Cryptocurrencies, topics and discussions related to them have become very popular and circulating over the past few years. By the beginning of 2022, estimates about the number of cryptocurrencies on the market that you can trade ranged from 6,000 to more than 10,000, with a total market capitalization of almost 2 trillion dollars.
The beginning with this new technology was in 2009 when bitcoin was first launched by an anonymous person (or group of people) called Satoshi Nakamoto. By 2011, new types of cryptocurrencies began to appear with the adoption of the blockchain technology on which bitcoin is based. The goal of these coins was to solve a lot of the problems that the latter faced. Suddenly the race began to create more and more cryptocurrencies.
General characteristics of cryptocurrencies:
Today there are thousands of different types of cryptocurrencies, and while each of them is designed to provide some new features or functions, most of them are based on principles similar to those on which bitcoin was created.
Cryptocurrencies are not regulated or supported by a central authority such as a bank.
They are created using blockchain or blockchain technology.
Bitcoin and other currencies are encrypted (secured) in such a way that it is almost impossible to hack.
Cryptocurrencies are generally stored in encrypted digital wallets, usually a wallet on the blockchain network, which allows users to manage and trade their currencies.
What are the types of cryptocurrencies ?
The different types of digital currencies generally fall into one of two categories:
Coin currencies, which include Bitcoin and altcoins (non-bitcoin cryptocurrencies)
Tokens or tokens are programmable digital assets that are located within the blockchain of a particular platform.
Although the terms cryptocurrency or crypto coin crypto and token tokens are used interchangeably, it is important to know the difference between them so that we can understand the cryptocurrency market.
Cryptocurrencies coins vs cryptocurrency token
Cryptocurrencies and crypto tokens or tokens may look similar in that they are modes of value transfer (like traditional cash money), only they differ in functions and characteristics. Firstly, cryptocurrencies have their own blockchain or blockchain that operates within them, and its main function is the transfer of value, that is, it is a form of money. For example, ether (often called Ethereum) is the cryptocurrency of the Ethereum blockchain.
In general, any blockchain-based cryptocurrency other than bitcoin is referred to as altcoin alternative cryptocurrency.
In turn, encrypted tokens or tokens are created on the already existing blockchain, but they are not considered tools for transferring value, but programmable digital assets that allow creating and executing unique smart contracts. These contracts can be used to confirm and prove ownership of assets outside the blockchain network.
Tokens can represent units of value including real-world items such as electricity, Money, points, cryptocurrencies, digital assets, etc.these tokens are exchangeable and can be sent and received.
For example, the BAT token, or Basic Attention Token, was created on the Ethereum platform and is used in digital advertising on The Brave web browser.
What are altcoins alternative cryptocurrencies ?
The use of the name “altcoin” began with the beginning of the emergence of new digital cryptocurrencies other than bitcoin, which is an abbreviation for “alternative to Bitcoin“, most of these cryptocurrencies were created in order to solve the problems and obstacles faced by the use of bitcoin and its blockchain, such as the speed of transaction execution, large energy consumption, the ability to expand and others.
Like bitcoin, some cryptocurrencies have a limited supply of coins which helps create demand and boost their value. For example, there is a fixed number of bitcoins that can be created — 21 million.
Although most altcoins are built on the same basic framework as bitcoin and share some of its characteristics, each of them offers something different. Some of the altcoins listed on the blockchain network use various methods and mechanisms to verify transactions and keep records in the new blocks(in the blockchain) that are being created. New features such as smart contracts are offered.
Why are there so many types of cryptocurrencies ?
Blockchain technology is open source, which means that any software developer can use the original source code and create something new. A lot of developers have ridden the wave of cryptocurrencies and blockchain technology, and have started creating their own digital currencies and projects. At the time of writing this article, there are more than 10,000 different cryptocurrencies in circulation and it is likely that this number will continue to rise until the market and the field of using blockchain technology reach maturity and saturation.
Part of the reason for this boom in the cryptocurrency market is the relative ease with which new cryptocurrencies can be created. The source code of one cryptocurrency can be used to create another. The huge rise in cryptocurrency prices also led to a frantic race to create cryptocurrencies and took a share of the huge money cake that was entering this field
Sometimes, disagreements occur between developers on how to manage and solve the problems that guide a particular blockchain network, so it is agreed to create a new branch independent of the original network. This currency is called forks, which means fork, and it always results in a new cryptocurrency. Bitcoin Cash (Bitcoin Cash) was created in 2017 as a result of a fork that occurred in the Bitcoin blockchain network, and the main reason for this branching was the creation of a new blockchain that allows registering a larger number of transactions on one block of the blockchain.
The uses of blockchain technology have benefits beyond just digital currencies. So, while some cryptocurrencies may be a bubble that will eventually burst, the decentralized nature of the technology and the wide scope of how it can be applied to solve real-world problems are two of the most important reasons why there are so many cryptocurrencies.
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