What is the best cryptocurrency to invest in now? Should you consider Bitcoin, Ethereum, Dash, Ripple, Litecoin, Monero or Lota.
it’s nearly impossible to keep up with the constant changes in the cryptocurrency space. Investors interested in trading currencies have nearly as many if not more options than they do with fiat currencies issued and backed by the world’s governments. While a deep and completely thorough understanding of these high-tech software-based currencies requires nearly a doctoral level of software engineering, there’s no reason an investor has to know their history or their specific unique technologies to trade them — just as an urban speculator need have little understanding of gold, wheat or bacon to play in those markets.
But even with that in mind, it’s not a bad idea to review the genesis of the major currencies — Bitcoin, Ripple and Etheruem — as well as some of the more important minor currencies. We address the Biggies in greater detail, naturally, but also think it is important to offer at least a brief description and some interesting facts to help you gain understanding and, perhaps, to pique your interest in this exciting investment space.
And exciting it definitely is. While frontier investments areas do have their own risk profiles — which can be significant and which must be clearly understood BEFORE trading — it’s pretty much undebatable that there are huge sums for even novice cryptocurrency investors to capture, with many of currencies seeing daily price swings that can exceed the annual per Forman experience of the Standard & Poor’s 500 Index! Let’s take a look.
Ethereum is a cryptocurrency officially introduced in 2015 based on the C++, Go and Rust programming languages (usable in Linux, OS, Windows, Posix and Raspbian operating systems) and a lot of functionality. The actual tokens are referred to as Ether. The most important is a feature called “smart contracts,” which makes it easy to create a deal or other agreement online with an unknown counterparty. Plus its ecosystem encompasses the Ethereum Virtual Machine, which runs scripts on a network of private nodes. Two other abilities to keep in mind: a digital payment token called ether and “gas,” a way to establish transaction costs, combat spam and ensure that the network has the proper resources where they need to be.
Vitalik Buterin conceived of Ethereum (or the shorthand “ETH”) in a 2013 paper that explored the notion of adding apps to cryptocurrency. The next year, a Swiss consortium called Ethereum Switzerland and, later, the nonprofit Ethereum Foundation. A crowdfunding initiative provided the initial capital in late summer: People could buy the Ethereum value token (called “ether”) as well as bitcoin. Several versions have emerged: The current one, Homestead, is thought to be stable, though future upgrades, Metropolis and Serenity, are in the offing and could deliver even more stability and functionality.
Then came DAO, which threw a monkey wrench into the works. The year was 2016 — an ice age ago in the cryptocurrency space. A group called The DAO introduced the smart contract concept, raising $150 million in crowdfunding — and an unknown someone got their hands on $50 million worth. A discussion ensued as to whether Ethereum should engineer a hard fork — that is, a split of two types of currency — to reallocate the stolen funds. The solution was to split the network into Ethereum and Ethereum Classic, which are now rival currencies. In late 2016, Ethereum beefed up its protective abilities and managed to stop other hack attacks.
The value of tokens has been volatile, which has presented some fantastic opportunities for traders. For instance, the value of Ether fell to $8 from $21.50 when hackers hit The DAO. Those who bought at this new basement level of support did pretty well for themselves: By June 2017, ether’s value had surged above $400, a stunning 5,000% increase since Jan. 1. Ether later saw a massive crash stemming from a gigantic sell order on an exchange that dropped the price to a dime — on its way to $300.
Ether is estimated to see a 14.7%% increase in supply in 2017. This increase will wane over the years until it reaches a growth rate of 1.59% in 2065. A new version of the software is based on proof of stake rather than proof of work, which could reduce the inflation rate even more over time.
Ethereum has several unique features to bear in mind. The Ethereum Virtual Machine is the backbone behind smart contracts. The EVM is “sandboxed” — that is, isolated from the main Ethereum network. All of the nodes in the network execute the same series of steps in the EVM to carry out tasks. Smart contracts carry out the exchange of value and also can facilitate, verify, and enforce the terms of the deal.
Contracts on the Blockchain can be public, which opens up the possibility to prove functionality, such as proving that a lottery is demonstrably fair to all participants. Ethereum is being reviewed for use in enterprise software by companies like Microsoft, IBM, Chase and Deloitte. The Enterprise Ethereum Alliance was launched with 30 founding members, now there are more than 115, including Cornell, Toyota, Merck, Samsung, Accenture and Santander. Chase is working on an overlay called Quorum. The Royal Bank of Scotland has constructed a clearinghouse mechanism based on Ethereum’s distributed ledger.
Ripple users transact business with cryptographically signed transactions. It has user-verification protocols: Trust has to be officially and literally extended for a deal to go down. Users basically set credit lines for each other. “Gateways” can accept currency deposits and create balances on Ripple’s ledger. Bitstamp, Mr. Ripple, Gatehub, Ripplefox are among the popular Ripple gateways.
An early cryptocurrency called Ripplepay was invented in 2004 by a Canadian who worked as a trader in Vancouver. His idea was to make a new monetary system to be used online. This led to the conception of a new system by Jed McCaleb, which was built by Arthur Britto and David Schwartz.
They added in the consensus transaction approval by network members instead of the blockchain-centric mining process Bitcoin employs. This makes everything faster and reduces bitcoin’s need for centralized exchanges and because it needs less computational assistance, it also uses less electricity. The Canadian trader said goodbye; the other programmers started a company called OpenCoin — Google was an early investor; it’s now called Ripple Labs — which came up with a new idea. This is, as you could have probably guessed, yet another acronym, this time the mouthful RTGS, which stands for “real-time gross settlement system.”
This is the Ripple Transaction Protocol (or “RTXP”) or just plain “Ripple protocol.” It’s an open-source ecosystem that uses a consensus ledger and the Ripple currency, which is sometimes abbreviated XRP.
Ripple is the brainchild of Arthur Britto, David Schwartz, Ryan Fugger and was released in 2012. Today, it is No. Three among the cryptocurrency heavy-hitters, behind Bitcoin and Ethereum.
In July 2013, Ripple Labs informed the world it was linking to Bitcoin using what it called the Bitcoin Bridge, which lets Ripple holders send payments nominated in ANY currency to a Bitcoin address. The media was abuzz that this development could ultimately be a threat to money-sending services like Western Union. Fast-forward a bit. In 2015, FinCEN fined Ripple Labs for violating the Bank Secrecy Act.
Ripple Labs pledged its full compliance to fix the problems. It has been as good as its word: About a year later, Ripple was granted virtual currency licenses by New York State, the fourth company to do so. A few months later, a group of Japanese banks said they’d use Ripple’s technology for payments: The 42 participating banks hold more than 80% of total Japanese bank assets. Thereafter a cabal of other financial groups entered the fray to create the Global Payments Steering Group. Among them: Bank of America, Mitsubishi Financial, the Royal Bank of Canada, Santander and Standard Chartered.
The group will oversee rules, standards, fees and new payment capabilities. The best thing about Ripple is that banks like it. The best thing about Ripple is that banks like it. Seriously, keep in mind that BANKS LIKE THIS ONE. Ripple was lauded as a Technology Pioneer by the World Economic Forum in Davos
Dash — an amalgamation of the “d” in digital plus the “ash” in cash — began life as Darkcoin, then adopted the name XCoin. The brainchild of Evan Duffield, it functions like bitcoin though it can be used for entirely private transactions, using a feature called PrivateSend, which is not recorded in a blockchain.
Dash also can be used instantaneously with InstantSend. Like bitcoin, Dash is decentralized and independent of any government backing or fiat power. It debuted in January 2013. The supply will decrease 7.1% until Dash reaches its limit at 19 million coins. Dash has two layers: The first of its two-tier architecture is made up of the miners who secure the network and record transactions in the blockchain.
The other tier is a collection of master nodes that give Dash its more sophisticated features. Nearly 2 million coins were mined in Dash’s first two days of operations. Then, trouble. An error in the code behind Dash “incorrectly converted the difficulty, then tried using a corrupt value to calculate the subsidy,” which led to the so-called “instamine” phenomenon.
Duffield suggested a re-release of the code to address the problem, but users decided they liked the feature and tended to be vocal about it. Duffield then offered to execute what he called an air drop of coins to extend Dash’s initial distribution. Again, the user base balked, and things continued on. With Bitcoin, all the work on the network is distributed out to be completed by active Dash miners. Dash does that but goes a step further with masternodes.
These operators do the heavy lifting behind Dash’s PrivateSend, InstantSend and administrative functions. A masternode must possess 1,000 Dash tokens as collateral. The sort-of downer is here is that the masternode crowd gets half the block reward — each group gets 45% of the block reward, with the other 10% allocated to fund a “treasury” or “budget” system to hire developers and employees and pay for connecting to coin exchanges and API providers.
There’s also a nifty little democracy feature: Each masternode operator gets a vote on various proposals posted via Dash.org forums or through community sites like DashCentral.
Founded by Da Hongfei, NEO brings a deep bench of professional experience. It shows. NEO got its start as Antshares. Some predict it will become China’s answer to Ethereum. Calling NEO Ethereum 2.0 might be appropriate. It’s certainly a step forward, and one that is seeing a lot of gains in a fairly short time. The conventional wisdom is that it’s because the technology is good.
NEO has its own blockchain coding algorithm, a new take on the smart-contract concept. NEO is based on code that a lot of programmers know. This seems wonky, but it’s worth pointing out. If you’re a large financial institution looking for a digital currency platform, it’s a lot easier to get your geeks working on something they know how to use rather than asking them to start over and become fluent in yet another code.
Ultimately, buying is a huge bet on our Chinese friends embracing NEO as their Ethereum.
Litecoin, or LTC, is a decentralized P2P cryptocurrency and open-source software platform introduced in 2011 by former Googler Charlie Lee. Litecoin functions the same way as bitcoin, but with a few twists that give the network more capacity to process transactions. Transaction costs are very low. And the system handles payments at quadruple bitcoin’s speed, just as someday there will be four times as many litecoin as bitcoin.
In May 2017, Litecoin began using a technology known as Segregated Witness and was able to move a fraction of coin from Switzerland to the United States in less than a second. Litcoins split every four years. Eventually it will reach a maximum of 84 million coins. Difficulty levels rise after each series of 2016 blocks. Litecoin has seen some fantastic returns for its early adopters. In late 2013, it gained 100% in value in just 24 hours.
Litecoin uses a password technology called scrypt,— say ess-SCRIPT — in the proof-of-work algorithm. It gobbles up a ton of memory, which is thought to level the mining playing field (obliterating the advantage of some mining computational methodology on the hardware side.
Iota is a peer-to-peer, permission-less distributed ledger launched in July 2016. The first three letters are IOT, which stands for the Internet of things, to which Iota traces its roots. Theoretically, Iota is the money that your refrigerator would use to replenish the items on your shopping list. Instead of the blockchain, it is based on a “directed acyclic graph” called the tangle.
In the blockchain, every block can be traced to a unique descendant, whereas in the tangle, a block links to two earlier blocks to confirm them. This linking is intended to convey a confirmation of the previous blocks. Iota has a fixed supply of 2,779,530,283,277,761 units (with zero inflation).
The system uses a coordinator as an intermediary between counterparties to a transaction. A deal is confirmed when a Coordinator includes the transaction in a set of released milestones. To send a transaction, a user must validate two others. A sent transaction has to gather a certain level of verification to be accepted by its recipient.
The coordinator role is meant to be removed eventually, once the network reaches a certain critical mass in its user base. The smallest unit in Iota is called an “iota.” Because of the huge number of iota coins, units are typically expressed together in larger groups to make things a little easier.
The usual decimal notation (what you’re accustomed to using with computers) is employed. Thus a kilo dota (expressed as Ki) is 1,000 iotas, a million is a megalota, then on to gigalota and terakota, ad infinitum.
A “seed” is the key users must employ to access the Iota network. Seeds can be up to 81 characters, which provides the most security: Each character must be the numerical digit 9 or a letter, which gives 27 unique options per.
Monero is an open-source cryptocurrency that’s sometimes abbreviated XMR. Its focus is privacy and scalability. It’s not an offshoot of the bitcoin platform and is instead based on the CryptoNote protocol. Introduced as BitMonero in 2014 — “bit” in deference to bitcoin plus “monero,” which is Esperanto for coin.
Try to just forget that Esperanto is a made-up language that no one speaks… Moreno’s market cap skyrocketed to about $185 million from roughly $5 million in 2016. Much of its volume stems from its adoption by AlphaBay, a large darknet marketplace. It’s used worldwide, running on Windows, OS and Linux.
Miners will have access to 18.1 million coins by the end of May 2022. The appeal here is PRIVACY, PRIVACY, PRIVACY. Hey, you see three privacies, you get three reasons why. First, the signatures are set up so as to hide the sending address of the payer. Two, the amount is concealed. Lastly, as you may have guesses, is the fact that the payee is also hidden.
NEM is something of a newcomer to the game. It went live on the last day of March 2015. Its Big Idea is “Proof of Importance,” which sends your transaction to the front of the line for approval based on how many coins you have and how often you use them.
The starting entry point is 10,000 coins; less than that and your transaction gets a zero importance score. NEM is built on blockchain technology, with a block time of a minute. NEM has one fewer than nine billion coins. It uses Nanowallet, which can run in any browser.
The system allows no direct line of attack from the node system to the wallet, which affords one more layer of protection. Groups of NEM can be customized into Mosaics, which can be designed to be transferable (or not) and the creator also gets to decide whether they can be divided.
Moving Mosaics through the network necessitates additional fees. The system also keeps an eye out for bad actors — as well as good ones — with its node reputation system, which monitors quality of work performed on the network and helps ensure network efficiency.