The merit of cryptocurrencies continues to spark debate among economists, investors, and financial professionals. It is exact, though – the trend of cryptocurrencies has taken, especially among the younger generations and those who like to stay on the cutting edge of technology. After Bitcoin turned what had always been an ethereal concept taught in advanced economics classes into a digital reality, it didn't take long for other types of cryptocurrencies to roll out and try to emulate the success of Bitcoin.
What is cryptocurrency?
Cryptocurrencies are merely virtual currency or digital currency. Since they exist in an entirely digital state, with no bills, coins, or backing by any central authority, security is of the utmost importance. For that reason, cryptocurrency and all transactions and accounts involving them are heavily encrypted, hence the name. They facilitate peer-to-peer financial transactions with very little government regulation since they are not issued by any central bank or backed by any government assets. As concerns about the potential for money laundering and other criminal activities are raised, governments are gradually working towards imposing some regulations on cryptocurrencies to ensure consumer protections and prevent illegal activities.
Bitcoin, the first cryptocurrency
The first real cryptocurrency to go mainstream was Bitcoin, released in 2009 by its pseudonymous inventor Satoshi Nakamoto. It is characterized by too complex algorithms used to manage the data trail on this cryptocurrency and the deflationary scale on which the Bitcoins are released, which will reach an end around the year 2140 when a total of 21 million Bitcoins have been released into circulation. The value of Bitcoin has historically been quite volatile, although it appears to have settled down and have started a prolonged but sustainable upward trend.
Litecoin, the "silver" cryptocurrency
If Bitcoin is gold, then Litecoin is silver, according to the creator. After being released in 2011, Bitcoin's initial success was right; Litecoin is currently Bitcoins' main competing cryptocurrency. It is characterized by less complex encryption that can be mined using a standard PC rather than the supercomputers required for Bitcoin, and by a transaction processing time that is about four times faster than Bitcoin. Litecoin will have a maximum limit of 84 million in circulation, compared to 21 million for Bitcoin.
Ripple, the cryptocurrency by OpenCoin
Ripple is very similar to Bitcoin in that it has both a cryptocurrency and a payment system component to execute transactions between users paying in Ripple currency. Its primary difference lies in the Ripple payment system's ability to complete a transaction in seconds, which is hundreds of times faster than a Bitcoin transaction. Ripple cryptocurrency was first released in 2012.
MintChip, the cryptocurrency that isn't
It sounds like a popular ice cream flavor, but MintChip is a currency that strangely bridges the gap between conventional government-backed fiat currency and actual, decentralized cryptocurrency. The Royal Canadian Mint created MintChip. The digital currency is stored on a secure chip on a smartcard, which can be transferred anonymously and securely to another user's card during a transaction.