Cryptocurrency is a young, intimidating industry for newcomers. There are so many buzzwords, acronyms and coins that it seems impossible to make any sense of it. Here, we’ll go through the differences between some of the top Cryptocurrencies, why there are so many, and why people are excited about them, in plain English.
We won't go through the details of Blockchain technology in this post. For the time being, know that just as the technology behind a website is its web server, the technology behind a Cryptocurrency is its Blockchain.
The Big Daddy
If you’re reading this, the likelihood is that you already know about Bitcoin. You might have even purchased some after a friend wouldn’t stop talking about it. But what is it?
Bitcoin is the oldest Cryptocurrency. Released in 2009, it was the first Blockchain of its kind. no one knows who created it, all we know is their pseudonym: Satoshi Nakamoto. Because no single entity runs it, it persists through the participation of its users like you and me. As long as it has users, it will always exist.
People are excited about it because it offers a store of value without centralised control. For example, cash is a bad store of value because it can be devalued by a government at any moment, by excessive printing. This is known as inflation (Venezuela and Zimbabwe are very recent examples of this).
Bitcoin has a mechanism which prohibits inflation from ever occurring. It is the first known asset to be cryptographically deflationary, prompting Weiss Crypto Ratings to call it "possibly the scarcest asset ever known to humanity".
There will NEVER be more than 21,000,000 Bitcoin in existence.
If Bitcoin is so perfect, why are there other Cryptocurrencies?
A very valid question.
The motivation for Bitcoin was to escape the fraudulent financial system we built, which led to the housing crisis in 2008. We know this because of the paper released by Satoshi Nakamoto, and the messaged he/she/they ingrained into the Bitcoin Blockchain:
“The Times 03/Jan/2009 Chancellor on brink of second bailout for banks” — Bitcoin Genesis Block
Bitcoin attempts to remove the single point of failure in our economy that the banks became. What if that same logic can be applied to other things?
When a website goes down, it’s because there is a centralised point of failure: the webserver. What if the concept of decentralisation that Bitcoin proposes can be applied to computing so that vulnerability is removed? That’s where Ethereum comes in.
The Second Fiddle
Just as Bitcoin offers a decentralised alternative to centralised value, Ethereum offers a decentralised alternative to centralised computing.
People are excited about it because Ethereum allows developers to run software on its Blockchain. That software is executed by the whole network, rather than just one server. So, if one node on the network goes down, it doesn’t matter because it can still be run by others. So long as there are users on the network, that software can always be run.
I understand why Bitcoin costs so much, but why does Ether?
Running software on a traditional web server is not free, there are ongoing costs (electricity, maintenance, etc). The same is true for software on Ethereum.
Once developers have deployed their software to Ethereum, they need to pay to run it. And the accepted currency is Ether (ETH).
So if you buy Ether, you are investing in Ethereum’s potential to replace traditional centralised technology platforms, because developers will always need Ether to pay for their software to run.
OK, but why are there so many others?
The advent of the two ideas expressed by Bitcoin and Ethereum have spread into almost every recognisable industry. Each Cryptocurrency has a project behind it which is attempting to decentralise something which is traditionally centralised.
There are so many because it’s an extremely immature market, and the world economy is so multifaceted. (As of 2020, only eleven years have passed since Bitcoin’s invention.)
With the possible upsides of mass decentralisation, the huge number of Cryptocurrencies out there essentially represents throwing stuff at a wall and seeing what sticks. The current leaders, like Bitcoin and Ethereum, have made the most progress towards making stuff stick, so they’re valued the highest.
Where can it go from here?
In short: Anywhere. Blockchain and Cryptocurrencies are still difficult to get involved in, so the next major step is making the whole industry more accessible to the general public.
In terms of Bitcoin disrupting our financial institutions, it has not taken place just yet. It will likely take some time, but when the tide turns in favour of decentralisation, the changes will be stark. It will turn economies in favour of the individual over the corporation. Find out more about it here.
Wow, this sounds exciting, how do I get involved?
There are so many ways you can get involved in this revolution. Whether it’s investing a tiny amount of money in Crypto, creating your very own Blockchain, and everything in between. Here's how to be part of the Blockchain Revolution.
If you’re interested in Blockchain Development, I write tutorials, walkthroughs, hints, and tips on how to get started and build a portfolio.Check out this evolving list of Blockchain Development Resources.
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