Altcoins of interest

“The question is, what question does the altcoin answer?”

Did you know that there are over 1500 altcoins in existence?  How do you know which ones are any good?  This is best answered by asking yourself… what question is the coin answering?  What problem does the coin solve? 

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Market Capitalization

If during your due diligence you cannot find the answer to this question, then stay away from that coin.  It has no real usage case and will probably disappear over time.    The top 100 cryptocurrencies by market capitalization can be viewed at https://coinmarketcap.com/.  You’ll see here that Bitcoin is the clear leader in terms of market capitalization.

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Here at Cryptopreneur, we have been following a number of altcoins of interest.  We will take an extended look at the following coins:

Ripple

Ripple

Ripple was launched in 2012.  Ripple (XRP) is a peer-to-peer powered cryptocurrency designed to work seamlessly with the Internet to allow a fast, direct and secure way to send payments on the web.

Dash

Dash

Dash coin was launched in 2014.  At Dash’s core is a unique fully-incentivized peer-to-peer network. Miners are rewarded for securing the blockchain and master nodes are rewarded for validating, storing and serving the blockchain to users. 

Ethereum

Ethereum

Ethereum was launched in 2015.  Ethereum is different than Bitcoin in that it allows for smart contracts which can be described as highly programmable digital money. Imagine automatically sending money from one person to another but only when a certain set of conditions are met.

Litecoin

Litecoin

Litecoin was launched in 2011 as an early alternative to Bitcoin.  The initial aim was to allow people to participate with domestic computing power (at the same time, Bitcoin processing was becoming very specialized as expensive hardware was required).

Ripple

  • Ripple is a system of the real-time gross settlements (RTGS), exchange and money transfer system. Another name is Ripple transaction protocol (RTXP), or Ripple protocol. It is built upon a distributed open Internet protocol, consensus ledger and its own currency called XRP.

    Using a common ledger that is managed by a network of independently validating servers that constantly compare transaction records, Ripple doesn’t rely on the energy and computing intensive proof-of-work used by Bitcoin. Ripple is based on a shared public database that makes use of a consensus process between those validating servers to ensure integrity. Those validating servers can belong to anyone, from individuals to banks.  Ripple is growing in popularity with banks, and they are embracing the technology.  American Express and Santander are two big adopters of the technology and Ripple claim they have signed up more than 100 financial institutions.

  • The Ripple platform was designed to move money in different foreign currencies around the world as quickly as possible.  Any type of currency can be exchanged, from fiat currency to gold to even airline miles. They claim to avoid the fees and wait times of traditional banking and even cryptocurrency transactions through exchanges.  This is the value proposition.  It is more orientated towards the enterprise rather than individuals.

    The Ripple network has been stable since its release with over 35 million transactions processed without issue. It is able to handle 1,500 transactions per second (tps) and has been updated to be able to scale to Visa levels of 50,000 transactions per second. By comparison, Bitcoin can handle 3-6 tps (not including scaling layers) and Ethereum 15 tps.

  • Ripple’s token, XRP, isn’t mined like Bitcoin, Ethereum, Litecoin and many other cryptocurrencies. Instead, it was issued at its inception, similar in fashion to the way a company issues stocks when it incorporates: It essentially just picked a number (100 billion) and issued that many XRP coins.

    Here is the interesting thing.  The use of XRP is totally independent of the Ripple network in general; that is, banks don’t actually need XRP to transfer dollars, euros which is what many small investors might be missing when they are buying the token.  Whilst the value with Ripple is with the network, it is unclear at this stage the role of the coin, XRP. 

  • There are some criticisms of the Ripple network.  Bitcoin enthusiasts criticise Ripple’s central control, advising it goes against the advantages of decentralized blockchains such as Bitcoin.  In order to secure its network, Ripple uses a “trusted unique node list”, which protects against malicious or insecure validating servers.  Whilst this protects against rogue validators, it also means that a central body, such as a government could force undesirable changes.

    The business case for Ripple is clear, in that it facilitates cross-border payments in real time with different currencies.  What is not so clear at this stage is the role of the coin, XRP.

Dash

  • Master nodes represent a new layer of network servers that work in highly secure clusters called quorums to provide a variety of decentralized services, like instant transactions, privacy and governance whilst eliminating the threat of low-cost network attacks.

    Whilst there are similarities to Bitcoin, such as the exchange of money on a highly secure, open-source, peer-to-peer network, unlike Bitcoin, it is the world’s first form of digital cash that works almost like physical cash. 

    Your money isn’t held in a central banking organization.  Instead, you hold your money in a safe and easy way, maintaining full control.  This means that you have total privacy when it comes to your purchases.  Your transactions can’t be tracked by any organization or curious 3rd parties.  Instead, your information is private!

  • Another great benefit is that transactions can occur instantaneously.  There’s no wait or lag.  Money changes hands right away, just like handing over physical cash when making a purchase.  And because Dash is truly fungible, it’s the first real working form of true digital cash.  That means Dash really is private, instantaneous and secure.  With Dash, fees are extremely low, or completely non-existent.  No bank is sitting in the middle of everything and charging you to hold or use your money.  Instead, you’ve got the power.  Anyone can use Dash, anywhere around the world, at any time. There is growing belief that Dash could become the payment cryptocurrency of the future. 

  • Dash works a little differently from Bitcoin, however, because it has a two-tier network. The second tier is powered by the master nodes (Full Nodes), which enable financial privacy (PrivateSend), instant transactions (InstantSend), and the decentralized governance and budget system. Because this second tier is so important, master nodes are also rewarded when miners discover new blocks. The breakdown is as follows: 45% of the block reward goes to the miner, 45% goes to master nodes, and 10% is reserved for the budget system (created by superblocks every month).

    The master node system is referred to as Proof of Service (PoSe) since the master nodes provide crucial services to the network. In fact, the entire network is overseen by the master nodes, which have the power to reject improperly formed blocks from miners. If a miner tried to take the entire block reward for themselves or tried to run an old version of the Dash software, the master node network would orphan that block, and it would not be added to the blockchain.

  • In short, miners power the first tier, which is the basic sending and receiving of funds and prevention of double spending.  Master nodes power the second tier, which provides the added features that make Dash different from other cryptocurrencies. Master nodes do not mine, and mining computers cannot serve as master nodes.

    The Dash network is one of the largest peer-to-peer networks in the world.  There are currently over 4100 master nodes.  Dash is unique in the sense that it is self-funding.  Dash funds its own growth.  Approximately $2 million is plowed back into the network to improve services and performance.  The innovations behind Dash are interesting, and this could help to make the coin more user-friendly than rival cryptocurrencies.

Ethereum

  • For example, an individual wants to purchase a home from another person. Traditionally there are multiple third parties involved in the exchange including lawyers and escrow agents which makes the process unnecessarily slow and expensive. With Ethereum, a piece of code could automatically transfer the home ownership to the buyer and the funds to the seller after a deal is agreed upon without needing a third party to execute on their behalf.

  • The potential for this is incredible! Think of the numerous applications that act as a third party to connect you with others based on some set logic (e.g. Uber, Airbnb, eBay). Many of the centralized systems we use today could be built in a decentralized manner on Ethereum. With Ethereum you can make these transactions trustless which opens up an entire world of decentralized applications. Decentralisation is important because it eliminates single points of failure or control. This makes internal collusion and external attacks very unlikely. Decentralised platforms cut out the middlemen which ultimately leads to lower costs and better service for the user.

  • In the Ethereum blockchain, instead of mining for bitcoin, miners work to earn Ether, a type of crypto token that fuels the network. Beyond a tradeable cryptocurrency, Ether is also used by application developers to pay for transaction fees and services on the Ethereum network.

  • Ethereum is the second biggest cryptocurrency after Bitcoin.  Some experts believe that ultimately, Ethereum will become the worlds top cryptocurrency in a short space of time, but no one knows how long this may be.

Litecoin

  • Litecoin is a peer-to-peer digital currency that enables instant, near-zero cost payments to anyone in the world. Litecoin is an open source, the global payment network that is fully decentralized without any central authorities.

  • Mathematics secures the network and empowers individuals to control their own finances. Litecoin features faster transaction confirmation times and improved storage efficiency than the leading math-based currency. With substantial industry support, trade volume and liquidity, Litecoin is a proven medium of commerce complementary to Bitcoin. 

  • As the original Litecoin code originates from Bitcoin, some changes have been made that have improved Litecoin over Bitcoin.  For example, the blocks are generated 4 times faster, thus transaction times are faster.  There is a maximum of 84 million coins.  The Litecoin network also undergoes ‘halving’ every four years. 

  • The next halving is scheduled for August 2019. Litecoin currently has the 6th highest market cap.  Whilst newer currencies such as Dash have taken some of Litecoin’s market share, it still has the early mover advantage, and momentum is increasing again as the original founder, Charlie Lee is now active again on the project.