All You Need To Know About Bitcoins and Other Cryptocurrencies

Over the years, the world has witnessed cryptocurrency grow at the speed of light. The evolution of cryptocurrency has been a sight to marvel at. There are more than 6000 cryptocurrencies in existence as of 2021. Bitcoin is the most popular and prosperous type of cryptocurrency there is. This allowed Bitcoin to pave the way for other cryptocurrencies. Many people consider Bitcoin to be the end-all-be-all of cryptocurrency but that is not the case. Knowledge of other coins in the market is important. Experts would often advise not to put all eggs in one basket and diversify. This advice encourages investors to have alternative coins at their fingers. In this article, all the information that needs to be known about Bitcoin and other alternative cryptocurrencies will be covered. Before diving deep into the topic, we must properly understand what cryptocurrency truly is.

What is cryptocurrency?

Cryptocurrency is a virtual currency whereby decentralized technology is used for transactions. Cryptocurrency is built on a technology called blockchain. Blockchain is a decentralized technology that contains a ledger of transactions. In simple words, cryptocurrency does not have a central authority. Transactions on cryptocurrency do not require a third party. This property of cryptocurrency makes it trusted and secure because it is very difficult to hack or manipulate records. Cryptocurrency has blossomed so well that there are now thousands in the market. As mentioned, the largest cryptocurrency is Bitcoin.

Bitcoin

Bitcoin is the first digital cryptocurrency created in January, 2009. It was invented by a pseudonymous founder who goes by the name, Satoshi Nakamoto. This large cryptocurrency makes up 44% of the market cap in cryptocurrency. Bitcoin aims to eliminate the need for a third party for transactions. Bitcoin prides itself in the fact that it protects against fraud. The technology it is built on makes it almost impossible to manipulate. Greater liquidity is also a big plus when dealing with Bitcoin. Liquidity is the ability of a coin to be converted to cash. High cryptocurrency liquidity entails that coins can easily be sold without having to lower their price. Suppose the price of Bitcoin has increased and Nate wants to sell it at that point. In a liquid market, many buyers would be willing to buy Nate’s coins. But in an illiquid market, buyers are limited and Nate would have to reduce the price of his coins to satisfy and sell to the buyers in the market. The large use of Bitcoin accounts for its numerous buyers and sellers. Hence, Bitcoin is highly liquid.

Altcoins

An altcoin is a shortened form of “Alternative coin”. Any cryptocurrency that is not Bitcoin is called an altcoin. After the advent of Bitcoin, many cryptocurrencies have been built with structures similar to that of Bitcoin. They often mimic the elements of Bitcoin and aim to overthrow Bitcoin.
When delving into cryptocurrency, it is important to understand the workings of other coins besides Bitcoin. The following are types of other cryptocurrencies:

Ethereum

This is the second-largest cryptocurrency was brought to life in 2015 by a small group of Blockchain enthusiasts. Ethereum aims to expand beyond regular transactions. It runs decentralized digital applications also known as “DApps”. DApps, also known as smart contracts are written by Ethereum coding language. A smart contract is a program that automatically executes actions according to the agreement between the parties involved. Ethereum issues smarts contracts that can be used without risks or third-party interference. Ethereum not only offers a platform for decentralized transactions but also a safe platform for the creation of smart contracts.

Tether

Tether is the third-largest cryptocurrency. A huge disparity between Tether and other cryptocurrencies is its low volatility. Tether is known as the ‘stable coin’. Stable coins are cryptocurrencies that have their market value linked to external commodities. The value of Tether does not fluctuate compared to the other coins. Each token is pegged to a fiat currency. It is usually equivalent to $1. Tether is the most popular stablecoin. It serves as a good medium of exchange as well as a store of value. Apart from making transactions, you can also store coins without the fear of devaluation.

Cardano

Cardano is a decentralized cryptocurrency that was founded in 2015 by Charles Hoskinson. Cardano is the first Blockchain to be founded on peer-review. For their consensus mechanism, proof-of-stake consensus is used. This stands in contrast with Bitcoin and Ethereum which uses proof-of-work, an energy-intensive consensus mechanism. It was reviewed by different experts and universities around the world. Just like Ethereum, Cardano can be used to build smart contracts. Cardano is considered to be built on five stages: Foundation, decentralization, smart contracts, scaling, and governance. All of these help Cardano to be one of the biggest cryptocurrencies in the market.

Litecoin

Litecoin was created by a computer scientist named Charles Lee in 2011. Litecoin is one of the oldest cryptocurrencies created after Bitcoin. Compared to other altcoins, Litecoin is more stable. It was created to fit in areas where Bitcoin was lacking. Hence, it was built with better technology making it faster and safer. Although Litecoin was aimed to be a better version of Bitcoin making them very similar, they were built on different cryptographic algorithms. Litecoin uses an algorithm called, “scrypt” while Bitcoin uses “SHA-256”. Many long-term investors use Litecoin because of ease of transaction. Transactions are a lot faster than Bitcoin and the fees are a lot less.

Ripple

Ripple is a decentralized technology that serves as a cryptocurrency and an intermediary for financial transactions. Traditionally, making financial transactions is a long and hectic process. If the two parties involved in the transactions use different banks or currencies, there needs to be an intermediary to convert the money to a common currency so it can be successfully sent. This process is often time-consuming and costly. Ripple aims to eliminate this problem. Ripple is targeted at bankers and payment providers to make transactions easier and faster.
Cryptocurrency offers a variety of coins to invest in. It is important to weigh different options, factor in the pros and cons, and choose wisely the coins you would like to invest in.