The Crucial Differences You Need to Know Between the Top Cryptocurrencies

Bitcoin may have been all the rage in 2017, and continues to reach new All-Time-Highs every week, but there are other strong players on the cryptocurrency market that potential investors must know about. The basics of trading 101 teaches us that we must research into every possible investment, and choose the one that fits us best. Or, if you are looking to diversify your cryptocurrency portfolio, knowing the strengths and weaknesses of the other top cryptocurrencies can be crucial towards knowing how much you are willing to invest in each.

Bitcoin

Bitcoin is the original cryptocurrency developed by mystery founder, Satoshi Nakamoto. Nakamoto introduced blockchain technology to the world, the platform on which Bitcoin and other cryptocurrencies are built. If you have trouble understanding the relationship between blockchain and cryptocurrency, think of the relationship between the Internet and email—there is only one Internet (blockchain), but several email platforms (Bitcoin and other cryptocurrencies).

Bitcoin is currently the most valued cryptocurrency, with many calling it “digital gold”. However, there are criticisms about its actual function as a currency. As the first cryptocurrency, Bitcoin is inferior to other top cryptocurrencies in important ways, such as transactions per second, transaction confirmation times, and transaction fees.

Litecoin

Litecoin is the easiest top cryptocurrency to understand if you are familiar with Bitcoin. Simply put, Litecoin can be considered Bitcoin 2.0; it runs almost exactly like Bitcoin, except it does everything better. Its founder, Charlie Lee, emphasizes the idea that Litecoin can be the silver to Bitcoin’s gold. Whereas Bitcoin has become a store of value rather than a functional currency due to its limitations, Litecoin can function successfully as a currency.

This is due to a number of reasons. Litecoin has four times as many coins as Bitcoin, meaning a higher number of tokens in circulation. It is also four times faster, is capable of several times more transactions per second, and its transaction fees are mere cents, compared to the several-dollar fees from Bitcoin.

Ethereum

To wrap your head around Ethereum, we have to go back to the Internet-email analogy. Ethereum is much more than just “email” on blockchain, unlike Bitcoin and Litecoin. Ethereum is a platform of its own, running on blockchain technology, allowing developers to build decentralized apps (DApps) on its platform. This opens up tons of possibilities for new apps that have never been on the market, and hundreds of developers are flocking to Ethereum for what they call the “Internet 2.0”, due to its decentralized nature.

However, for Ethereum to truly function as a platform independent of the real world, it must have its own currency by which users can trade for services and products on the platform. This currency is known as Ether, and the value of Ether as an investment relies entirely on the mass adoption of the Ethereum platform and its apps. If more people use Ethereum and decentralized apps, then Ether is sure to rise; if not, it may stay at its current price and fluctuate around there.

Ripple

Many in the cryptocurrency community look down on Ripple, due to its stark ideological contrast from everything that Bitcoin and its succeeding cryptocurrencies stand for. Unlike Bitcoin, Litecoin, and many other altcoins, which advocate for a decentralized future in which banks are no longer necessary and each person can be their own bank, Ripple instead has built itself on a foundation of partnering with many central banks from around the world.

While Ripple can be used as a currency, its primary function is to assist users and banks when transferring money from one country to another. Right now, when a bank wishes to transfer money from Japan to the US, they are required to buy US dollars with Japanese yen, and several fees and transaction times are involved. However, with Ripple, banks can simply exchange their currency for Ripple, send Ripple to their designated receiver, and that receiver can exchange Ripple for their own currency.

Ripple is not decentralized, but many trust in its future success due to its funding and partnerships. If things go right, Ripple is expected to be one of the biggest cryptocurrencies in the next few years.