The top end of the cryptomarket is well-established, but how can we differentiate between each coin? With more than 1000 to choose from, we open the lid on Bitcoin Trader’s five favourite cryptocurrencies, plus a bonus coin, in this explainer.
1. Bitcoin (BTC)
The history of the first cryptocurrency is now well-documented. Developed by the pseudonymous Satoshi Nakamoto, the conception of the Blockchain platform provided a decentralised solution to the problems faced by earlier attempts to create digital currencies. By operating on the peer-to-peer Blockchain network, Bitcoin bypassed the issues of double spending and institutional trust. The first crypto transactions were made between members of the Cypherpunk movement, who joined Nakamoto in developing the Blockchain and mining the first bitcoins.
Although Nakamoto’s famous whitepaper described the bitcoin as a currency for everyday transactions, it has evolved into a kind of digital gold standard, albeit one characterised by price volatility. Critics denounce bitcoin as having “no intrinsic value”, a characteristic that bitcoin shares with the dollar, but that’s about where the similarity ends. Bitcoin’s value is based purely on uptake, usage (demand), and sentiment. It is a deflationary currency due to its limited supply (no government or central authority can print more of it), and as has become particularly clear in 2018, it is also subject to seasonal downward price pressure in January, a trend the original crypto has followed for the past five years running.
Nb. It is worth noting that the upper case ‘Bitcoin’ refers to the Bitcoin Blockchain, while ‘bitcoin’ is a unit of currency.
2. Ethereum/Ether (ETH)
First there was bitcoin, then came the ether. Ether is indeed the second cryptocurrency, launched in 2015 by then-21 year old Russian-Canadian Vitalik Buterin. Buterin first proposed the Ethereum Blockchain in 2013, setting the wheels in motion for the mining of ether. Ether is arguably just as important as its bigger brother, bitcoin, due to the fact that ether is the coin of choice for purchasing tokens in most ICOs (Initial Coin Offerings). As such, it forms a gateway to speculative investments in alt-coins.
3. Ripple (XRP)
The third largest “virtual currency” by market capitalisation, Ripple is technically a token, rather than a conventional ‘cryptocurrency’ like bitcoin or ether. Ripple is not a decentralised network, and rather is focussed on functional enterprise payment services; in other words, working as an everyday currency. Ripple is of great interest to the banking sector, and in Australia both NAB and Westpac have been involved with Ripple since 2016, when the banks saw opportunity to bypass the aging SWIFT international transaction settlement engine.
4. Bitcoin Cash (BCH)
Bitcoin takes a few minutes or more to complete a transfer of funds. This is lightning fast compared to SWIFT (which can take up to a week), but Bitcoin Cash takes transaction speeds to the next level. It’s what is known as a ‘hard fork’ of Bitcoin, which means the original network was split into two separate chains, creating a whole new blockchain. The bitcoin cash network was forked on August 1, 2017.
In early 2018, Layer 2 scaling of Bitcoin was anticipated to make transactions instantaneous and cost a fraction of a cent – a shift which could threaten the demand for Bitcoin Cash.
5. Dash (DASH)
The name ‘Dash’ is a portmanteau of ‘digital cash’. First released as XCoin in January 2014, 1.9 million coins were mined in its first two days of existence; 10% of the total supply to be issued. The coin was renamed in 2015.
Dash builds on the Bitcoin feature set by including instant transactions (InstantSend), private transactions (PrivateSend), run by a decentralised autonomous organisation (DAO) that governs payments to businesses and individuals who do value-adding work on the network.
6. Bonus coin – Monero (XMR)
The key to the Monero alt-coin is total privacy. Monero is not yet part of the Bitcoin Trader ACL (Accepted Coin List), but it’s been seeing a lot of negative press lately for being the coin of choice for completely anonymous transactions. This is no fault of the Monero coin in its own right, which was built simply with privacy in mind, but the lack of traceability has had some interesting consequences. By using malware, hackers are able to compromise websites and use the computers of site visitors to mine the alt-coin without them knowing. Recently, government websites in the UK were compromised through a test-to-speech plugin called, designed to be used by sightless internet users: essentially the hackers took advantage of blind people by using government websites to hijack their CPUs for mining Monero. Fortunately, this only went on for four hours before the scheme was shut down.
The malware phenomenon is not a problem for people wanting to invest in Monero, however everyday internet users should be diligent about keeping their anti-malware software up to date, and watch for apparently slowed internet connection, or their computer’s CPU working hard enough to reach high operating temperatures.
Bitcoin Trader is a digital currency brokerage firm providing a buy and hold strategy for high volume cryptocurrency investments.
Disclaimer: This content is for informational purposes only. It does not constitute investment or financial advice. Any information, material or commentary is intended to provide general information only. Information contained in this document has been obtained from sources believed to be reliable, but BT Brokerage Services Pty Ltd trading as Bitcoin Trader, makes no representation as to its accuracy or completeness. Before acting on any information contained in this document, each person should consider its appropriateness having regard to their own or their clients’ individual objectives, financial situation and needs. You should obtain independent taxation, financial and legal advice relating to this information and consider it carefully before making any decision or recommendation.