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Within a few years, cypto currency has already made a statement in the financial sector. Cryptocurrencies are an alternative, digital form of currency. It uses a decentralized control as opposed to centralized digital currency and central banking systems. This currency emerged as a side product of another invention. Satoshi Nakamoto, the unknown inventor of Bitcoin, never intended to invent a currency. The most important part of Satoshi‘s invention was that he found a way to build a decentralized digital cash system. After seeing all the centralized attempts fail, Satoshi tried to build a digital cash system without a central entity. Like Peer-to-Peer network for file sharing. This decision became the birth of cryptocurrency.
Top 10 Cryptocurrencies
- Bitcoin
- Ethereum
- Ripple
- Stellar
- Litecoin
- EOS
- Cardano
- Monero
- TRON
- IOTA
Bitcoin (BTC)
Bitcoin is the original and most popular cryptocurrency. It has been around since late 2008 but it only started making the news in early 2013. Its main advantage is that transactions are anonymous and peer-to-peer. Bitcoin’s architecture is set-up in such a way that their mining gets progressively more resource-intensive and total production limited. The limit will be 21 million Bitcoins. It’s an interesting concept with advantages as well as important disadvantages. These include: –
- Bitcoin has been recognized as currency in many countries. And as of today, it’s the most liquid & widely accepted cryptocurrency in the world. However, there is a long list of alternative cryptocurrencies that are eager to grab market share and challenge Bitcoin’s dominance. It is also possible that the 21 million Bitcoin limit will become limiting to users. This will cause users to seek other cryptocurrencies, effectively increasing the global supply.
- Given its fictitious nature and the fact that address owners are not identified, such transactions are virtually anonymous. However, this anonymity has been known to attract transactions from illegal activities. This has been a problem for regulators and officials as they recognize that it is a medium for such transactions.
- Bitcoin trades continuously on exchanges around the world in a very quick and straightforward manner. It is conveniently stored electronically in “wallets”. However, having online wallet providers introduces an extra risk factor that cannot be ignored. One such example is the security breach at Mt. Gox in 2011, which sent shockwaves in the cryptocurrency community. At the time, Mt. Gox was handling around 70% of all Bitcoin transactions. One day, it declared that around 850,000 Bitcoins had been stolen. Soon after the exchange suspended trading and filed for bankruptcy. It’s this potential security vulnerability that makes many people skeptical when it comes to cryptocurrencies.
So, what does the future hold for Bitcoin? As outlined, it has many advantages and for this reason, it will remain relevant as a currency. The biggest risk seen to Bitcoin is its parallel use by other cryptocurrencies. Die-hard fans claim it can never happen because Bitcoin is the pioneer and as such enjoys first-mover privileges. This is flawed because although Bitcoin is used for payments, this is only a small percentage of all Bitcoins. Only time will tell with Bitcoin. The only certainty is that its price will remain very volatile in the future.
Ethereum (ETH)
Ethereum is a new player in the market. It increased from a mere $8. 24 in January 2017 to $1,000 in January 2018. This makes it the second most valuable cryptocurrency on earth – second only to Bitcoin. Ethereum’s functionality is quite different from the cryptocurrency Bitcoin. It’s a decentralized peer-to-peer network like Bitcoin, users have the unique ability to create smart contracts and host crowdfunding campaigns.
There is increased interest in alternative tokens, token distributions, and token offerings or related token-based projects. But to participate types of projects and distributions, you must buy into Ethereum. This automatically applies the terms of the contract. Situations like these drive the use and adoption of this technology, which will be critical for the future of cryptocurrency.
Lastly, Ethereum is not just a cryptocurrency, but it’s infrastructure for contracts, crowdfunding, and other potential applications. This has provided something that was previously unavailable in the marketplace. Together, these factors give Ethereum the probability of long-term success.
Ripple (XRP)
Ripple was mostly created to solve problems with banking transactions and optimize the price of international transfers. In order to achieve that, they had to make a few tradeoffs. How the protocol works and who controls it. Ripple’s development has been fast ever since the coin first showed up in early 2017. Ripple currently holds the third place and has done very well for itself when it comes to stats. Back then, it was valued at $0.0064 per coin, and in less than a year, it reached $0.8. Experts believe it can reach and maybe even surpass $9 per coin by the end of this year.
Ripple can process 1,500 transactions per second, which is huge compared to other cryptocurrencies. Due to such powerful technology, Ripple can replace international payment systems such as VISA. This reduces costs and allows instant transfers. Many banks from around the world are actively working with Ripple to implement its technology over their payment infrastructure. It makes Ripple trustworthy, and investors find XRP to be a safer bet as compared to other cryptocurrencies.
2017 saw the price of XRP surging quickly during the first half. Other cryptocurrencies won’t find it easy to copy the market development of Ripple. Ripple’s cryptocurrency looks like a promising long-term investment with a promising financial technology for future and growing network of banks. More investors are becoming aware of XRP and a growing awareness of its technology. XRP’s prices are expected to rise in 2018.
Stellar lumens (XLM)
Lumens are native assets of the stellar network. They contribute to the ability to move money around the world and to conduct transactions between different currencies quickly and securely. You can think of Stellar as Bitcoin’s annoying younger brother. However, it is faster, more scalable and cheaper. It is often associated with Ripple, however, Ripple targets banks. Stellar is generally more concerned with providing banking services for individuals.
Since Stellar was launched, a working partnership with one of the largest tech companies in the blockchain, IBM was established. IBM and Stellar have a working blockchain product that uses Stellar Lumens in the South Pacific. The project connects retailers in some of the most isolated islands in the Pacific Ocean. This is an exciting partnership for Stellar and its investors.
2017 was a breakout year for Stellar Lumens. The price of Stellar in April 2017 was well below 1 cent. It started to gain some attention in May. It wasn’t until December 2017 that it started to really pick up. It’s the highest point in December was $.31 cents. Then in January 2018, Stellar went even higher, growing to its all-time high of $.93 cents. Due to regulations, as well as several other factors, the cryptocurrency market on a whole has dropped, and Stellar is no exception.
If cryptocurrencies continue their upward trend, one can easily foresee a restructuring in, e.g. the concept of a bank. Banks currently provide financial services and act as custodians of customers’ money. Bitcoin, blockchain technology can potentially allow banking services to be performed without the need to trust banks with your money. It is highly unlikely that the cryptocurrency will become the standard, international currency. It is very likely, however, that the technology underlying it will become useful for reducing the need for trust. This is something the current monetary system heavily depends on.
Some of the limitations cryptocurrencies presently face include: –
- One’s digital fortune can be erased by a computer crash.
- A virtual space may be ransacked by a hacker.
These issues may be overcome in time through technological advances. The more popular they become, the more regulation and government scrutiny they are likely to attract. This then erodes the main reason for their existence. While the number of merchants who accept cryptocurrencies has steadily increased, they are still very much in the minority.
For cryptocurrencies to become more widely used, they must first gain widespread acceptance among consumers. However, their complexity compared to conventional currencies will likely turn off most people, except for the technologically aware. A cryptocurrency that aspires to become part of the mainstream financial system may have to satisfy a wide criterion including: –
- The need to be mathematically complex (to avoid fraud and hacker attacks) but easy for consumers to understand.
- Decentralized but with adequate consumer safeguards and protection.
- Preserving user anonymity without being a conduit for tax evasion, money laundering, and other illegal activities.
Overall, cryptocurrency is popular right now in most of the world. At a time of global uncertainty, individuals and institutions are looking at less traditional methods of safeguarding their money. For some, cryptocurrency is the answer. Trading and mining cryptocurrencies are at an all-time high and this digital currency trend is expected to continue.
