Bitcoin has not only been a trendsetter, ushering in a wave of cryptocurrencies built on a decentralized, peer-to-peer network but has also become the de facto standard for cryptocurrencies, inspiring an ever-growing legion of followers and spinoffs. In fact, there are thousands of digital tokens available.
Some are intended to be currency. Others are intended to be tokens representing currency. For example, casinos and arcades use tokens. In the case of casinos, you trade fiat money for the tokens to use for placing bets. Then, you trade your tokens for fiat money when you leave.
When you trade fiat money for cryptocurrency, the fiat money is being used to build the infrastructure. For example, when you buy Ether, the fiat money you use to buy the digital coins are used to build the Ethereum infrastructure.
What is Bitcoin (BTC)?
Bitcoin is the world’s first successful decentralized cryptocurrency and payment system, launched in 2009 by a mysterious creator known only as Satoshi Nakamoto.
Bitcoin is built on a distributed digital record called a blockchain. As the name implies, blockchain is a linked body of data, made up of units called blocks containing information about each transaction, including date and time, total value, buyer and seller, and a unique identifying code for each exchange. Entries are strung together in chronological order, creating a digital chain of blocks.
While the idea that anyone can edit the blockchain might sound risky, it’s actually what makes Bitcoin trustworthy and secure. For a transaction block to be added to the Bitcoin blockchain, it must be verified by the majority of all Bitcoin holders, and the unique codes used to recognize users’ wallets and transactions must conform to the right encryption pattern.
What is Ether (ETH)?
Ether is the transactional token that facilitates operations on the Ethereum network. All of the programs and services linked with the Ethereum network require computing power (and that computing power is not free). Ether is a form of payment for network participants to execute their requested operations on the network.
Ether is the world’s second-largest virtual currency by market capitalization as of 2021. It is second only to Bitcoin (BTC), according to market value. Ethereum’s live blockchain was launched on July 30, 2015. Unlike bitcoin, the total number of ether tokens does not have an absolute cap—it changes and grows constantly according to demand. As a result, the Ethereum blockchain is significantly larger than the bitcoin blockchain, and it is expected to continue to outpace bitcoin in the future.
Another key difference between the two is that, while the bitcoin blockchain is simply a ledger of accounts, contributors to the Ethereum blockchain can build more code into the transactions, creating what are called “smart contracts.” So transactions on the Ethereum network may contain executable code, while the data that is connected to bitcoin network transactions are generally only used for record-keeping.
Ethereum developers started working on shifting the network from a proof-of-work (PoW) system to a proof-of-stake (PoS) system in 2017. The new underlying network is known as Ethereum 2.0. The purpose of upgrading to Ethereum 2.0 is to make the underlying network faster and more secure.
What is Tether (USDT)?
Tether (USDT) is a cryptocurrency stablecoin pegged to the U.S. dollar and backed "100% by Tether's reserves," according its website. Tether is owned by iFinex, the Hong Kong-registered company that also owns the crypto exchange BitFinex.
Tether was launched as RealCoin in July 2014 and was rebranded as Tether in November 2014. It started trading in February 2015. Originally based on the Bitcoin blockchain, Tether now supports Bitcoin's Omni and Liquid protocols as well as the Ethereum, TRON, EOS, Algorand, Solana, OMG Network, and Bitcoin Cash (SLP) blockchains.
As of May 2022, Tether was the third-largest cryptocurrency after Bitcoin (BTC) and Ethereum (ETH), and the largest stablecoin with a market capitalization of nearly $83 billion. In April 2022, Tether's USDT accounted for two-thirds of exchanges out of Bitcoin by value.
What is Dogecoin (DOGE)?
Dogecoin started out as a joke. But, still managed to gain a following. It was participating in the cryptocurrency bubble that show up the values of many coins. However, like many coins, Dogecoin lost much of its value in 2018. However, it still has a core of supporters using it for content on Twitter and Reddit.
What is Solana (SOL)?
Solana is a blockchain platform designed to host decentralized, scalable applications. Solana uses a "proof of history" consensus algorithm, and claims to be much faster in terms of the number of transactions it can process, with significantly lower transaction fees than Ethereum.
What is HBar (HBAR)?
HBAR is the native cryptocurrency of the Hedera network and has a fixed supply of 50 billion HBARs. It’s used as network fuel to pay for transaction fees and for in-app payment and micropayments.
What is Ripple (XRP)?
Ripple is a money transfer network designed to serve the needs of the financial services industry. XRP is the native cryptocurrency on the Ripple network, and it consistently lists among the top 10 cryptocurrencies by market capitalization.