Different Types of Cryptos
Not all cryptocurrencies (cryptos) are the same, as of January 7, 2018 there are roughly 1,384 different cryptos in circulation in the global market. What makes them different from each other, how do they work, what is the blockchain, and are they safe? Continue reading to learn more about cryptos and how they are revolutionizing the way we think about finance.
What makes them different
Cryptos are digital assets, that are designed to work as a medium of exchange that uses cryptography; to secure its transactions, to control the creation of additional coins, and to verify the transfer of the digital assets.
What is a blockchain
A blockchain is a long list of transactions stored on a network of computers, this is also known as a distributed ledger. Every single transaction that takes place, gets added to the blockchain. Think of the blockchain as a universal ledger (A general ledger account is an account or record used to sort and store balance sheet and income statement transactions) that cannot be manipulated by anyone, or anything, it is unhackable.
Some key points of blockchain technology:
- It can keep adding to the ledger even if large amounts of the network are down.
- Cryptography ensures that previous transactions cannot be erased or modified in any way.
- The complete ledger is viewable to anyone.
What are protocols? The definition of protocol according to the Encyclopedia Britannica, “is a set a set of rules or procedures for transmitting data between electronic devices, such as computers.” For computers to exchange information, there must be a preexisting agreement as to how the information will be structured and how each side will send and receive it.” In short, protocols are rules and regulations that govern the way the blockchain operates.
Each cryptocurrency has different protocols, and this is what makes them unique. The most well-known cryptocurrency is Bitcoin; Bitcoins protocol enables transactions directly with no need of any third party i.e. banks, decreases credit cost in minor casual transactions, and was the first to prevent double spending (Double spending means not using the same coin more than once).
Ethereum is a public open source (open source means, free redistribution and access to an end products design and implementation. Anyone can create applications that use Ethereum). This crypto features smart contracts, the coin is called ether, but is also referred to as Gas. The biggest selling point of Ether is the open source protocol. Many applications are in the works that will use ether as the fuel, there are few out in the market today; https://steemit.com/, https://www.toshi.org/.
Ripple also known as the banker coin, was first issued in 2012. Ripple’s token is known as XRP, this coin enables instant, safe, and almost free global transactions of any scale. This is the third biggest coin currently in circulation.
This is the second part of cryptocurrencies, the next article will cover how to buy and invest in digital assets, how to safely secure them, the dangers of day trading, and how to use cryptocurrencies for everyday purchases.