“Blockchain” and “cryptocurrency” are among some of the most-searched terms in Google recently thanks to news of high profile celebrity backers. Most people don’t know much about digital currencies, yet they are growing in profile despite not being backed by a central bank.
In this article, we define blockchains and cryptocurrencies, so you better understand what the fuss is all about.
Defining Blockchains and Cryptocurrencies
Let’s start with the basics and explain what these two terms mean.
- Blockchains are essentially digital edgers where transactions in cryptocurrencies are recorded. It’s a form of technology that enables cryptocurrencies to exist in the first place. Think of it as a gigantic database where every single transaction is kept in chronological order. You don’t need to understand how it works if you’re interested in Bitcoin or another cryptocurrency, but it’s nice to get a general overview of what it implies.
- Cryptocurrencies are digital currencies that utilize encryption techniques to regulate their value and also validate transfers safely. These cryptocurrencies are independent of banks and generated digitally. Two good examples of popular cryptocurrencies are Bitcoin and Ethereum. There are many different advantages to both the currencies, and their values fluctuate drastically over the years. Ethereum, for instance, was worth $10 per unit in 2017. Currently, they are quoted at around $800. Ripple is another popular cryptocurrency that has recently grown in popularity.
Now that you have a basic understanding of blockchains and cryptocurrencies, let’s see what the fuss is all about and why it’s making waves in the news.
Advantages of Cryptocurrencies
So why use cryptocurrencies over regular currency? Here are just a couple of the most popular advantages:
- Lower transaction fees. Unlike other currencies, there are lower fees involved when making payments with cryptocurrencies.
- Immediate transactions. Transactions happen faster when using cryptocurrencies unless a third-party is involved.
- No risk of fraud. Cryptocurrencies are digital and, unlike paper money, cannot be counterfeited.
- No risk of identity theft. Since your personal information isn’t required when making payments with cryptocurrencies (unlike credit and debit cards) you’re not at risk of identity theft.
- Decentralized currencies. Cryptocurrencies are decentralized, which means that there isn’t a single source or authority that governs them.
- Universal use. Virtually every country can adopt cryptocurrencies because various rates like exchange rates do not bind them. They are exchanged wherever a cash system supports them.
Industries That Use Cryptocurrencies
As you might expect, cryptocurrencies are slowly becoming more mainstream and being used in all kinds of different industries.
One of the first industries to adopt the use of cryptocurrency is the technology industry. Early uses of cryptocurrencies involved being able to purchase goods on the internet or trade digital items and pay for services.
There are now many uses for cryptocurrency on the web, such as making donations with it or accepting crowdfunding payment.
Some car dealerships offer vehicles for BitCoins, and there are even some realtors that accept Bitcoin payments. With the use of BitCoin expanding so rapidly, don’t be surprised to see your local coffee shop offering goods for cryptocurrency in a few years or even months.
Here’s some information on two of the most popular cryptocurrencies: Bitcoin and Etherum and why you should notice Ripple.
Bitcoin is the world’s first and top cryptocurrency that had gained popularity and a considerable increase in value. It was created in 2009 by a person under the alias Satoshi Nakamoto. Its main feature is that transactions can be made without the middle man – meaning that no banks are involved!
You can use Bitcoin to book hotels, pay for Xbox games, and buy furniture. But most of its hype has recently come from people trading it. In February 2018, the price per share was around $8207 which if you bought it then you’d be pleased as it is now $49,000+ a coin and we can only expect it to grow due to release of more development apps on its platform and ‘whale’ investors like Elon Musk.
Another reason why Bitcoin is impressive is that it is mined. A person (company or group) can mine Bitcoin through record-keeping and advanced math. This is how it works; when someone sends Bitcoin to someone else, the network records it and then records the other transactions and places them on a “block.”
Miners use powerful hardware and specialized software to convert the blocks into code sequences known as “hash.”
Bitcoin is ranked first because it started new concepts such as “decentralization” and “peer to peer trading.” We would see other cryptocurrencies, such as Ethereum use this concept to help users make apps and trade their currencies at a rate that’s faster than Bitcoin.
Ranked second on our list is Ethereum. Like Bitcoin, Ethereum is running on a public blockchain network. While Bitcoin and Ethereum are utterly different in technology, their most considerable distinction is their difference in capability and purpose.
Ethereum’s blockchain is used to run the program code for any decentralized application. Instead of miners obtaining Bitcoin, they receive Ether, the main currency that fuels the network.
Ethereum also has smart contracts, which acts like a self-ran computer program that automatically execute once specific guidelines are met. Since they are running on the blockchain, the code can run without downtime, third party interference, and censorship.
What makes Ethereum a top cryptocurrency is its ability to let startups create decentralized apps. They can receive funding from other Ether owners to help power their app without the long process of seeking a venture capitalist to invest in them. Ethereum priced in February 2018 at $857.70 a share, and lately, it’s passed $1800 a coin.
Ripple is the third top cryptocurrency on our list. Like other cryptos, Ripple has a distributed ledger network that allows users to help each other validate transactions.
Where Ripple excels is its transaction speed. On average, Bitcoin takes about 10 minutes to complete a transaction. Ripple can accomplish this task in under 60 seconds. Ripple is, therefore, more appealing to a mass market, used to a faster network when paying for purchases.
Ripple Labs currently develop ripple. As of now, they have 100 billion XRP available, as it is unable to be mined. Ripple’s price was $.73, making it the cheapest option on this list in February 2018, and while it’s the price has dropped it’s a popular currency with banks.
While other cryptos used for separating financial transactions from centralized banking, Ripple seems to do the opposite.
To conclude, we believe that each of these cryptocurrencies provides a lot of value to today’s current market. Not only are they bringing in new financial options for users, but their combined technology helps make transactions safer and faster. Ultimately, it will be interesting to see how these cryptocurrencies will act as blockchain technology evolves.
Disclaimer: This article is informational only and not investment advice.
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