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Why Are All Cryp­tocur­ren­cies Not the Same? Find out…

Though Bit­coin is by far the most pop­u­lar cryp­tocur­ren­cy in the mod­ern mar­ket­place, it is def­i­nite­ly not alone. Last year in 2017, over 1000 new sim­i­lar cur­ren­cies were cre­at­ed, and the over­all cryp­to-sec­tor is now lit­tered with — at last count — well over 2500 coins. Many of these coins are, to put it del­i­cate­ly, garbage that should be avoid­ed at all costs. Oth­ers are great invest­ments that back key­stone tech­nolo­gies of the future. Then there are a few that have poten­tial to one day sur­pass Bit­coin itself. With so many coins in the mar­ket, it can be over­whelm­ing nav­i­gat­ing this mine­field of options, and for many peo­ple just enter­ing the mar­ket­place, the job of fig­ur­ing out which ones of these coins fit into what cat­e­go­ry can be daunt­ing. That being said, BTC Casi­nos prove that the rewards of choos­ing the right coin can see huge cap­i­tal gains for adopters like Bit­coin itself. Con­sid­er that, at one point, a sin­gle Bit­coin was trad­ing online at less than a pen­ny. Today, a sin­gle Bit­coin is worth more than most peo­ple make in a year, and the rewards can seem well worth the gam­ble. Though many are look­ing to angel-invest in the next Bit­coin and find their for­tune, investors should be weary and learn to iden­ti­fy what makes these coins dif­fer­ent and what key sta­tis­tics to fac­tor in when choos­ing which coin is right for you.

Here is a look at why all cryp­tocur­ren­cies are not the same and how they dif­fer in class, func­tion­al­i­ty and, ulti­mate­ly, val­ue.

Coins vs. ICO Tokens

cryptocurrency mining concept with golden bitcoin

To begin with, it is impor­tant to under­stand the dif­fer­ence between a coin and a token. A coin is a decen­tral­ized cur­ren­cy that is mined and cre­at­ed through that process. It is more sim­i­lar to a con­ven­tion­al com­mod­i­ty than a secu­ri­ty or cur­ren­cy, and its val­ue is in the fact that no sin­gle enti­ty has domin­ion over it. A token, on the oth­er hand, is usu­al­ly issued pub­licly through an ICO (Ini­tial Coin Offer­ing) and is not mined but rather cre­at­ed out of thin air by a com­pa­ny or enti­ty that is look­ing to raise cap­i­tal to devel­op a spe­cif­ic tech­nol­o­gy or busi­ness. In this man­ner, a token is much more sim­i­lar to a stock or secu­ri­ty, as it is not decen­tral­ized and is issued, rather than mined. The vast major­i­ty of new coins in the mar­ket­place fall into this sec­ond type of coin, and in most cas­es, are just a way for a busi­ness to raise fund­ing pub­licly with­out hav­ing to adhere to the strict secu­ri­ties laws that pro­tect the investor. Most tokens are there­fore much riski­er, and you should only buy into a token after doing exten­sive research on the com­pa­ny, idea or tech­nol­o­gy that coin is sup­pos­ed­ly going to back. A great exam­ple of a token is Rip­ple (XRP), cur­rent­ly one of the top coins avail­able. Rip­ple is not decen­tral­ized and was issued sim­i­lar to stock. Its val­ue is based on the promise of wide finan­cial indus­try adop­tion and one day poten­tial­ly being the bridge between the con­ven­tion­al finan­cial mar­ket and the new finan­cial mar­ket­place revolv­ing around cryp­to.

Max­i­mum Sup­ply & Min­ing Net­work

crypto currency concept

Anoth­er major dif­fer­ence between cryp­tocur­ren­cies has to do with a coin’s max­i­mum sup­ply and their min­ing net­work. The more coins any sin­gle dig­i­tal cur­ren­cy has, the less each coin will like­ly be worth. One of the most impor­tant fea­tures of Bit­coin, for exam­ple, is the fact that it is lim­it­ed to a max­i­mum sup­ply of 21 mil­lion units. Oth­er cur­ren­cies are also lim­it­ed but, in most cas­es, have a much high­er max­i­mum sup­ply. For exam­ple, Lite­coin has a max­i­mum sup­ply of 84 mil­lion, and Digibyte has a max­i­mum sup­ply of 100 bil­lion total units. The max­i­mum sup­ply will deter­mine how scarce a coin is and will thus work on a sup­ply and demand prin­ci­ple. The more in demand a coin is and the less total avail­able sup­ply will gen­er­al­ly see coin price per unit rise. Anoth­er key dif­fer­ence is the min­ing net­work that mines and ver­i­fies the trans­ac­tions of the spe­cif­ic coin. Gen­er­al­ly speak­ing, the more adopt­ed and mined a coin is, the high­er the val­ue. This is due to the blockchain being well dis­persed and not being sus­cep­ti­ble to a 51% attack or net­work-wide black­out. The more diver­si­fied a coin’s min­ing net­work is, the health­i­er and usu­al­ly more valu­able a coin is. Bit­coin, for exam­ple, is the most wide­ly mined and adopt­ed coin and thus has a val­ue to reflect this.

Under­ly­ing Blockchain Tech­nol­o­gy & Algo­rithm

Blockchain technology on futuristic hud background with world map and blockchain peer to peer network. Global cryptocurrency blockchain business banner concept.

Anoth­er major dif­fer­ence in coins is the blockchain tech­nol­o­gy or algo­rithm that it is based on. Bit­coin is based on a SHA-256 algo­rithm that pio­neered the sec­tor. How­ev­er, devel­op­ers soon real­ized Bit­coin had a few draw­backs. For one, the time it takes for a new block to be cre­at­ed is 10 min­utes and that means it takes around that same amount of time to ver­i­fy a trans­ac­tion, which is quite a long time to wait. Sec­ond­ly, Bit­coin is lim­it­ed to only 21 mil­lion units, and for some, that sup­ply is too small con­sid­er­ing its adop­tion. This has led to a sin­gle coin being extreme­ly valu­able but the net­work being cum­ber­some to use. Lite­coin, how­ev­er, was a cryp­to made to address these Bit­coin draw­backs and its blockchain uses a Scrypt algo­rithm that ver­i­fies blocks much faster and has 4 times as many coins. Oth­er algo­rithms also look to address oth­er Bit­coin short­com­ings like, for instance, Mon­ero. Mon­ero uses the Cryp­tonight algo­rithm for its blockchain that is even faster than Lite­coin and anony­mous due to the way it routes a trans­ac­tion. It also is resis­tant to ASIC & GPU min­ing. This algo­rithm was cre­at­ed to fix the issue of sin­gle min­ing enti­ties hav­ing too much pow­er due to them using pow­er­ful com­put­ers and graph­ics proces­sors. This way, a min­er with a less pow­er­ful com­put­er can still mine and thus, there are more min­ers mine cre­at­ing a much wider pool and more secure net­work for the coin.

These are the main dif­fer­ences between the coins in the mar­ket­place and as you can see, they are not all the same. Tokens issued at ICOs are not cryp­tocur­ren­cies. They are more like stocks and should not be treat­ed as wealth hold­ers, but rather invest­ments into spe­cif­ic ideas. Of the actu­al cryp­tocur­ren­cies that are wealth hold­ers, the main dif­fer­ences are in their secu­ri­ty fea­tures, min­ing net­works and algo­rithms. Tak­ing all this into con­sid­er­a­tion when choos­ing a coin is key to know­ing which ones have poten­tial and which ones are garbage. Remem­ber, all coins are not equal, just like all fiat cur­ren­cies are not equal. You wouldn’t want to trade a US dol­lar for a sin­gle Peso, and you wouldn’t want to trade gold for the same weigh in sil­ver. Make sure you do your home­work before invest­ing, as many of the new coins emerg­ing are not coins at all and will cause more heart­break than healthy, hap­py growth.

Josh War­di­ni

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