WHAT ARE CRYPTOCURRENCIES?
Cryptocurrencies are a modern form of virtual and digital currencies, meaning they only exist online. They are totally decentralised with no entity controlling them such as central banks, commercial banks or governments. When using these crypto coins to transfer funds to other users, there is no specific authorisation required or any third party involvement. Cryptocurrency transactions are added to a distributed ledger technology, also known as blockchain, where all transactions are recorded without the ability to delete or modify any information.
Bitcoin is the “God” of cryptocurrencies. It was the first digital coin to appear back in 2008 thanks to its anonymous creator, Satoshi Nakamoto. Since then, it remains the largest and most traded virtual currency in terms of market capitalization. It represents a worldwide payment system, as well as a digital currency. Bitcoin is a peer-to-peer network where users directly make transactions without any intermediaries involved. It uses blockchain technology which approves and validates every transaction with its public key cryptography. Most Bitcoin are created to reward miners – those approving the transactions by solving complex mathematical equations on their computers.
Ethereum is the second most significant cryptocurrency in the market, created by Vitalik Buterin in 2015. The Ethereum system operates with the associated currency, Ether. It has brought the cryptocurrency world one step further by allowing the creation and use of Dapps and smart contracts. Smart contracts allow any type of contractual clauses to be partially (or fully) self-executed. This provides for higher security compared to traditional contracts and it also reduces transaction costs. Smart contracts are designed to automatically execute the terms of a contract when certain conditions are met. Of course, the rules governing these smart contracts can cover any verifiable event in a computerised manner such as automatic payment upon package delivery.
Litecoin, launched in 2011, was created by former Google and CoinBase employee, Charles Lee. Based on the same source code as Bitcoin, Litecoin is considered an updated version of the Bitcoin network offering much faster and cheaper solutions. The blockchain used by the Litecoin network was created to accelerate the verification process, which could ultimately increase the number of transactions as well as lower costs. On the Litecoin network, a block is created every 2.5 minutes compared to the Bitcoin network which has a block time of 10 minutes. Litecoin is often described as the cryptocurrency of micropayments for daily uses. In February 2018, a fork occurred that led to the creation of a new cryptocurrency known as Litecoin Cash.
Ripple is among the three most noteworthy cryptocurrencies thanks to its system, RippleNet which is known as the “world’s only enterprise blockchain solution for global payments”. Created in 2012, the Ripple system offers remarkable features to allow faster and cheaper cross-border payments. Many international banks and financial institutions such as UBS, Standard Chartered, UniCredit or Santander are already using its blockchain to execute transactions without fees, with its infamous solutions, xCurrent and xRapid. Litecoin payments are also made a lot faster – transactions on the Ripple system are made in around 4 seconds, compared to the 2 minutes with Ether and the 1 hour with Bitcoin. Ripple is often compared to a real-time gross settlement system (RTGS) like the SWIFT system.