Types of Cryptocurrencies – Ruhani Walia
These are coins that are alternative to Bitcoin in particular. The majority of altcoins are a fork of Bitcoin like Namecoin, Peercoin, Litecoin etc.
These are not derived from Bitcoin’s open-sourced protocol (they are not modified versions of Bitcoin’s source code) All Altcoins have their own blockchain. They operate separately.
A hard fork is when a group of developers disagree with the direction that the blockchain network is taking — especially if the updates reduce the rewards given to the miners.
If they decide to fork, the developers first copy the Bitcoin protocol code. Then, they make their changes and decide when the fork will become active.
Below is a more in depth look at different types of Altcoins — there’s a lot more than the one’s here. I’ve just picked and chose the most significant.
- All payments are recorded on the public ledger (the Blockchain)
- Can send money anywhere in the world at any time
- Transaction fees are considerably less than traditional banks
- Both parties have proof that the payment happened
- Only ever be 84 million Litecoin — no inflation will decrease value
- Similar to Bitcoin (BTC) simply because both are cryptocurrencies that rely on the cryptographic integrity of the network
Litecoin wants to become the silver to Bitcoin’s gold. The largest difference between the two is their cryptographic algorithms.
A cryptographic algorithm, also called a cipher, is a set of mathematical instructions used to encrypt/decrypt data. Bitcoin uses SHA256 and Litecoin uses Scrypt.
Hey, remember miners? With Bitcoin, many have chosen to now use Application-Specific Integrated Circuits (ASICs). These are hardware systems made specifically to mine Bitcoin.
The massive computing power used has made mining Bitcoin super inaccessible to the average user. Scrypt, on the other hand, hasn’t reached that level yet.
Another difference is how many coins each can produce. Both are actually infinitely divisible (the minimum quantity transferable of Bitcoin is 1 one hundred millionth or one satoshi)
This divisibility thing isn’t very popular among users. So, wallets like Coinbase and Trezor display Bitcoin values as Fiat currencies (currencies like the Euro or Dollar)
Bitcoin will never exceed 21 million coins. Litecoin will never exceed 84 million coins.
One of the key differentiating factors of this cryptocurrency is its governance and ownership structure.
Bitcoin is decentralized, open sourced, and run by a community that agrees on changes (the use of soft forks). Ripple, on the other hand, is kind of weird.
It is owned by a private company, uses an internal ledger and consensus to make changes.
Wait, if it’s owned by a private company then how is it a crypto? Doesn’t that mean it isn’t decentralized?
It’s kind of confusing, but it is still considered decentralized because it operates on a peer-to-peer distributed network.
Another difference is in transaction time and fees. In Bitcoin, users may pay miners to prioritize their transactions. Ripple has a mandatory minimum transaction cost.
This cryptocurrency aims to create a more scalable coin with quicker transactions. Nano transactions are only verified when a problem occurs — running a node on this network requires much less energy than a network with a proof-of-work model like Bitcoin’s blockchain. They’ve also designed an acyclic graph algorithm called Block-Lattice Infrastructure.
This video does a pretty good job of explaining the algorithm if you’re interested 🔽
Published at Sun, 03 Nov 2019 15:12:22 +0000