In the world of cryptocurrencies, there are thousands of different coins, each with its own operating mechanism and applications. Below are the most popular cryptocurrencies that investors and newcomers need to understand.
1. Bitcoin (BTC) - The First Cryptocurrency
History and Significance
Created in 2009 by a person (or group of people) under the pseudonym Satoshi Nakamoto.
Designed to become a peer-to-peer electronic cash system, enabling transactions without the need for an intermediary like a bank.
Bitcoin is often referred to as "digital gold" due to its limited supply and high security.
How it Works
Underlying technology: Blockchain.
Consensus algorithm: Proof of Work (PoW) - Miners use computational power to verify transactions and create new blocks.
Block time: Approximately 10 minutes per block.
Max Supply: 21 million BTC
Applications of Bitcoin
Store of Value: Similar to gold, Bitcoin can be used to hedge against inflation and preserve assets.
Payment Transactions: Some businesses, such as Tesla, Microsoft, and Starbucks, have experimented with accepting BTC as payment.
Investment: Bitcoin is the primary investment asset in the crypto market, with many viewing it as a long-term investment vehicle.
What is Bitcoin Mining?
Bitcoin mining is the process of using computers to solve cryptographic puzzles, verify transactions, and add new blocks to the blockchain.
How it works:
Miners are the individuals who use computers to help verify Bitcoin transactions.
They compete to solve a highly complex cryptographic puzzle (the SHA-256 algorithm) by trying many random numbers (nonce) until they find the correct solution.
The first person to solve the puzzle correctly is granted the right to record the new transactions in a block on the blockchain and receive the reward of newly minted Bitcoin and transaction fees.
Initially, the reward was 50 BTC per block, but it halves every 4 years (210,000 blocks).
Description of the Bitcoin mining process
2. Ethereum (ETH) - The Smart Contract Platform
History and Key Features
Created in 2015 by Vitalik Buterin.
Ethereum is not only a cryptocurrency, but also a smart contract platform that enables the development of decentralized applications (DApps).
How it Works
Blockchain: Ethereum.
Consensus algorithm: Initially Proof of Work (PoW), but transitioned to Proof of Stake (PoS) with Ethereum 2.0 in 2022.
Block time: Approximately 12-15 seconds per block.
No maximum supply - ETH is not capped like Bitcoin.
Applications of Ethereum
Ethereum is a versatile blockchain platform with many important applications. Thanks to its support for smart contracts, Ethereum enables the execution of automated transactions without the need for intermediaries. It is also the primary platform for decentralized finance (DeFi), supporting protocols like Uniswap, Aave, and Compound. Additionally, Ethereum is the most popular blockchain for creating and trading Non-Fungible Tokens (NFTs), unlocking significant potential in digital art and collectibles. Furthermore, Ethereum plays a crucial role in the development of the Metaverse & Web3, supporting decentralized projects and applications.
Ethereum is the largest ecosystem in the current market, with over 1,300 diverse DApps and protocols across various sectors.
3. Altcoins (Alternative Cryptocurrencies to Bitcoin)
"Altcoin" is a term used to refer to all cryptocurrencies other than Bitcoin. Some popular Altcoins include Litecoin (LTC), Binance Coin (BNB), Solana (SOL), Aptos (APT), Sui (SUI), and more.
According to data from the website coinmarketcap, there are nearly 40,000 altcoins currently in the market. The actual number is much higher.
4. Stablecoins
Stablecoins are cryptocurrencies pegged to a stable asset, such as the US dollar or gold, to reduce price volatility.
Popular Stablecoins
USDT (Tether) - Pegged to the US dollar, is the most widely used stablecoin.
USDC (USD Coin) - Issued by Circle, with full reserve backing.
BUSD (Binance USD) - Issued by Binance, pegged to the US dollar.
DAI - A decentralized stablecoin, collateralized by assets on the MakerDAO platform.
