first cryptocurrency that was created in 2009, by Satoshi Nakamoto. Within bitcoin, no physical coin exists like a countries currency instead balances are stored on a public ledger that everyone can access.
Unlike normal currency, bitcoin is not backed by any government or central bank instead bitcoin is seen as a source of value to investors as only a limited amount can be mined.
Mining is the process of releasing bitcoin into the wider circulation, this mining requires a massive amount of computing power as it requires the computer to solve difficult puzzles to discover the new block that will be added to the blockchain.
For bitcoin, there is a limited amount of these blocks to be discovered hence Bitcoin is seen to be an appreciating currency. The current price of trading bitcoin is £25,000 per coin however it has seen highs this year of over £45,000 per coin with even Tesla accepting it to buy their cars.
The rise of bitcoin has led to an increase in altcoins, these are simply cryptocurrencies that are not bitcoin.
Ethereum is also a blockchain currency that is decentralized with data held by a public ledger that verifies and records transactions.
However, Ethereum is different from bitcoin as it is not seen as much as a source of value but as a creative platform. Within Ethereum you can create, publish, and monetize applications, which you can use its own built-in currency ether to pay for.
Ethereum has been described as the “world’s programable blockchain” this is how it differentiates itself from bitcoin.
Ethereum provides a programmable network that serves as a marketplace for apps that are safe from fraud, theft, or censorship
This is an altcoin that works through peer-to-peer lending. It is based on the meme of dodge the dog and the altcoin was created as a joke back in December 2013.
Dogecoin has an unlimited supply which means it’s an inflationary currency and usually means it has a relatively low price to buy.
In recent times in 2021 fuelled by tweets from Elon Musk and other Dogecoin followers, the price of dogecoin hit a high of 61 cents on the dollar.
Dogecoin also has a Dogeday on the 20th of April every year, dogecoin by the wider investment community is seen as a joke and not a serious investment, although some devout dogecoin investors believe it is a true source of value.
Alternative to Bitcoin