Eight Types of Cryptocurrencies Compared

FINANCE, SYSTEMS & TECHNOLOGY   |   2 minutes  |   March 19, 2019

Eight Types of Cryptocurrencies Compared Eight Types of Cryptocurrencies Compared  

The rise of cryptoassets has given people more options when it comes to storing value. According to Dr Usman Chohan in his review of cryptocurrencies, the definition of a cryptoassets are, “A crypto asset exists in a dimension that is not physical and can only exist in a digital form. Furthermore, the value is derived from supply and demand forces instead of outside intervention, while offering the utmost privacy.”1

This distinction is significant as cryptoassets are segregated into four distinctive categories: cryptocurrencies, platform tokens,2 utility tokens and transactional tokens. In July 2018, Forbes commented, “the cryptocurrency market was regaining momentum with market capitalisation once again exceeding $300 billion”3 although this value this has been fluctuating. Due to the vast number of cryptocurrency types, we have ordered this guide according to market capitalisation values – as this is generally one of the main ways to rate the value of cryptocurrencies.4

Considering the above, the the top eight cryptocurrencies are:

Bitcoin, the original and most well-known cryptocurrency Bitcoin, the original and most well-known cryptocurrency  
  • 1MB block size
  • Token limit of 21 million with 16.8 million tokens in circulation
  • Slow processing speeds
  • Transactions take about 10 minutes to process7
  • High energy usage
  • High transaction fees
  • No-counterparty assets (value determined by market dynamics)8
  • Decentralised platform
  • Concerns about scalability of this platform led to the incorporation of SegWit2x,9 which helps make the amount of data to be verified per block smaller and includes signature data as an extended block instead

 


Ripple (XRP) cryptocurrency. Highly reliable platform, 42 million ledgers have been settled without incident Ripple (XRP) cryptocurrency. Highly reliable platform, 42 million ledgers have been settled without incident  
  • Token limit of 100 billion,11 with XRP owning 60 million tokens
  • No-counterparty assets (value determined by market dynamics)
  • Decentralised exchange on the XRP Ledger
  • Can create customisable tokens
  • Escrow feature allows a user to set a conditional exchange on the XRP Ledger, until a date or condition is met – the XRP is inaccessible
  • High processing capacity
  • Extremely fast transaction settlement speed of four seconds
  • Uses less energy than Bitcoin, Ether or Visa
  • Protects against distributed denial of service (DDOS) attacks, by charging escalating transactional costs for each transaction

 


Ethereum - The cryptocurrency is called Ether Ethereum - The cryptocurrency is called Ether  
  • Token limit of 18 million per year
  • Currently, has over 95.7 million tokens in circulation
  • Is a decentralised blockchain platform
  • Specialises in ‘’smart contracts’’ that facilitate the exchange of value
  • Coded programmes run without third-party interference
  • Users must use tokens to perform actions on the blockchain, this forces them to mainly stick to financial actions13
  • In 2016, after a cyberattack that totalled $150 million, it was split into Ethereum (ETH) and Ethereum Classic (ETC)

 


Stellar Lumens (XLM). This platform shines for peer-to-peer networks Stellar Lumens (XLM). This platform shines for peer-to-peer networks  
  • Token supply limit of 100 billion16
  • Tokens are named Lumens17
  • Decentralised platform for distributed exchanges
  • Exchange isn’t limited to fiat currency it includes cryptocurrencies and fiat trading pairs
  • Allows for multi-currency transactions
  • Extremely fast transaction settlement speed of two-five seconds
  • Similar to Ripple (XRP), protects against DDOS attacks by charging a base fee for each transaction
  • It’s also cost-effective for micropayments, a fee of $0.01 handles ~600,000 transactions

 


Bitcoin Cash - A well-traded cryptocurrency despite being fairly new Bitcoin Cash - A well-traded cryptocurrency despite being fairly new  
  • 8MB block size
  • Faster processing speed
  • More memory intensive
  • Instituted as a hard fork alternative with increased block sizes to speed up verification19
  • Despite these differences, Bitcoin cash essentially performs the same functions as bitcoin20

 


EOS - Renowned for processing 10000 or more transactions per second EOS - Renowned for processing 10000 or more transactions per second  
  • Smart contract platform
  • User accounts are separated from their private keys
  • This provides delegated proof of stake
  • Includes on chain governance
  • Parallel processing allows users to freeze or modify their applications according to programmable rules
  • Decentralised operating system
  • Maximum of 5% annual inflation
  • Tokens have automatic emission
  • System is upgradable
  • Asynchronous communication with other blockchains even if EOS is faster
  • Fast processing speeds

 


Litecoin cryptocurrency - Known as the younger sibling of Bitcoin Litecoin cryptocurrency - Known as the younger sibling of Bitcoin  
  • Token limit of 84 million
  • Fast transaction speeds
  • More memory intensive
  • Much smaller market capitalisation than bitcoin
  • Generates four times as many coins as bitcoin26
  • Is available for sale and purchase in seven global currency exchanges27
  • Cheaper than bitcoin, more accessible to middle income earners28
  • It was launched as an alternative to bitcoin29

 


Tether - Generally rated as a stable cryptocurrency. Valued at approx. $1.31 Tether - Generally rated as a stable cryptocurrency. Valued at approx. $1.31  
  • No limit on tokens33
  • Converts your digital money into traditional money34
  • Carries counterparty risk, there is a possibility that a party can default on their contractual obligations
  • Popular as traders use them as a substitute for US Dollars
  • Tokens are designed to be stable for volatile cryptocurrency markets
  • Highly-traded currency
  • Low transaction fees35
  • Recently, it has been embroiled in controversy of issuing more tether tokens than it has dollars in the bank36

In July 2018, Forbes commented, “the cryptocurrency market was regaining momentum with market capitalisation once again exceeding $300 billion” although this value has been fluctuating.

The advent of blockchain technologies has led to the age of digital assets and currencies. The different types of cryptocurrencies serve to alleviate the red tape and fees associated with traditional currencies, and with financial innovations becoming more common, these continue to grow in popularity. As these digital assets continue to evolve, the potential of this disruptive technology seems to be limitless. It’s clear that whether traditional monetary systems survive the threat of disruption or not, cryptoassets are becoming global fixtures.

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  • 2 Aashish Pahwa. (May 2018). ‘What is a cryptoasset? Types of cryptoassets [ultimate guide]. Retrieved from Feedough.com The entrepreneur’s guide.
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  • 6 Reynard, C. (May, 2018). ‘The 10 most popular cryptocurrencies in 2018’. Retrieved from The Telegraph.
  • 7 Frankenfield, J. (June, 2018). ‘Bitcoin vs Bitcoin Cash: What’s the difference?’ Retrieved from Investopedia.
  • 8 (Sep, 2018). ‘XRP: The basics’. Retrieved from XRP Blog.
  • 9 Frankenfield, J. (June, 2018). ‘Bitcoin vs Bitcoin Cash: What’s the difference?’ Retrieved from Investopedia.
  • 10 (Sep, 2018). ‘XRP: The basics’. Retrieved from XRP Blog.
  • 11 (Jul, 2018). ‘XRP is not a security – Ripple defends token after price collapse fears’. Retrieved from Express.
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  • 13 Macalinao, I. (Mar, 2018). ‘The cryptoeconomics of EOS vs Ethereum’. Retrieved from Medium.
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  • 18 Reynard, C. (May, 2018). ‘The 10 most popular cryptocurrencies in 2018’. Retrieved from The Telegraph.
  • 19 Frankenfield, J. (June, 2018). ‘Bitcoin vs Bitcoin Cash: What’s the difference?’ Retrieved from Investopedia.
  • 20 (2018). ‘Bitcoin Cash’. Retrieved from Investopedia.
  • 21 (2017). ‘EOS details and specifications’. Retrieved from Steemit.
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  • 27 Mittal, T. (Nov, 2017). ‘The 8 most valuable cryptocurrencies the world is excited about’. Retrieved from YourStory.
  • 28 (2018). ‘List of cryptocurrencies’. Retrieved from CryptoCurrency Facts.
  • 29 Mittal, T. (Nov, 2017). ‘The 8 most valuable cryptocurrencies the world is excited about’. Retrieved from YourStory.
  • 30 Tan, A., Robertson, B., and Leising, M. (Oct, 2018). ‘Why crypto traders are so worried about Tether’. Retrieved from Bloomberg.
  • 31 Jenkinson, G. (Oct, 2018). ‘Untether: The history of stablecoin Tether and how it has lost its $1 peg’. Retrieved from Coin Telegraph.
  • 32 Jenkinson, G. (Oct, 2018). ‘Untether: The history of stablecoin Tether and how it has lost its $1 peg’. Retrieved from Coin Telegraph.
  • 33 Khatwani, S. (Oct, 2018). ‘Tether (USDT): A beginner’s guide controversies and more’. Retrieved from Coin Sutra.
  • 34 (2018). ‘FAQs’. Retrieved from Tether.
  • 35 Khatwani, S. (Oct, 2018). ‘Tether (USDT): A beginner’s guide controversies and more’. Retrieved from Coin Sutra.
  • 36 Jenkinson, G. (Oct, 2018). ‘Untether: The history of stablecoin Tether and how it has lost its $1 peg’. Retrieved from Coin Telegraph.