Cryptocurrencies – the top 8 in the blockchain world

By Saunthra Thambyrajah

Cryptocurrencies have exploded into the mainstream media recently and Bitcoin is certainly hogging the limelight. However, the cryptocurrency world is bigger than Bitcoin or the next big player, Ethereum. At the time I began writing this post, the coinmarketcap.com website claimed that there were 840 cryptocurrencies in existence. Now that number has increased to 847.

Each cryptocurrency has its own purpose and varies in price range – from thousands of dollars to just one cent per coin, number of coins in circulation, technology platform, programming language and design. It makes for very interesting reading and I started this list as a way of categorising and cataloging the information about the different coins.

There seems to be two broad categories of cryptocurrencies. Coins such as Bitcoin Core, Bitcoin Cash and Litecoin are alternate forms of money. They can be used to buy goods or services – both online and in brick and mortar shops and also be converted to cash. In countries like Japan, Bitcoin can be used to pay for services such as your hairdresser and meals at a restaurant.

The second category of cryptocurrencies are tokens on a technology platform that offer some kind of service. Smart contracts, cross border payment facilitation, messaging, asset creation, credit card services for cryptocurrencies and selling and buying property are just a few examples of the services offered by these platforms. In these cases, the tokens can be used to pay for services or fees on their proprietary platform. It usually can’t be used anywhere else.

Cryptocurrencies such as Ether (used on the Ethereum platform), XRP (used on the Ripple platform) and XEM (used on the NEM platform) fall into this second category.

These tokens can also be used to raise funds for the development of these platforms through initial coin offerings (ICOs) – very similar to public offering of shares in a company.

The attraction of using the platforms associated with these cryptocurrencies  is that they offer quicker transaction times, at a lower cost to what is available now. For example, the Ripple network allows users to send money to a person in a different country almost instantaneously, while banks take 3 to 5 days.

Sometimes, the functionality provided by the platforms are not available or possible otherwise – the services provided by the IOTA platform is a good example of this.

I decided to focus on the top 8 cryptocurrencies according to market capitalisation for this article. I might also do a follow on post that covers cryptocurrencies, which are not in the top 10 but that I think rate a mention. The top 4 cryptocurrencies in this list haven’t changed, while I was writing this post, there have been a flurry of movement in the second 4. Apologies if this  is out of date, by the time you read it.

The top 8 cryptocurrencies at this time (15 August 2017) are:

1. Bitcoin Core
2. Ethereum
3. Ripple
4. Bitcoin Cash
5. IOTA
6. Litecoin
7. NEO
8. NEM

Common terms in the world of cryptocurrencies

Before diving in, it would probably be useful to explain a few technical terms:

Market capitalisation: This is the market value of the coin calculated by multiplying it’s value per coin at any point in time by the total number of coins that are in circulation.

Blockchain: A public distributed ledger that’s the underlying technology for all cryptocurrencies. In simple terms it allows people to transact peer to peer, without middlemen, using computers, cryptography and clever software programming. The transactions are verified using network nodes and are recorded on the blockchain. Watch this TED Talk video, by Don Tapscott, for a more indepth discussion about blockchain.

Exchanges: Online service providers that will let you transfer in fiat currencies (dollars, pounds etc) and buy cryptocurrencies. They will also store your cryptocurrencies for you, but after the Mt Gox exchange hacking scandal – where the exchange allegedly ‘lost’ their customers’ cryptocurrencies in a hacking incident – very few people are comfortable storing large amount of cryptocurrencies in exchanges.

Wallets: Used to store cryptocurrencies. It can be at an exchange, online, a software that is downloaded to your computer, or a piece of hardware used to store the coins.

Points of interest: Bitcoin has been around since 2009 and was invented by one Satoshi Nakamoto. It’s anyone’s guess whether this is one person or a group of people.

Despite being the most expensive coin available today, there is still a high demand, which keeps pushing the unit price to increasing heights.

There is no central repository for Bitcoins and as such it’s the first decentralised digital currency.

Blocks are added to the Bitcoin blockchain by miners who run computer farms to verify the transactions. They are rewarded with Bitcoins and transactions fees. The number of Bitcoins rewarded, was 12.5 newly created Bitcoins for every block added to the blockchain, as of July 2016.  However, this reward gets halved every 210,000 blocks added. Eventually, this reward will be reduced to 0.

Miners have to be resource rich. Mining for Bitcoins is an expensive process that requires oodles of processing power and millions of lightbulbs worth of electricity.

The total number of Bitcoins that can come into existence is 21 million.

A new block is added to the Bitcoin blockchain roughly every 10 minutes. The number of transactions recorded within each block amounts to about 4200 (7 per second). With the demand for transactions at an all time high, at peak times, it can take hours for Bitcoin transactions to be fulfilled.  In August 2017, the Bitcoin Core developer community decided to take action to fix this delay issue.

The Bitcoin Core community employed the SegWit2x change to improve the way Bitcoin worked by making the underlying technology more efficient.

However, other members of the community had a different idea about how this delay issue should be resolved. They felt so strongly about it that they created a hard fork – simply this is a new blockchain and cryptocurrency called Bitcoin Cash. (I will be talking a lot more about Bitcoin Cash as it’s number 4 on the list.)

Disruptor of: Currency market and the payments industry. It can be exchanged worldwide for other currencies (using exchanges), services or products. Transactions are almost instantaneous.

Hacking incidents: In 2010 a vulnerability in the Bitcoin protocol was exploited and over 184 million Bitcoins were generated in a transaction and sent to two addresses on the network. The transaction was discovered and erased from the transaction log after the vulnerability was fixed and the Bitcoin protocol was updated.

Points of interest: Ethereum is the brainchild of one Vitalik Buterin and came into existence in July 2015. He designed a blockchain that is a decentralised platform to run smart contracts.

The Ethereum Foundation’s website describes smart contracts as applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference. These apps run on a blockchain that is a shared global infrastructure that can move value around and represent property.

The Ethereum applications are developed using a programming language called Solidity.

It can be used to design and issue new cryptocurrencies (referred to as tokens) or create a ‘trustless crowdsale’ market where a contributor’s money will be held until a given date or project milestone is reached. If the goals are never reached, the funds can be returned to the contributor. All this without a middleman – like a clearing house or arbitrator.

The Ethereum platform’s token or cryptocurrency is called Ether and can be transferred between accounts and used as compensation.

In June 2017, the value of Ether dropped suddenly after a hoax claimed that the founder Vitalik Buterin, had died in a car crash. It dropped from USD$317 to USD$216. It has since bounced back but serves as a reminder that the fate of a coin should not be the responsibility of one person alone.  And also a reminder that investors are nervous individuals who get spooked by the slightest things.

Disruptor of: Contracts market

Hacking incidents: Ethereum went through a hard fork in 2016 which resulted in two blockchains – the Ethereum and the Ethereum classic. The fork came about as a way of addressing a security vulnerability.

Cryptocurrency developers like to fix their own messes and in the case of the Ethereum developers, they came up with two fixes. This was then put to a vote by the coin holders. The majority decision was implemented.

In the case of Ethereum, the action that was taken, returned the money to the original investors and prevented the hacker from using his ill gotten gains. It also kept regulators and the legal system out of the debate.

The action that was taken also created a new blockchain which is the Ethereum that we know now.

However, the minority felt strongly enough about the original blockchain that they decided to continue maintaining it and this original blockchain is referred to as Ethereum Classic.

Points of interest: Ripple is a blockchain technology framework, that is based on a consensus protocol, that connects banks, payment providers, digital asset exchanges and companies via a network called RippleNet.  It has been around in one form or another since 2004.

The company that developed this technology is also called Ripple. Originally a startup in San Francisco it has since expanded with offices in New York, London, Luxemborg and Sydney.

It created a scalable digital asset or currency for payments called XRP which is confusingly sometimes also referred to as Ripple.

XRPs are not mined liked Bitcoins. Ripple, the company, created 100 billion XRPs. Of the 100 billion created, 20 billion were retained by the creators and 80 percent of the remaining total was given to the company to distribute using various strategies. From the end of 2017, 55 billion XRPs were placed in an escrow that will allow Ripple, the company, to sell up to 1 billion monthly. According to Ripple, this is how it works:

‘The recently launched Escrow feature in XRP Ledger allows parties to secure XRP for an allotted amount of time or until specific conditions are met. For example, Escrow allows a sender of XRP to put conditions on exactly when a payment can be completed, so the payment remains cryptographically locked until the due date.

We’ll use Escrow to establish 55 contracts of 1 billion XRP each that will expire on the first day of every month from months 0 to 54. As each contract expires, the XRP will become available for Ripple’s use. You can expect us to continue to use XRP for incentives to market makers who offer tighter spreads for payments and selling XRP to institutional investors.

We’ll then return whatever is unused at the end of each month to the back of the escrow queue. For example, if 500M XRP remain unspent at the end of the first month, those 500M XRP will be placed into a new escrow account set to expire in month 55. For comparison, Ripple has sold on average 300M XRP per month for the past 18 months.

Restricting the supply this way ensures the market will not be flooded.

A number of banks worldwide have started using the Ripple system to realise faster settlement including Santander, RBC, UBS and UniCredit. Furthermore, a group of Japanese banks have piloted the software and plan to use it on a commercial scale by the end of 2017 according to themarketmogul.com website. This means that 40 percent of Japanese banks will be in some way connected to Ripple technology.

Disruptor of: Cross currency payments eg person in the US wanting to send money to a person in Singapore using their bank accounts. Ripple, the company, believes that they will be able to do it at a fraction of the cost and time of conventional cross currency transactions.

The Ripple platform does compete directly with Bitcoin but it’s underlying technology allows Ripple to process the transactions faster than Bitcoin. It also does it more cheaply than Bitcoin.

Hacking incidents: None that are known off to this day. However, in 2014 the Stellar network  – that is a modified fork of Ripple started by Ripple ex founder Jed McCaleb – ran into some problems and the Stellar Development Foundation alleged that problems arose from the original Ripple code and that the same problems could be experienced by the Ripple network.

Ripple, in a blog post by their chief technology officer, defended their protocol by saying that their network had not experienced the same problems as the Stellar network and that the problem must lie in the changes that Stellar had made to their code.

Points of interest:  Bitcoin Cash is a very new coin. It came into being on 1 August 2017 when the Bitcoin hard fork took place.

All Bitcoin holders as of block 478558 were holders of Bitcoin cash.

The Bitcoin Cash developers increased the block size limit from 1MB to 8MB and introduced a new way of signing transactions that the developers claim will bring additional benefits such as improved hardware wallet security and elimination of the ‘quadratic hashing problem’.

Despite upgrading the block size, the BCH blockchain is running slower than anticipated. The first block took 5 hours to complete and the one after that was only added after 12 hours. It was taking 1-2 hours to add each block about 5 days after launch.

A day after Bitcoin Cash launched, it was trading at US$358. On 15 August its price is US$297.

Disruptor of:   See Bitcoin Core

Hacking incidents: None to date. Early days.

Points of interest: If you work in the IT industry, you have probably heard of the Internet of Things (IoT), but it’s probably meaningless to a lay person. In simplistic terms, IoT is about putting wireless networked sensors and controls on ‘things’ such as thermostats, cars, watering systems, manufacturing lines, security cameras, clothing and much much more. These sensors will feed information back to a computer that monitors the ecosystem. Depending on the scenarios/ parameters that the computer detects, a pre-programmed action can be carried out or a person is alerted to the situation.

These devices require a power source, computing power, data storage and network connectivity to be able to function. This is where the IOTA peer to peer platform comes in as it enables an exchange mechanism for IoT devices to find and use these resources. It was created in 2014.

The people at IOTA observed that as the IoT market expands, the need for interoperability and sharing resources will become a necessity. “IOTA enables companies to explore new business to business models by making every technological resource a potential service to be traded on an open market in real time.”

Given that interoperability is a key feature of this platform, the folks at IOTA deconstructed the blockchain ledger and created the Tangle ledger, based on a directed acyclic graph (still trying to figure out this one). So instead of working within the rigid confines of sequential blocks, IOTA users are able to go backwards, forwards and sideways to find opportunities.

The Tangle ledger is able to settle micro and nano transactions with zero fees and opens up business opportunities for companies that were not possible before because the fees would have been higher than the transaction cost.

The IOTA tokens are premined. No new tokens will be created. All tokens are in circulation.

Disruptor of:  The IoT resources and services industry by making resources cheaply available.

Points of interest: Has been around since 2011 and is almost identical to Bitcoin Core with a few key differences. It started using Segregated Witness in May 2017 and has the distinction of being the first coin in the top 8 by market capitalisation to do so.

Litecoin also has a faster block generation time (2.5 minutes instead of 10 minutes).

It also adopted the use of the Lightning Network that allows superfast transaction times. According to Wikipedia, it can facilitate payments 4 times faster than Bitcoin and has almost zero payment cost.

The Litecoin network will produce 84 million Litecoins  (almost 4 times as many currency units as Bitcoin).

Disruptor of: Currency market and the payments industry. It can be exchanged worldwide for other currencies (using exchanges), services or products. Transactions are almost instantaneous.

Hacking incidents: None that I can find reference to. The LiteCoin website was hacked once but that is not the blockchain.

Points of interest:The following excerpt is taken from the NEO whitepaper https://github.com/neo-project/docs/blob/master/en-us/index.md.

“NEO is the use of blockchain technology and digital identity to digitize assets, the use of smart contracts for digital assets to be self-managed, to achieve “smart economy” with a distributed network.

Digital assets are programmable assets that exist in the form of electronic data. With blockchain technology, the digitization of assets can be decentralized, trustful, traceable, highly transparent, and free of intermediaries. On the NEO blockchain, users are able to register, trade, and circulate multiple types of assets. Proving the connection between digital and physical assets is possible through digital identity. Assets registered through a validated digital identity are protected by law.

Digital identity refers to the identity information of individuals, organizations, and other entities that exist in electronic form…

NEO has two native tokens, NEO (abbreviated symbol NEO) and NeoGas (abbreviated symbol GAS).

NEO, with a total of 100 million tokens, represents the right to manage the network. Management rights include voting for bookkeeping, NEO network parameter changes, and so on. The minimum unit of NEO is 1 and tokens cannot be subdivided.

NEO’s 100 million tokens is divided into two portions. The first portion is 50 million tokens distributed proportionally to supporters of NEO during the crowdfunding. This portion has been distributed.

The second portion is 50 million NEO managed by the NEO Council to support NEO’s long-term development, operation and maintenance and ecosystem. The NEO in this portion has a lockout period of 1 year and is unlocked only after October 16, 2017. This portion will not enter the exchanges and is only for long-term support of NEO projects.

GAS is the fuel token for the realization of NEO network resource control, with a maximum total limit of 100 million. The NEO network charges for the operation and storage of tokens and smart contracts, thereby creating economic incentives for bookkeepers and preventing the abuse of resources. The minimum unit of GAS is 0.00000001.

GAS has not yet been generated. 100 million GAS, corresponding to the 100 million NEO, will be generated through a decay algorithm in about 22 years time to address holding NEO.”

Added 17/08/2017: Despite the NEO white paper saying that GAS tokens haven’t been generated, there are almost3 million GAS tokens in circulation. It’s ranked 58 by market capitalisation.

The NEO token only entered the cryptocurrency field in June 2017. And by 14 August 2017 it has reached the top 8 list by market capitalisation.

It’s developed by a Chinese company founded by one Da Hongfei and is also referred to as the Chinese Ethereum.

However, a key difference is that instead of using a proprietary programming language, the NEO platform uses traditional programming languages. It’s far more friendly to software developers who won’t have to learn a new language to use the platform!

Disruptor of: Contracts market

Points of interest:  NEM is a peer to peer solution platform and offers services such as payments, messaging, asset making and naming systems. XEM is  used on the NEM platform. It was launched in 2015.

It ‘s written in Java with a C++ version in the works and uses a proof of importance (POI) algorithm to timestamp transactions in the block. To be considered ‘important’ a NEM user must have more than 10,000 XEMs. Accounts with less than 10,000 XEMs have zero importance. This is a way for XEM holders to earn more XEM. If you aren’t interested in earning XEM, this is not relevant.

The fact that it is written in Java is also significant. This is a common software development language which means XEM wallets can be easily integrated into applications such as online shopping and gaming platforms.

XEM coins are harvested. It’s similar in concept to mining but uses far less computing power and electricity than mining Bitcoins.

The NEM Foundation will be partnering with Australia based Blockchain Global to build a dedicated exchange for XEM tokens.

Disruptor of: Payments, messaging, make/buy/sell/trade assets and goods worldwide.

Hacking incidents: I haven’t been able to find any cases of hacking.

This article first appeared on the topazturtle.com blog in August 2017. Access the original article at http://topazturtle.com/2017/08/cryptocurrencies-the-top-8-today.html/ for the reading list used to write this article. Saunthra is a freelance writer and website developer who blogs at topazturtle.com.