Major cryptocurrencies shaping the economy in 2017

The cryptocurrency phenomenon is truly upon us. Rapidly gaining momentum with investors, banks as well as governments across the world, this digital currency is shaping the worldwide economy. As at July 2017, there are more than 900 cryptocurrencies available over the internet, and the figure keeps growing as a new cryptocurrency can be created at any time.

What exactly is a cryptocurrency?

Cryptocurrencies, which are a subset of digital currencies, may still look vague and complex to many people. The first one to be created is Bitcoin which emerged as a side product of another invention by Satoshi Nakamoto- a pseudonym used by an unknown programmer or group of programmers. In 2008, the latter announced his creation of a Peer-to-Peer Electronic Cash System which ensured a completely decentralized network with no server or central authority. Prior to his invention, several attempts to create digital money failed, starting in the 90s, most probably because a centralized system was being used.

Learning from these failures, Satoshi Nakamoto understood that he had to avoid repeating the same mistake of creating a system based on a central entity. His aim was to create a system similar to Peer-to-Peer network for file sharing. His decision was revolutionary and gave birth to Bitcoin in 2009.

In brief, cryptocurrencies are limited entries in a database that no one can alter without fulfilling specific conditions. In fact, even if this may seem complex, it is not: money itself is all about entries in databases, accounts, balances, and transactions. They are digital assets programmed to work as a medium of exchange based on cryptography so that transactions are secured. Unlike centralized systems such as banks, companies or governments cannot produce new units and control the supply of currency.

The mechanism of cryptocurrencies

A cryptocurrency, such as Bitcoin, consists of a network of peers. Each peer has a record of the complete history of transactions made, and consequently, the balance of every account. Every transaction is some sort of a file and is signed by keys. Once signed, the transaction is broadcasted in the network, from one peer to another. Once the transaction is known to the network, it also has to be confirmed. And once confirmed it can no longer be reversed, altered or forged. It becomes part of a permanent record of transactions carried out, also known as blockchain. Those who confirm transactions are known as miners who are rewarded with a token of the cryptocurrency for their job. Miners are members of the general public and they use their computers to validate transactions. The security of cryptocurrency ledgers is based on the assumption that the miners are honestly maintaining the ledger, urged by financial incentives.

In general, most cryptocurrencies are designed in such a manner to gradually decrease the production of currency by placing an ultimate cap with regards to the total amount of money in circulation, imitating precious metals.

The top ten cryptocurrencies that are trendy in 2017

Bitcoin

Bitcoin was released in 2009 as an open-source software by an unknown or a group of unknown programmers going by the pseudonym of Satoshi Nakamoto. Based on a peer-to-peer system, transactions take place directly between users without any intermediary. Bitcoin is the first decentralized digital currency. Apart from serving as financial rewards for mining, it can be exchanged for other currencies, services or products.

Anonymous transactions

Bitcoins can be used to buy products or services anonymously, legally and illegally. Even if Bitcoin transactions are recorded in a public log, names of buyers and sellers are never revealed. The anonymity feature makes it difficult to trace transactions back and this is the reason why it has become the favorite currency for certain illicit activities like buying drugs online. Furthermore, since it is not tied to regulations and legislations of any country, international payments are easy. Bitcoin is attractive to small business as there is no implication of credit card fees. Certain people simply buy bitcoins as an investment, hoping their value will increase.

Bought and sold on Exchange

Bitcoins can be bought on an Exchange. There are various marketplaces called "Bitcoin exchanges" allowing people to buy and sell bitcoins using multiple currencies. The largest Bitcoin exchange is Mt.Gox. Else, bitcoins can be earned through mining. People use their computers to solve math puzzles and compete with each other. A winner may be rewarded with 25 bitcoins every 10 minutes on the average.

Bitcoins are stored in digital wallets found either in the Cloud or on the user's computer. This virtual bank account allows users to send and receive the cryptocurrency, pay for products and services or simply save it.

Bitcoin is on the top of the list in the market, with a market capitalization of $29,919,930,192. As at May 2017, 1 BTCUSD Bitcoin US Dollar can be bought by paying $1,832. It is the costliest virtual currency and is even legalized in many countries such as Canada, Japan, and Israel. It is legal in certain parts of the United States.

Ethereum

Ethereum is an open-source, public platform based on blockchain. It was proposed in 2013 by researcher and programmer Vitalik Buterin and was developed based on online crowd sale in 2014. Ethereum went live the year after with 11.9 million coins premined. It features smart contract functionality facilitating online contractual agreements. Ethereum provides a cryptocurrency called Ether.

Ethereum is more than digital money

Ether is a tradeable cryptocurrency that fuels the network and is used by application developers to pay for transaction fees and services on the network.

Unlike Bitcoin, Ethereum is not limited to operate exclusively as a peer-to-peer digital currency. Existing blockchain functions were expanded to create the Ethereum Virtual Machine (EVM) which is a Turing complete software. It allows the development of thousands of different applications in one single platform. Other applications are built on Ethereum and are raising money using the Ether currency.

In 2016, Ethereum was forked into Ethereum and Ethereum Classic, with the former one being the majority. This happened after the system was hacked but Vitalik Buterin and his team managed to get control over the system and return it to users. How they dealt with the issue earned them more respect and credibility.

A solid rival to Bitcoin

Today, Ether is seen as a solid alternative to Bitcoin. Despite its yet infantile stage, Ether has blasted by 4,500% in the middle of 2017 compared to the beginning of the year. In other words, the value of an Ether was 82% of the value of a Bitcoin as at June 2017.

Similar to Bitcoin, Ether is not controlled by governments or organizations and is established on the private exchange where people can sell their tokens at the going market price. The market cap of Ethereum was $8,284,240,957 with a price of around $90 at the beginning of the year.

Certain people, however, argue that Ethereum may end up facing the same issues as Bitcoin in terms of technicality and legality. The reason is that the system is very complex and that the setup itself may attract the attention of authorities as it remains very vulnerable to fraudulent contracts like Ponzi schemes that can be written directly into the Ethereum system.

This is not dissuading giants like JPMorgan, IBM, and Microsoft that see it as some sort of Bitcoin 2.0 and are already experimenting it. Major banks are also showing fascination and consider that it can make trading and money transfer more efficient. 

Ethereum Classic

When Ethereum was split into two blockchain systems in 2016 after the DAO attack, certain people against this decision decided to stick to the "original" system known today as Ethereum Classic. In other words, they considered that going for forking was against the philosophy of the immutability of the blockchain. Ethereum Classic has recently got the support of some big players. It, however, does not get access to all the new updates made in the ETH chain and is known to be full of scammers. It nonetheless has a market cap of $575,782,074 and value of approximately $6.58 and figures among the top ten cryptocurrencies actually.

Ripple

Ripple is a blockchain startup that built a digital payments network for real-time financial transactions and currency exchange. Released in 2012, Ripple purports to allow instant and almost free global financial transactions of any amount in all security and without any chargebacks. Despite its young days, Ripple already has billions of dollars worth of cryptocurrency. David Schwartz, the chief cryptographer of Ripple, explains that the system has been designed to seamlessly connect multiple payment systems together.

Free flow of money

Ripple is also the creator and the largest owner of the digital currency Ripple XRP, having 61% of XRP. It's value blasted by 40 times within the period of January to May 2017. There is approximately 100 billion XRP in circulation, each at 26 cents.

XRP is gaining traction alongside Bitcoin and Ether, mainly due to the growing interest in blockchain. It is considered as a system to allow people to free themselves from the closed system of financial networks such as credit cards, banks and other institutions that impose fees and charges for currency exchanges and processing. In this manner, Ripple aims at ensuring a free flow of money.

Litecoin

Litecoin is a peer-to-peer cryptocurrency based on an open source cryptographic protocol. This decentralized system has been largely inspired by Bitcoin but possesses certain technical improvements. As such, Litecoin enables a greater amount of transactions to be processed in a given period of time, avoiding potential bottlenecks.

Litecoin was released in 2011 by Charlie Lee, who was previously working for Google. Two years after its release, that is in November 2014, the value of Litecoin witnessed a 100% expansion within 24 hours, reaching a market cap of $1billion. The latest figures of May 2017 set the market capitalization at US$1,542,657,077 at around $30 per coin. It is also the first of the top five cryptocurrencies having adopted Segregated Witness in that month.

Faster transactions

The Litecoin network aims at processing a block every 2.5 minutes Bitcoin takes 10 minutes. Consequently, Litecoin allows for a faster transaction confirmation and thus, a higher volume of transactions. This fast time equally reduces the risk of double spending attacks. 

Monero

Monero is a cryptocurrency created in April 2014 and runs on Windows, Mac, Linux, and FreeBSD. The initial name was BitMonero but five days after its release, the community opted for Monero. This open-source cryptocurrency goes by the code XMR and unlike many other cryptocurrencies that are derivatives of Bitcoin, Monero is based on CryptoNote protocol. The algorithmic differences are significant compared to blockchain obfuscation.

High levels of privacy

Monero is known for its privacy protection that runs in three ways. Ring signatures hide sending addresses, RingCT hides the amount of transaction and stealth addresses hide the receiving addresses of transactions. However, transaction history can be shared selectively as well.

Monero furthermore offers fungibility, that is, each individual unit of a currency holds an equal value with another. As such, no two coins are distinguishable from each other and remain equal in the eye of the merchant.

Monero's market functions like many other cryptocurrencies. It can be purchased on exchanges including Poloniex, Bitfinex, and Kraken. Since its creation, Monero has fluctuated between approximately $0.25 (in January 2015) and close to $60 (in May 2017). Monero witnessed rapid growth in market capitalization (from US$5M to US$185M) and transaction volume during the year 2016.

Dash

Dash is a cryptocurrency formerly known as Darkcoin and XCoin and was released in 2014. It was developed by Evan Duffield. It is based on a peer-to-peer system that offers same features as Bitcoin. Dash, however, has some advanced capabilities like instant transactions, known as InstantSend, and private transactions (PrivateSend).

In the first two days after launch, 1.9 million coins were mined, in an era full of scams. But Dash managed to stay afloat. In May 2017, Dash joined the billion dollar cryptocurrency club, passing the $1 billion market cap but soon dropped to $ 952M.

Dash can be bought in over 20 different fiat currencies including USD, GBP, and EUR amongst others. The currency is highly promoted on social media.

SafeCoin

SafeCoin is a cryptocurrency that is the gateway to the Maidsafe network. It is considered as a fair and transparent way of giving end users, backers and developers the chance to get involved in the SAFE network. SafeCoins may be earned, purchased or traded. A total cap of $ 4.3 billion will be generated.

SafeCoin is based on a brand new algorithm known as Proof of Resource which is a fresh level of the Bitcoin proof of work algorithm. This new system uses the miners CPUs to regulate the MaidSafe network. It has the same peer-to-peer decentralized platform and all data is secure, private and protected from deletion or removal.

SafeCoin can solely be purchased through the MasterEexchange site and cannot be exchanged on a typical exchange site. No third parties are involved in this process and only a handful of merchants accept it for goods and services.

SafeCoin has a market cap of $148,897,399 and price of around $0.322 per unit.

Augur Reputation

Augur is an open-source decentralized prediction market platform. It was built on Ethereum and well-known supporters of the project include Ron Bernstein, co-founder of Intrade, the Thiel Foundation as well as Vitalik Buterin.

An alpha version of Augur was launched in 2014 while a global crowdfunding the year after, raising $ 5.2M in cryptocurrency, enabled further development. A beta version was launched in 2016.

Augur Reputation (REP) is the tradable tokens. Launched in 2015, the total amount was fixed at 11 million coins. This cryptocurrency gives individuals the right to report or weigh on the outcome of events. Those providing truthful reports earn the tokens. Untruthful reporting will make users lose their Reputation and earn nothing.

Prediction system

Augur works on a system of prediction. In other words, events on any topic may be set up and shares are bought for the possible outcomes. Both Bitcoins and Ether are also accepted on the Augur system. Top predictions are based on consensus.

The co-founder Joey Krug insists that Augur is much more than a betting platform. He argues that it can be used by farmers in Argentina to hedge against weather cycles or by Chinese traders unable to access the US stock market, for instance. The highly decentralized nature of Augur makes that the platform remains largely unaffected by regulations and limitations.

Augur has a market cap of $188,505,585 with the value of $17.15.

NEM

NEM follows the same peer-to-peer cryptocurrency and blockchain model. The stable first version was released in March 2015, written in Java. It features innovative elements like proof-of-importance algorithm, multi-signature accounts, encrypted messaging as well as an Eigentrust reputation system.

NEM was created by a Bitcoin Talk forum user called UtopianFuture. It was however not a legal entity at the time of inception. The market cap of NEM is $1,031,274,000.

Mijin

Mijin is a private blockchain that uses the NEM software. Developers claim that banking institutional costs may be reduced by 90% while making banking transactions more secure.