Types of cryptocurrencies

First you need to get acquainted with the essence of the definition of "cryptocurrency" and analyze its advantages and disadvantages. When meeting, it is important to start from the method developed by the physicist R. Feynman, which implies writing down the material being studied in the form in which one would like to present it to the child, but usually professionals choose complex terms for explanation, which further confuses the student. In the article, the features of each type of cryptocurrency are described so that it is as clear as possible to the average reader.

So, cryptocurrency is considered to be a virtual currency, the unit of its measurement is a coin or a token. The main feature of the crypt is its existence exclusively in digital format, there are no analogues of it and cannot be. The coin cannot be tampered with - it is impossible to copy or guess the encrypted data it possesses. The name "cryptocurrency" came from the use of cryptography in the creation of currency, which provided the prefix "crypto".

Given this description of the cryptocurrency, one can assume its similarity with the payment systems WebMoney, Yandex-money, but this is completely wrong. In the first case, currency units appear immediately in electronic form, in the second - this requires depositing money into a wallet or account.
The main advantages of cryptocurrency

The advantages of cryptocurrency include the following:

    Decentralization: Dispersed data with multiple duplication to prevent loss. The data chain (blockchain) is not stored on any one server, but is located simultaneously on many computers around the world.
    Confidentiality: here each user is his own bank, there is no need to contact external financial institutions to conduct transactions.
    Security: high levels of security of electronic money are ensured by means of a cryptographic code, there is no place for counterfeiting, all transactions are instantly recorded on the servers. In the event of violations of the integrity of the system, it automatically restores itself.
    No inflation: an excess of virtual money supply is impossible due to the limitation of the amount of virtual money of each type by a special mathematical algorithm.
    Minimum commission: by the way, commissions are paid here not to banks, but to miners who provide PC power for processing information.
    Information about the circulation of electronic money is recorded and stored on all PCs simultaneously, this approach to storage ensures privacy, openness and transparency of all transactions in the system.
    Open Source: Cryptocurrencies are circulated through the blockchain, a gigantic global database distributed across a huge number of PCs.

Cryptocurrency is a coin that exists only in the virtual world and has many advantages. However, the disadvantages of cryptocurrency are also worth mentioning.

The main disadvantages of cryptocurrency

The disadvantages of cryptocurrency include the following factors:

    If you lose access to an electronic wallet, you can forget about money: if the user has forgotten the private key or his computer with the installed wallet breaks down, there will be no way to restore access to the virtual account.
    The strong dependence of the price on external factors and, as a result, its frequent fluctuations, even fake news can instantly change the value of electronic currency.
    Impact of Governments and Banks on the Crypto Industry: Today, both banks and governments are structures that have a great influence on the cryptocurrency world, but are not interested in its development.
    The relative disadvantage of mining: today it is very difficult to mine coins due to the increase in the number of chains that are needed to carry out verification, the earnings that the same user receives on the same PC regularly decreases.

The listed disadvantages of cryptocurrency must be considered and analyzed by users of the systems.
Types of cryptocurrencies

Nowadays, the world of cryptocurrency is developing quite rapidly, the reason for this is the widespread use of payment for goods and services via the Internet. Depending on the functionality, cryptocurrency is divided into the following categories:

    market currency - a speculation product of stock exchanges created to replace bitcoin;
    game currency - created for the purpose of making payment and mining in virtual games;
    cryptocurrency - created specifically for a specific platform.

Now there are more than 800 types of cryptocurrencies, but many users are familiar with only one - bitcoin.

The most famous cryptocurrencies: Bitcoin, Ethereum, Litecoin, Monero, Ripple, DASH, IOTA, Primecoin, Peercoin, Namecoin.

The TOP 10 most popular cryptocurrencies presented above have been analyzed in detail by experts.

Bitcoin

Bitcoin is the first computerized digital network of operations. The platform does not require confirmation of each operation performed by one or another person or organization, security and transparency are ensured by the approval of operations by each member of the network.

Principle of operation

With each operation, information is transmitted, which is reflected on all computers in the network. An operation here refers to the process of sending a certain amount of bitcoins from one account to another. In the future, the ongoing operation is combined with others that entered the network at about the same time in order to form a block of operations (transactions). This means that absolutely any PC in the network can check these operations in the block and solve a certain computer problem.

Later, with an increase in the number of computers in the network simultaneously participating in solving this problem, the level of its complexity increases. The complexity is automatically selected within the program so that the solution of the problem in the PC network takes about 10 minutes, respectively, with a more powerful PC network, the tasks become more complex.

The first PC to solve a computer problem gets the opportunity to form a block of all valid operations and the reward for the solution is a certain amount of bitcoins (they are issued by the network itself). Further, the resulting block of operations is entered into the register, which fixes the remaining pre-approved blocks, such a database is called a blockchain. The blockchain is distributed across all computers in the network, which means that all connected PCs can control all transactions that take place on the network at any time.

It is noteworthy that the blocks of operations in the blockchain are interconnected with each other at the cryptographic level, and any change in information in any block will cause a change in information in all blocks following it. Accordingly, it will be available to all network participants, which means that it is almost impossible to imperceptibly introduce changes to information about transactions already recorded in the blockchain.

The basis of Bitcoin security is the blockchain, or a list of the entire history of blocks of operations. Each PC connected to the network has the opportunity to get acquainted with the entire history of transactions, namely: find out how many bitcoins are provided for a particular account, check transactions, monitor compliance with the number of used bitcoins within the existing coins on the balance sheet, detect and warn various machinations.

It should be noted that Bitcoin cannot be called a market, gaming or platform-specific coin. Bitcoin is the leader in the electronic payment market, it will be incredibly difficult for other cryptocurrencies to displace it, it has a strong foundation and high demand. This position of bitcoin is not affected even by the fact that the generation rate lags.
Where can you buy bitcoins

You can buy bitcoins on certain sites, we will list them:

    Bitcoin exchanges - here you can exchange "regular" money for coins: Bittylicious, BitBargain UK (UK), LocalBitcoins, Coinbase (Canada, USA).
    Intermediary sites - to exchange bitcoins for money, you can directly contact the sellers represented there: LocalBitcoins.
    Cryptocurrency exchanges - provides for the exchange of coins for money or other types of cryptocurrency: CoinCorner, BTER.
    Websites for trading goods or services that provide payment in bitcoins: Purse.

Also, when considering bitcoins, you should dwell on the methods of storing coins.

Basics of storing bitcoins

The storage of Bitcoin cryptocurrency is carried out on a special "wallet". There are three options for wallet applications - Full Client, Light Client, and Web Client. For beginners, the "Web Client" option, which resembles e-mail, is suitable because it is completely dependent on an external server. Here, all operations take place under the control of a third party on behalf of the user. Also, the types of wallets can be divided into desktop, browser and mobile, "paper" and in the form of a special device.

To ensure reliable protection of bitcoins, it is recommended to store them in the same way as paper money. For example, save a part on a computer, in a client, a mobile phone, and distribute the other part to separate addresses that have better protection (for example, an offline wallet disconnected from the network). From time to time, you need to back up your own wallet. It is also important to have complex passwords for an electronic wallet and smartphone, periodically update the software and install the multiple signature function, which gives consent to a certain operation.

Ethereum

Ethereum (Ethereum) is in second place in the popularity rating of cryptocurrencies. This is a platform for creating applications that do not need to be launched manually, the platform functions are similar to the principle of the Bitcoin system, but these platforms are not identical. The main criterion that distinguishes systems from each other is the ability of the Ethereum platform to create complex programs. Such an opportunity for Ethereum is provided by "smart contracts" - software codes that form their own rules for the operation of sent transactions.

Each operation within the network, sent under the "smart contract", forms the program code of this contract, and thanks to this, any user gets the opportunity to create programs that are superimposed on top of the main platform. This solution provides the formation of various applications that do not need to be launched by turning on your own PC to function. Most often, applications are created in the field of finance and management.

Thus, the Bitcoin platform is focused on tracking the ownership of virtual currency, while Ethereum is focused on running the program code, the network. The Bitcoin system creates new original blockchains for each new application, while Ethereum creates different applications on the same platform. The Ethereum system provides for the receipt of Ether (this is a cryptographic token for starting the network).

Experts argue that the Ethereum platform is often used as a tool for decentralizing centralized services (bank loans, Paypal transactions, voting systems, and others). Another application of the platform is the formation of the Decentralized Autonomous Organization (DAO), a leaderless organization. Here, management is carried out through program codes on a set of "smart contracts" that are written on the Ethereum blockchain. This organization replaces traditional structures and eliminates the need for people and centralized control.

Ethereum platform advantages

Two main advantages stand out here, the first is the inability to make changes to information from third parties, and the second is reliable protection against damage and hacking, provided by secure cryptography.

Here, however, it is worth noting the fact that the DAO project was hacked, which happened in 2016 and led to the emergence of another cryptocurrency - Ethereum Classic, which became a fork of Ethereum.

Litecoin

The first launch of the cryptocurrency Litecoin (Litecoin), created on the basis of bitcoin, fell on 2011. The creators focused on the bitcoin platform, but planned to introduce some changes. It is noteworthy that Litecoin also managed to fix the highest market capitalization among other types of cryptocurrencies that were mined after bitcoin. The main goal pursued by the creators of Litecoin was to fill the gaps in the Bitcoin system. The main difference between the platforms is the speed of block creation, in Bitcoin this process takes 10 minutes, and in Litecoin - 2.5 minutes, such an advantage ensures the prevention of doubling of costs.

However, Litecoin failed to get the second place in popularity and interest rates. Currently, it is quite actively mined, sold and bought, investors perceive Litecoin as a worthy replacement for Bitcoin.

Another significant advantage of the Litecoin platform is the reduced fees, the cost of each operation is much less than in the Bitcoin network.

But, nevertheless, Litecoin is not a replacement for bitcoin, it is, in a sense, its addition: often innovations are tested on the Litecoin platform, which are subsequently introduced into bitcoin.

Monero

Monero is a cryptocurrency and ecosystem that uses a one-time ring signature algorithm to conduct private transactions. Monero was launched in 2014. The principle of ring signatures is based on the combination of user account keys and public keys obtained through the Monero blockchain. This is necessary to form a ring of potential subscribing users, which in the future will prevent tracking the connection of the signature with certain users. Monero users fully maintain the confidentiality of transactions, but they have access to information about their transactions in a selective manner.

Another feature of the Monero platform is the presence of a "view key". Thanks to him, you can get information about the transactions of the account, for this it is enough just to have this key.

Previously, the “ring signature” system hid information about the participants in transactions, but the transfer amounts were revealed. Later, a new "ring system" was introduced, known as "Ring CT", and this version hides information about both transaction amounts and recipients. The ring signatures update is not the only platform improvement; privacy settings have been additionally improved by means of one-time "hidden addresses", obtained by random generation.
Mining Monero

Each user with his own computer can start mining coins, Monero can be mined on both processors and video cards.

It should be noted that Monero cryptocurrency is popular among many dark web sites. A large number of fans are attracted to them by the privacy feature of the platform. This advantage is twofold, as it reduces user confidence due to an opaque reputation.

Ripple

Ripple technology is distinguished by its functionality. It can be used as a digital currency and a payment network for financial transactions. The cryptocurrency was launched in 2012. The main difference between Ripple is that it operates on a decentralized and open peer-to-peer platform that provides open source code. Such a platform allows transfers of funds in any form; in the case of currency transactions, Ripples work is carried out through intermediaries (gateways). The gateway acts as a credit intermediary, receiving and sending currencies over the Ripple network to public addresses. This function negatively affected the popularity of the cryptocurrency and, accordingly, its value. Most often, this virtual coin is used as a bridge for other currencies that include different forms of money (fiat and cryptocurrency). The Ripple platform allows you to exchange any currencies with each other, which is very convenient.

DASH

Dash, a world-class cryptocurrency, is also a payment system built on top of the bitcoin network. Today, cryptocurrency is in demand as a means of paying for online purchases in different countries.
How Dash differs from Bitcoin

The main differences between Dash are as follows:

    The Dash platform has a unique two-tier architecture that allows for unique enhancements and updates.
    A guarantee of complete confidentiality of all transactions in Dash, which cannot be said about bitcoin: in the first case, no information is reflected in the network, in the second, information about transactions is published in the blockchain.
    High security and ease of use of Dash due to the use of a decentralized masternode network and distributed confirmation technology, which significantly saves time when confirming transactions.
    There is no minimum commission for certain services in Dash.

Dash benefits

The main advantages of Dash cryptocurrency include the following:

    guaranteed confidentiality, secured by enhanced security measures;
    extensive coverage (transfers are sent from anywhere in the world, while the commission and speed of transactions do not differ);
    low commission for transactions;
    introduction of innovative technologies that provide instant funds transfer (operation time is 4 seconds).

The above benefits are provided by the PrivateSend function.

IOTA

IOTA cryptocurrency is powered by Tangle technology. There are no transaction fees and validators (miners entering transactions into blocks). Tangle IOTA provides automatic verification of transactions through subsequent operations, as a result, the processing process takes relatively little time and in no way depends on the degree of network congestion. Interestingly, with the growth of the flow, the approval of transactions occurs many times faster due to the increase in the number of users, this makes the IOTA cryptocurrency scalable, which cannot be said about systems operating on the basis of the blockchain.

Tangle IOTA has no restrictions on the number of transactions and volumes.
Benefits of IOTA cryptocurrency

The main advantages of cryptocurrency include the following:

    Availability of micropayments starting from 1 cent.
    The global scalability of the system, the speed of transaction processing is directly proportional to the number of participants in the network.
    The entry of the system into Microsoft Azure, the option of creating its own processor is also being considered, which would be able to process up to 1000 transactions per second. Such a breakthrough definitely had a positive effect on the cryptocurrency rate.
    Complete decentralization of the network.
    Lack of miners.
    The network participants are users conducting operations.

Currently, many large companies in the world are interested in the IOTA project.

Primecoin

The Primecoin cryptocurrency has one significant difference from Litecoin and Bitcoin - this is a feature of the mining process: when mining in the Primecoin system, there is an increase in the processing speed of transactions within the network. In addition, Primecoin mining is not just the guessing of information for some kind of reward, but a process that is beneficial in a scientific context. In calculations of various levels of complexity, the computer deciphers a digital series, which includes numbers from 1 to hundreds of billions.

The speed of generating a new block in the Primecoin system is 60 seconds and this is 10 times faster than that of Bitcoin.
Differences between Primecoin and Bitcoin cryptocurrency

The main differences between cryptocurrencies are in the following factors:

    Generation speed: in Bitcoin, 1 block is generated in 10 minutes, and in Primecoin - 1 minute.
    A gradual change in the level of difficulty: in Bitcoin, the difficulty of mining tends to change with the onset of every 2016 block (approximately every 14 days), in Primecoin this process occurs every minute.
    High speed of transaction confirmation: The faster block generation in the system provides a similar confirmation speed of transactions.
    Lack of premine: the platform is characterized by launch without preliminary generation of blocks, which took place on 07.07.2013.
    Obtaining a block reward: the amount of a block reward depends on the difficulty level of the search, the reward is 999 / difficulty level.
    During the functioning of the Primecoin system, useful calculations take place; for confirmation in the system, it is required to search for long Cunningham chains.
    Absence of any emission restrictions: within the framework of the system, the final volume of coins is not established, but is controlled by Moores law.

Also, the Primecoin platform is more energy intensive than Bitcoin. It is focused on ensuring high security and prosperous mining while maintaining good scarcity properties perfectly.

Peercoin

The Peercoin cryptocurrency operates on an open source hybrid blockchain. Peercoin is very similar to Bitcoin, but there are still significant differences between the systems.

Peercoin cryptocurrency features:

    simplicity and environmental friendliness of mining
    the average block size is 800 bytes;
    the time required to confirm the operation is 6 blocks;
    the average time between blocks is 7 minutes;
    recalculation of the mining difficulty occurs every block.

Peercoin cryptocurrency has a number of advantages and disadvantages that you should be aware of. Lets list the benefits:

    The platform is better protected from attacks, which is provided by the combination of PoW + PoS, and this solution also significantly increases the energy value of the Peercoin blockchain.
    No need for additional network maintenance due to the use of a peer-to-peer system.
    Peercoin is more profitable when compared to other popular cryptocurrencies.
    The cryptocurrency has been around for a long time and during this time has gathered many supporters, this fact provides Peercoin with a stable rate.

Along with the advantages, cryptocurrency also has some disadvantages, which you should also be aware of:

    An almost complete lack of privacy in the system, which is explained by the use of a centralized control node when verifying the authenticity of coins. Using the available information correctly, you can determine the sender and recipient of a particular operation.
    Lack of decentralization, although the cryptocurrency itself considers itself to be decentralized. Using points to verify the authenticity of coins greatly reduces the decentralization rates of the system, but at the same time significantly increases its security.
    Low speed of transaction processing.
    There is no limit on the issue of coins.
    There is relatively little demand for Peercoin.
    The lack of clear advantages of Peercoin over other cryptocurrencies.
    Little known coin.

The Peercoin cryptocurrency has little volatility, but the relatively low daily trading volumes of the coin allow users to play a little with its rate. However, it makes no sense to talk about a significant increase in the rate of Peercoin coins in the future.

Namecoin

Namecoin cryptocurrency appeared in 2011, when it was created, the emphasis was on the use of alternative DNS servers. The platform provides for the emission of coins in the amount of 21 million.

The guaranteed security of the system is ensured by the use of a unique cryptographic coding of information. Coding implies the ability of the system user to block or modify the domain exclusively. And Namecoin itself in this case acts as a means of payment that is used by users to calculate the content of the domain, registration.

There is a lot of interest in Namecoin among platform users. The reason for this is the importance of cryptocurrency, which is an alternative to the global system of control and distribution of domain addresses ICANN. This means that Namecoin is able to offer absolutely any domain address, and its users can use this feature to purchase their own domains in a zone such as "bit". It is important that this "bit" is guaranteed to be retained by the user. The main difference between Namecoin and Bitcoin lies in the complicated calculation system of the first platform.

Having considered the types of cryptocurrencies listed above, which are well-known and widespread, having considered their advantages and disadvantages, we can distinguish a pattern: almost all cryptocurrencies existing today are clones of the "grandfather" of the world of cryptocurrencies - bitcoin. Of course, there are some differences in the functionality of the platforms, however, it makes no sense to say that Bitcoin in the future will "give up" the leading place to one of the platforms considered.