The rising popularity of cryptocurrencies turns everyone’s head to the subject little by little. And then the questions is raised: do all of them work the same? Check the topics below to know about it.
Do All Cryptocurrencies Work The Same?
Not always. While coins are for monetary transactions, tokens not always are made for that. There are security tokens and utility tokens. One example of a utility token is the NFTs, which are very popular right now. Some cryptocurrencies can work likewise when built on the same technology, but most of them have differences (notably because there are too many).
First of all, each cryptocurrency has different developers behind it, so each coin or token has a different approach to how the security and privacy of data works.
The focus here, however, is on cryptocurrencies that work mainly as coins. There are different ways of dividing crypto coins.
It is possible to differentiate between volatile and stable.
Volatile coins get such a name because their value can fluctuate.
Bitcoin was the first of the type and nowadays is still the most popular (though, perhaps, not the best for those who want privacy over anything else). Ethereum and Zcash are two other examples of popular volatile coins.
On the other hand, you have stablecoins. As the name suggests, their price/value shouldn’t fluctuate.
They still can carry one of the main appeals of crypto, which is the privacy of transactions (not letting anyone know how you use your money). However, making them stable is an arduous deal.
One of the most famous attempts at that is Tether, a stablecoin purported to be backed by the US dollar. Each Tether coin should equal one dollar. However, there is controversy on that.
Another way of separating the types of crypto coins is with the name “altcoin,” which designates any crypto coin alternative to Bitcoin. That shows how huge Bitcoin is.
Are Cryptocurrencies Interchangeable?
Yes. Although each crypto coin functions on a different blockchain, it is possible to trade between crypto coins.
To do that, you will need to use a cryptocurrency exchange/digital currency exchange (DCE).
Most popular crypto coins are volatile, so being able to trade between currencies is an amusing and desirable feature if you want to invest your money and make a profit in the long run.
You can trade your altcoin for Bitcoin and back to other altcoins that you think will have a rise in value.
DCEs let you trade your coins with other users or withdraw in the form of conventional fiat money.
When exchanging, DCEs take a commission for each trade or only a certain fee.
To withdraw, you can use credit cards, wire transfers, PayPal, and any other method, depending on the exchange you choose.
Why Do Cryptocurrencies Fluctuate Together?
First of all, the fluctuation of the value of cryptocurrencies is a regular event. As already explained, most of them are volatile coins, without a fixed value.
The most popular coin is Bitcoin, whose value fluctuates immensely throughout the years.
Now, as for why cryptocurrencies, in general, seem to rise and fall in value together, the reason is that altcoins are highly dependent on Bitcoin.
For someone to invest in crypto coins, it is usually necessary to first buy Bitcoin. After that, it is easy to trade it for whatever altcoin one wants. So, when Bitcoin fluctuates, it creates a ripple effect that affects other coins too.
Is There A Cryptocurrency Better Than Bitcoin?
It truly depends on what you are considering to be “better.” Many altcoins are based upon Bitcoin and claim to have improved features.
Some of them will be faster to mine. Others can make transactions quicker. Others get best accepted within specific communities or certain online services (such as sports betting with crypto).
Read about types of mining at Why Do Cryptocurrencies Have To Be Mined?
Security and privacy are huge concerns of crypto coin developers. And the team behind each coin is constantly pushing cryptography forward, so that is a thing to watch out for when looking for the best cryptocurrency.
As you can see, there are many criteria to judge which crypto coin is the best option.
7 Most Popular Cryptocurrencies
The criterion here for most popular cryptocurrencies will be the most traded in general.
Take note that, in some periods, some cryptocurrencies get more used while others fall behind.
As expected, Bitcoin (official site) is still the most known and traded cryptocurrency.
As the first popular crypto coin, it set the bar for what you can expect of cryptocurrencies: privacy when doing transactions, decentralization of information, varying value, a fixed number of units issued, halving of reward to miners every four years.
Though not as popular among people outside of the crypto world, Ethereum (official site) is one of the most traded crypto coins.
Ethereum is the name of the blockchain platform, while Ether is the true name of the coin.
Ethereum advertises itself as the blockchain for “smart contracts.” Such contracts act as “rules” that make it possible to create a variety of applications.
These applications are called Dapps (decentralized applications). They cover a variety of functions, ranging from games to Initial Coin Offerings (ICOs) and even decentralized domains.
Ripple (official site) is a utility coin. It is the currency used by the RippleNet.
RippleNet is a network used by banks and other financial institutions such as American Express, Santander, etc.
Because of that, some call it the “establishment” cryptocurrency. That fact makes some question its genuine status as a cryptocurrency since it doesn’t look as decentralized.
Litecoin (official site) is a rival for Bitcoin. Its developers want to make it highly accessible so people can use it for everyday transactions.
It is, right now, already more practical than Bitcoin since the confirmation of transactions happens quicker.
All of this should already make Litecoin more attractive, but since crypto is still not hugely popular among everyone and Bitcoin has a more popular name, it will be a long way before Litecoin reaches its goal.
Similar to Ether, NEO (official site) functions with smart contracts, making Dapps possible.
It was released in 2014 as an alternative to Ether, with more sophisticated technology.
However, NEO suffers from the fact that Ether came before and retains a larger market share.
It works with the Internet of Things (IoT) devices. IoT makes feeless microtransactions easier while protecting data.
It was just recently that IOTA became one of the most traded crypto coins. That shows that IoT is a technology that has the potential to become the standard.
Tether (official site) was already mentioned in this article before as an example of stablecoin.
This cryptocurrency is backed by the American dollar with a 1-to-1 ratio, meaning the Tether price is one dollar.
That way, Tether token owners can remain secure about the value of their tokens.
There has been some controversy about that, but if you look at recent charts, you can see that Tether is highly traded.
It seems to represent more safety to people that want to use crypto coins only for privacy while they know how much their tokens are worth exactly.
Do You Need A Different Wallet For Each Cryptocurrency?
Not necessarily one for each. Nowadays, some wallets can be used to store more than one different type of cryptocurrency.
However, none of them can support all cryptocurrencies, because there are too many of them.
To take an example, Coinbase is a popular wallet that supports BTC, BCH, ETH, ETC, LTC, and all ERC-20 tokens.
However, there are many more coins, and if you have any of them, you will need to find a wallet other than Coinbase.
A wallet such as HolyTransaction, for example, has support to a larger number of coins than Coinbase. Still, it doesn’t support everything.
What’s The Difference Between Ethereum And Bitcoin?
The first remarkable difference between Ethereum and Bitcoin is the confirmation time for any transaction on the blockchain. While confirmation for Bitcoin takes minutes, the same process happens in seconds for Ethereum.
Moreover, transactions on Ethereum might have executable code, while data affixed to Bitcoin only serve the purpose of keeping notes.
As for algorithms, Ethereum runs on ethash and Bitcoin on SHA-256.
The goal of each cryptocurrency is different, too.
Bitcoin has come a long way claiming to deliver a new era of monetary freedom.
On the other hand, Ether is humbler on its aims, which are to ease and monetize the functioning of the Ethereum platform.
In theory, Ether is not a rival to Bitcoin, but rather a use-case for a blockchain that supports it.
Still, when you check trading charts, Ether is usually behind Bitcoin. It became a competitor against many cryptocurrencies.
It is clear that cryptocurrencies are very diverse.
If you look at the CoinMarketCap, you will see that some coins are worth thousands of dollars, while others cost less than one dollar.
This points in the direction of making cryptocurrencies accessible to anyone.
If you are an investor, you can buy Bitcoin or any high-price altcoin. If you just want privacy, you can go with Tether, Dogecoin, or any other low-price coin.