Blockchain is a public database that records digital transactions. These transactions are legitimized by computers that work to solve complex coded problems. In a traditional bank transaction, the authorization for currency comes from financial institutions controlled by governments, are subject to taxation, and contracted by parties with known identities. Blockchain, however, is decentralized, unregulated, and relatively anonymous, making Bitcoin and other cryptocurrencies appealing for many users.
Blockchain, a technology which was originally developed as the accounting method for the virtual currency Bitcoin, is currently being used primarily as a method to verify transactions. Many Bitcoin users are inherently distrustful of financial institutions and governments; thus, the technology equips people to regain and maintain control over their money and investments, with no restrictions over where and when they can send it.
Bitcoin, however, is not the only cryptocurrency currently available. While it is the oldest and most popular form of digital currency, others include Ethereum, Ripple, DASH, and Litecoin, and they are quickly catching up to Bitcoin in terms of market value and consumer appeal. By comparing the different forms, the average investor can judge for himself the appeal of each of the cryptocurrencies.
DASH, which stands for digital cash, has become one of the fastest-rising and strongest cryptocurrencies worldwide. It is currently the leading anonymity-centric digital currency. While mass media has claimed that Bitcoin is anonymous, transactions can actually be publicly accessed on the blockchain, and although these do not contain personal information of the wallet owner, they may be linked to IP addresses that have the potential to de-anonymize the transaction and the wallet owner.
The infamous Silk Road serves as an example of just how quickly law enforcement, for example, can trace many Bitcoin transactions. DASH allows users to make instant, anonymous transactions with lower fees than Bitcoin. Furthermore, unlike Bitcoin, which has been involved in a power struggle over the scaling of its network, DASH has chosen to adopt a voting mechanism that allows investors to vote on what changes the network desires to implement and to remove any development teams that refuse to comply to what is wanted.
As result of this, DASH has increased in popularity and market value and now has the market capitalization of $10 billion. It is the eighth largest digital currency in the market.
Ripple has taken a global approach, attempting to set itself as an international currency that emphasizes its asset as a tool for banks around the world. It is the digital currency of the Ripple Interbank Payment Network; its goal is to provide a high-speed and low-cost payment framework for financial institutions.
That said, the coin is still able to offer benefits to individual investors and the cryptocurrency aficionado. The banner on Ripple’s designated website proclaims it to be “the world’s only enterprise blockchain solution for global payments.” It is currently the fourth largest digital currency.
Ripple currently has a market capitalization of $50 billion. Due to a strong connection with banking institutions, Ripple may show stronger stability and less volatility than other cryptocurrencies, allowing investors to see it as a relatively safer investment with long-term protection.
Similar to Bitcoin, Ethereum is a blockchain network that is both public and distributed. While the Bitcoin blockchain focuses on the tracking of digital currency ownership, Ethereum is designed to run the programming code of any decentralized application. The currency earned is Ether, a type of crypto token that is used to pay for transaction fees and services on the network. It is important to note that, although both Ethereum and Bitcoin are scalable, Ethereum delivers nearly double the number of transactions per second.
Ethereum is slightly different than both Bitcoin and Ripple in that it is geared toward interactions between several parties rather than utilized for consumer payments. According to CoinDesk, Ethereum’s smart contracts use blockchain applications for contract negotiation and facilitation, resulting in the fact that the blockchain provides a decentralized means by which to verify and enforce them. This aspect makes it difficult for censorship and fraud and aims to bring down associated costs in contract negotiation and provides greater security than more traditional contracts.
Whether you are attempting to understand blockchain and Bitcoin, are an individual looking to enter the cryptocurrency market, or simply want to understand the latest investment opportunities and platforms, it is important that you look at the relative strengths and weaknesses of each crypto asset. Each has distinctive purposes and processes that can be appealing, based on your objective.
Which cryptocurrencies do you find most appealing? Share your investment strategy insights in the comments.