‘What is needed is an electronic payment system based on cryptographic proof instead of trust’ Satoshi Nakamoto, Bitcoin creator/inventor
Cryptocurrency is best described as: ‘a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank.’
Currency is a generally accepted form of money. Cryptography involves encrypting and decrypting techniques to ensure security in transaction.
In the age of everything going digital, currency also goes digital with a high standard of security. Another important highlight in the description is ‘operating independent of a central bank’. This is done with Blockchain technology which is basically a peer to peer network instead of centralised system or server.
As of now, there are several hundred cryptocurrencies. This article will look briefly at three of them:
- Bitcoin – BTC the pioneer,
- Ethereum – ETH, the most versatile
- Litecoin – LTC, a technically strong contender
The business technology aspects are presented here though some may look at them from Investment perspective.
Started as the earliest Cryptocurrency way back in the year 2009 itself, Bitcoin is considered as the Big Daddy of coin universe. It is said that the creator of Bitcoin known by the name Satoshi Nakamoto still remain anonymous.
The Bitcoin network started as pioneer venture which made transactions possible between users directly, without an intermediary and verified by network nodes and recorded in a public distributed ledger employing Blockchain open source software.
Bitcoin can be acquired by investing or by Mining; Mining can be simply understood as computationally intensive process of record-keeping. As of 2017 the unique users of Bitcoin are estimated to be around 5 million worldwide. Bitcoin also continues as a Cryptocurrency accepted for some commercial transactions, payment services and by some financial institutions though the legal status of Bitcoin may vary between countries.
Compared to Bitcoin, the Ethereum network is relatively new as it went live only in mid-2015. The origin has undergone many forms starting from a cryptocurrency researcher and programmer, Vitalik Buterin, to Ethereum Foundation in 2015 and to Enterprise Ethereum Alliance (EEA) in 2017. The basic concepts of decentralised distributed ledger and Cryptography is involved in Ethereum network also. The architecture of Ethereum consists of Ethereum Virtual Machine the runtime environment and Smart contracts which are computer protocols intended to facilitate, verify, or enforce the negotiation.
Ethereum is mostly referred as a platform facilitating many use cases; also providing Cryptocurrency token called ETHER that can be transferred between accounts. As with Bitcoin, Ether is also bought through exchanges or earned through Ethereum Mining. An Ethereum Mining Calculator can be used to help estimate the profitability when you are thinking about mining ETHER.
Litecoin is another Cryptocurrency like Bitcoin, released in the year 2011 by a former Google employee by the name of Charles Lee, with basics same as other Cryptocurrencies but with some technical improvements leading to speedy transactions.
The notable differences are, the Litecoin Network gives faster transaction confirmation as it processes a block in 2.5 minutes compared to Bitcoin’s 10 minutes, the adoption of Segregated Witness, and the Lightning Network. Due to Litecoin’s use of the Script Algorithm, Mining Rigs are complicated and more expensive to produce than they are for Bitcoin.
The growing popularity of Litecoin can be attributed mainly to its faster speed.
The combined market cap of Cryptocurrencies is given as US $161 Billion as of August 2017 and keep raising at high rate. Cryptocurrency is a rapidly growing area of interest not only for the technology geeks with interest in mining and getting in to maximum profitability, but also to others as the is a big investment opportunity.