A cryptocurrency can be described as a digital currency that takes the form of coins or tokens, and is available on a distributed and decentralised ledger. Although there are a few cryptocurrencies that have entered the physical world through projects like credit cards, the vast majority exist exclusively in the digital space and remain intangible.
Cryptocurrencies serve as real money in a digital form that is not governed or managed by any central authority. The beauty of this is that users are able to transact with digital currencies without having governments, banks, or any middlemen involved.
It is thought that there are more than 10,000 cryptocurrencies in circulation, which include both coins and tokens. In terms of coins, this would include Bitcoin as the most popular followed by altcoins, which are all other non-Bitcoin cryptocurrencies.
Start of cryptocurrency
While Bitcoin was the first cryptocurrency to be established, there were previous attempts to create a digital currency using ledgers that are secured by encryption. Currencies like Bit Gold and B-Money were created but never developed fully. In 2008, a white paper entitled “Bitcoin — A Peer to Peer Electronic Cash System” was posted by a Satoshi Nakamoto, an unknown identity that remains a mystery to this very day.
In 2009, Bitcoin software was made available to the public and mining of the coin began. In 2010, Bitcoin was valued for the first time and started growing in popularity as the idea of encrypted and decentralised currencies began to catch on. Due to this, many altcoins started to emerge in an effort to improve on the original Bitcoin. As mentioned earlier, there are now more than 10,000 in circulation with new ones popping up frequently.
Top Crypto Coins in Circulation
Whilst there are thousands of coins in circulation, the most popular ones appear below:
Bitcoin is the most popular cryptocurrency in circulation and the one most closely associated with the cryptocurrency system. It is the go-to for traders and investors, and currently has more than 18.5 million Bitcoin tokens in circulation. The capped limit for Bitcoin is 21 million, so once that number has been mined, no new Bitcoins will be created ever.
Bitcoin Cash is an extremely popular cryptocurrency in circulation at the moment. It was created in 2017 and has faster processing speeds than the original Bitcoin. This is due to it having a bigger block size of 8MB when compared to the original Bitcoin that has a block size of 1MB.
Litecoin was created in 2011 and functions in almost the same way as Bitcoin. It is designed to improve on the Bitcoin technology and offers shorter transaction times, lower transaction fees, and more concentrated miners. The mining cap on Litecoin is 81 million.
Ethereum is the second most popular cryptocurrency behind Bitcoin. Ethereum differs from Bitcoin in the sense that its focus is more on decentralised applications rather than being a digital currency. Ethereum tried to improve on Bitcoin through the use of smart contracts and offering much faster transaction speeds of up to 5 times.
Ripple is different when compared to the aforementioned cryptocurrencies as it uses an iterative consensus ledger and validating servers as opposed to a pure blockchain. It is intended for large companies as opposed to individual users because it is meant to move larger amounts of funds globally. It remains popular because of its digital payment protocol and is capable of facilitating up to 1,500 transactions per second. This is far more than Bitcoin (3–6 transactions per second) and Ethereum (15 transactions per second).
How the industry has grown
Since its inception, cryptocurrencies have proved to be extremely resilient, with growing interest amongst investors for digital assets. Bitcoin and other cryptocurrencies appear to have emerged as a new asset class, with investors enjoying exponential returns over the past decade.
The journey hasn’t been smooth sailing, however, as there have been periodic slumps in the crypto market. 2019 and 2020 seem to have marked a period of recovery for cryptocurrencies, as the pandemic proved to spark more interest amongst investors.
Things are certainly looking bright in present-day as cryptocurrencies like Bitcoin, Ethereum and Dogecoin have already hit record highs in 2021. While there are concerns over the risky nature of the crypto market and security breaches, investors appear to be more confident as an increasing number of global companies, like Tesla and PayPal, are opting to invest in crypto.
The blockchain industry is growing stronger by the day with Bitcoin responsible for more than 50% of the entire cryptocurrency market capitalisation. With the value of the crypto market recently topping $2 trillion, an increasing number of retail and institutional investors are coming onboard. Whilst governments and banks across the world struggle to control digital assets and impose harsher regulations, it is clear that digital currencies are bound to upset the traditional financial applecart in the long run.