Bitcoin, Ethereum, cryptocurrency, blockchain. They are all trending. Yet, has anything ever trended so furiously without being properly understood?
JP Morgan has repeatedly warned that Bitcoin is a fraud. Some countries have legalized the digital currency and others don’t allow it. All the while, cryptocurrencies are soaring in value. Just last week Bitcoin was valued at around $11,800 at the beginning of the week and by the end of the week it soared to $16,000. Dramatic doesn’t even begin to describe the virtual currency’s rise in recent weeks.
In countries that allow it, you can pay for goods just as you would with the local currency, only you are not handing over a real coin. The entire transaction, including the bitcoin, is virtual. No bank is involved.
Where and how does the transaction take place?
Bitcoin and other cryptocurrencies like Ethereum are underpinned by a technology called the blockchain, which is an online ledger that keeps a secure record of each transaction all in one place.
Every time anyone buys or sells bitcoin, record is kept of the transaction across a network of individual computers. Several hundred of these back-and-forth transactions make up a block. No one controls these blocks and central organization like a bank is involved.
Because Bitcoin is protected from fraud and counterfeit by blockchain technology it is regarded by many as a safe investment. But as we have seen bitcoin is a highly volatile currency and investors are routinely warned to exercise caution.
Others are more concerned by possible financial risks than potential benefits, reports Fortune. “Investing pioneer and Vanguard Group Inc. founder Jack Bogle reportedly advised avoiding bitcoin and “like the plague,” joining other investors in similar criticism.
But who stands still when there’s a gold rush?
Despite growing warnings of a bubble, cryptocurrency mania shows no sign of abating, with more and more traders and startups entering the fray.
While bitcoin and its main rival Ethereum dominate headlines, they are part of a surprisingly large number of currencies. The website CoinMarketCap lists no less than 1,037 different types of cryptocurrencies, 626 of which have listed market caps of at least $100,000. Bitcoin’s main rivals, discussed below, had a market value of over $5 billion on Monday according to the website.
Here are bitcoin’s main rivals.
1) Ethereum (ETH)
It is actually confusing to talk about bitcoin and Ethereum in the same breath as if they are the same thing. They are not. Bitcoin is a virtual currency run on blockchain technology; Ethereum is the blockchain network that underwrites the virtual tokens called ether.
It differs from bitcoin primarily in application: Ethereum is an open, decentralized software platform where ether is used to pay for transaction fees and services. As of today, it was trading at a rate of more than $472 with a market cap of about $45.5 billion.
2) Ripple (XRP)
Again, Ripple itself is not a cryptocurrency. Ripple, in the simplest sense, is a real-time payment system. It allows money to be exchanged between individuals regardless of where they are located or the banks they use. When you buy Ripple, you are also purchasing XRP.
Ripple is viewed by many insiders as having the best chance of supplanting bitcoin, according to the New York Times. Founded in San Francisco by former bitcoin developers, Ripple holds out the promise not just of a new currency, but also of a novel method to send money around the world. With that potential, it is winning something that has proved elusive for virtual currencies: involvement from more mainstream players in the financial system, reports the New York Times.
As of Monday, Ripple was trading at a rate of more than $0.25 with a market cap of around $9.82 billion.
3) IOTA (MIOTA)
IOTA, with the tagline “Next Generation Blockchain,” is one of the newest contenders in the cryptocurrency market. It is unlike all the other cryptocurrencies and has the potential to become the biggest of them all since IOTA is focused on Machine-2-Machine (M2M) transactions; in other words it will be powered by the Internet of Things (IoT).
That also explains the terms Iota and Miota: The smallest unit of account on IOTA is an Iota, after the smallest letter in the Greek alphabet. One million Iota are called a MegaIota or Miota (Mi), which is the base unit of Iota used for trading on cryptocurrency exchanges.
As of today, it’s trading at a rate of $4.21 with a market cap of around $6.75 billion.
4) Dash (DASH)
Dash is seen as one of the most promising alternative coins to Bitcoin. Dash was created three years ago by Evan Duffield using Bitcoin’s core code. Dash differs from its competitors with a focus on privacy and anonymity of transactions, and by operating on a two-tiered system: coin “miners” are overseen by “masternodes,” a decentralized, volunteer network that signs the transactions, reports Baron. It’s currently trading at a rate of $765.46 with a market cap of around $6 billion.