Unless you’ve been living under a rock, you have surely heard about cryptocurrencies and the blockchain system. If you find the cryptocurrency world confusing, you are not alone. As in the case of many new inventions, it is important to carefully study trends and learn how the system works before trading in it. In this article we will discuss some of the most powerful cryptocurrencies and platforms, as well as inherent advantages and disadvantages.
What is Cryptocurrency?
Trend Micro defines cryptocurrency as an encrypted data string that denotes a unit of currency. It is monitored and organized by a peer-to-peer network called a blockchain, which also serves as a secure ledger of transactions such as buying, selling, and transferring. Cryptocurrencies are decentralized, which means they are not issued by governments or other financial institutions.
Pros and Cons
Cryptocurrencies are not reliant on banks or other third parties to verify transactions. On the one hand, this is a clear advantage because many of the fees and commissions charged by middlemen are eradicated. In addition, the elimination of intermediaries makes transactions and payments more transparent.
On the other hand, the regulations that monitor banks and other financial institutions do not apply to cryptocurrencies. This renders the crypto market open to speculation, and its relatively small size makes it more vulnerable to extreme price fluctuations. Cryptocurrencies have been used for money laundering and other criminal activities. While the blockchain system is considered highly secure, there are hacking and phishing attempts, and owners (especially newcomers) stand the risk of falling victim or losing their irreplaceable keys.
A clear advantage is that cryptocurrencies aren’t linked to a single currency or economy, so their price reflects global demand rather than that in any given country. Also, the number of coins is usually capped, so the amount available can’t spiral out of control – this basically means no inflation.
Bitcoin – The Reigning Prince of Cryptocurrency
Founded in 2009, Bitcoin (BTC) was the first cryptocurrency and is still the most commonly traded. It’s capped at 21 million coins so it is guaranteed to be inflation-proof, Bitcoin is currently the most widely accepted cryptocurrency for payments. One drawback is that Bitcoin’s blockchain infrastructure starts to slow down once it exceeds a rate of seven transactions per second. Bitcoin was originally designed and released as a peer-to-peer payment method. However, its use cases are growing due to its increasing value and competition from other blockchains and cryptocurrencies. Bitcoin has a high return potential with a possibility of reaching prices close to $500,000 by 2025.
Ethereum – Both a Currency and a Ledger Technology
Ethereum is a decentralized global software platform powered by blockchain technology which is most commonly known for its native cryptocurrency, ether (ETH). It is supported by the Enterprise Ethereum Alliance, a group of Fortune 500 companies working together to build upon Ethereum’s technology. Its innate robustness allows for the building of decentralized applications on top of it. It can also be used by participants as a method to pay for work done on the blockchain.
According to Ken Fromm at the Enterprise Ethereum Alliance, “Ethereum is different from Bitcoin in that the network can perform computations as part of the mining process. This basic computational capability turns a store of value and medium of exchange into a decentralized global computing engine and openly verifiable data store.”
Unlike Bitcoin, Ethereum has no limits on its total amount.
Solana – Outstanding Scalability and Speed
Solana is a public, open-source blockchain that supports smart contracts, including NFTs and a variety of decentralized applications (dApps). Native to Solana’s blockchain is the SOL token, which provides network security through staking as well as a means of transferring value. The Solana network can theoretically process over 710,000 transactions per second (TPS), which is about 3800 times faster than Ethereum and 10000 times faster than Bitcoin. Launched in 2020, SOL has become a leading cryptocurrency by means of total market capitalization. Solana has achieved high levels of scalability by leveraging the Proof of History and several other breakthrough innovations.
Solana has the fifth-largest DeFi ecosystem and has amassed the second-largest NFT transaction volume of any layer-1 blockchain. Its current total supply is 519,387,431 SOL.
Want to learn more about cryptocurrencies? Stay tuned for our next article about specialized cryptocurrencies.