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Introduction to Major Cryptocurrencies

BTC, ETH, EOS, LTC, BCH, XRP

This topic introduces six prominent cryptocurrencies, highlighting their key characteristics and distinguishing features. 1. Bitcoin (BTC): The Original Cryptocurrency

  • Purpose: Designed as a peer-to-peer electronic cash system.
  • Key Features:
    • Proof-of-Work (PoW): Uses the SHA-256 hashing algorithm for mining. Miners compete to solve complex cryptographic puzzles to add new blocks to the blockchain.
    • Limited Supply: A maximum of 21 million bitcoins will ever be created.
    • Halving: The block reward for miners is halved approximately every four years, reducing the rate at which new bitcoins are created.
    • Transaction Model: Uses the Unspent Transaction Output (UTXO) model, where each transaction consumes and creates UTXOs.
    • Script Language: Has a simple scripting language for defining transaction conditions.
  • Advantages:
    • First-mover advantage
    • Largest network effect
    • Most secure blockchain (due to its massive mining network)
  • Disadvantages:
    • Relatively slow transaction speeds
    • High transaction fees (especially during periods of high demand)
    • Limited scalability
    • Energy-intensive mining process

2. Ethereum (ETH): The World Computer

  • Purpose: Designed as a decentralized platform for building and running smart contracts and decentralized applications (dApps).
  • Key Features:
    • Smart Contracts: Self-executing contracts written in code and stored on the blockchain.
    • Ethereum Virtual Machine (EVM): A runtime environment for executing smart contracts.
    • Proof-of-Stake (PoS): Ethereum has transitioned from Proof-of-Work to Proof-of-Stake, called The Merge. In Proof-of-Stake, validators "stake" their ETH to have a chance of being selected to create new blocks, which greatly reduces the environmental footprint.
    • Gas: A unit of account used to measure the computational effort required to execute smart contracts. Users pay gas fees to execute transactions and smart contracts on the Ethereum network.
    • ERC-20 Tokens: A standard for creating fungible tokens on the Ethereum blockchain.
  • Advantages:
    • Smart contract functionality
    • Large and active developer community
    • Versatile platform for building dApps
    • Transition to Proof-of-Stake reduces energy consumption
  • Disadvantages:
    • Scalability challenges (though Layer 2 solutions are being developed)
    • High gas fees (especially during periods of high demand)
    • Smart contract security risks (vulnerable to bugs and exploits)
    • Complexity

3. EOS (EOS): A Decentralized Operating System

  • Purpose: Designed as a decentralized operating system for building and running dApps.
  • Key Features:
    • Delegated Proof-of-Stake (DPoS): A consensus mechanism where token holders elect a limited number of block producers (BPs) to validate transactions.
    • High Transaction Throughput: Aims to provide high transaction speeds and low fees.
    • Scalability: Designed to be highly scalable.
    • Resource Allocation: Uses a system of resource allocation (CPU, RAM, and network bandwidth) based on token ownership.
  • Advantages:
    • Fast transaction speeds
    • Scalability
    • Low transaction fees
  • Disadvantages:
    • Centralization concerns (due to the limited number of block producers)
    • Governance issues
    • Relatively complex resource allocation system

4. Litecoin (LTC): Silver to Bitcoin's Gold

  • Purpose: Designed as a faster and cheaper alternative to Bitcoin.
  • Key Features:
    • Scrypt Hashing Algorithm: Uses the Scrypt hashing algorithm for mining, which is less energy-intensive than Bitcoin's SHA-256.
    • Faster Block Times: Has a faster block time (2.5 minutes) than Bitcoin (10 minutes), resulting in faster transaction confirmations.
    • Larger Supply: Has a larger supply than Bitcoin (84 million Litecoins).
    • Segregated Witness (SegWit): Implemented SegWit to improve transaction throughput.
  • Advantages:
    • Faster transaction speeds than Bitcoin
    • Lower transaction fees than Bitcoin
  • Disadvantages:
    • Less secure than Bitcoin (due to smaller mining network)
    • Less development activity than Bitcoin and Ethereum
    • Not as widely adopted as Bitcoin

5. Bitcoin Cash (BCH): A Fork of Bitcoin

  • Purpose: Created as a fork of Bitcoin to increase the block size and improve transaction throughput.
  • Key Features:
    • Larger Block Size: Has a larger block size than Bitcoin, allowing for more transactions per block.
    • SHA-256 Hashing Algorithm: Uses the same SHA-256 hashing algorithm as Bitcoin.
    • Difficulty Adjustment Algorithm (DAA): Has a DAA to adjust the mining difficulty and ensure consistent block times.
  • Advantages:
    • Faster transaction speeds than Bitcoin (in theory, due to larger blocks)
    • Lower transaction fees than Bitcoin (in theory, due to larger blocks)
  • Disadvantages:
    • Centralization concerns (due to larger blocks requiring more powerful hardware to mine)
    • Less secure than Bitcoin (due to smaller mining network)
    • Significant community divisions
    • Smaller network effect than Bitcoin

6. Ripple (XRP): For Enterprise Solutions

  • Purpose: Designed as a payment protocol and cryptocurrency for facilitating fast and low-cost international payments.
  • Key Features:
    • Ripple Protocol Consensus Algorithm (RPCA): A consensus mechanism that relies on a network of trusted validators.
    • Fast Transaction Settlement: Claims to offer near-instant transaction settlement.
    • Low Transaction Fees: Offers very low transaction fees.
    • Centralized: More centralized than other cryptocurrencies, as Ripple Labs controls a significant portion of the XRP supply and the development of the Ripple protocol.
  • Advantages:
    • Fast transaction settlement
    • Low transaction fees
    • Designed for enterprise use
  • Disadvantages:
    • Centralization concerns
    • Not truly decentralized
    • Regulatory uncertainty
    • Not mined
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