What Are The Different Cryptos In The Galaxy?
If we were speaking in terms of space exploration, the creation of Bitcoin would be like the first step on the Moon by Neil Amstrong: a historical moment that paved the way to thousands of other space missions and related innovations. Bitcoin laid the foundations for other cryptocurrencies to flourish, play the crypto game and create their own rules. So be prepared. Because what comes next is about crypto creativity and how smart people are stretching blockchain possibilities. In other words, this part is about basic crypto rules and exceptions to the rules. All is made easy. We promise.
A 2000-Stars Galaxy
Although Bitcoin is the shining star of the crypto galaxy, it is not the only one. The cryptocurrency market currently hosts over 2000 digital currencies and is still expanding.
As explained here, each crypto has its own blockchain with its own rules. Like each budding chef has their own variation of the Carbonara Pasta. And these rules are created depending on the specific goals that this or that crypto wants to achieve.
Fortunately, this galaxy is a little bit organized. Cryptocurrencies are commonly divided in 3 groups:
- Crypto tokens
This one is pretty easy. If you haven’t checked it yet, this article is exclusively dedicated to Bitcoin. Put briefly, Bitcoin’s goals are about purchasing goods and services and storing value. And its blockchain rules are based on the Proof of Work protocol.
Simply standing for “alternative coins”, this group includes all the cryptocurrencies other than Bitcoin. Today, there are more than a thousand Altcoins in existence. They can be distinguished in 2 subgroups.
- Bitcoin-derived coins: they are alternate versions of Bitcoin with minor changes. Their goals are often to solve any limitations that Bitcoin has. One of the most successful is Litecoin, which aims at improving transaction speed.
- Native coins: they are very different from Bitcoin, in terms of rules, protocols and goals. Among the many rule variations existing between blockchains, there is the choice of validation protocol, between Proof of Work (PoW) and Proof of Stake (PoS). Some famous native altcoins with PoS protocols are TRON (TRX) or TEZOS (WTZ).
Compared to the other two groups, they are completely unique in the fact that they do not have their own blockchain. Instead, they only exist on other blockchains. Wait! What? Have we not just said “one blockchain = one crypto”? Yep. But we also warned you: rules and exceptions. There are several blockchains that allow the existence of tokens on their network. The most famous is Ethereum.
A Star War: Proof of Work VS. Proof of Stake
In the Bitcoin network, the verification and validation of transactions is made according to the Proof of Work consensus protocol. But some more recent blockchains are based on another consensus mechanism for verification and validation called Proof of Stake. Here are the main differences.
Another main difference is what PoS allows you to do with your coins: staking. It provides you with the option to generate passive income with your coins. By owning such coins, you can delegate some of your assets to a validator. Then it’s the validator that gets the fees to share a part of their gains with you. In other words, PoS allows you to grow your assets without doing anything. You don’t even need to be a validator.
The Rising Stars: Ethereum And Its Tokens
The Ethereum blockchain was launched in 2015. Its native currency is known as Ether (ETH) and it is one of these highly distinctive Altcoins. Ethereum quickly became the number two cryptocurrency in terms of market share. While being a decentralized and open-source blockchain like many other crypto assets, it has made its way to the top by having unique goals and features. Ethereum has been designed to be a network that others can build upon and create separate ecosystems – all on a single blockchain. While also hosting its own native currency (ETH). Very far from Bitcoin’s purpose to be a digital currency indeed.
With such rules, everyone can create their own crypto tokens on the Ethereum blockchain, called ERC20 tokens. And each token has its own rules. This means the options are limitless! And not only with Ethereum. Other blockchains such as NEO or Binance Chain (BNB) also allow the existence of tokens on their network. Thanks to this unique feature, Ethereum is in first position in the race towards “The Flippening”. This crypto-slang term refers to a foretold turning point where Bitcoin will be dethroned by another cryptocurrency. If that ever happens…
A Star For Everyone, A Crypto for Every Use
Sure enough, there is a use for every crypto. Therefore for everyone. To continue the equation, we could say that “one blockchain = one crypto = one (or a bit more) dedicated use cases”. That’s why it’s really important to do your own research before buying. Or “DYOR” as the common crypto slang term advises you. So that you are sure to invest in something you actually understand. Once you enter the crypto universe, your options are limitless. You can easily exchange – or swap – one crypto asset for another, without using fiat. It’s also possible today to travel with crypto, to ask for a loan in fiat using your crypto as a collateral, or to raise money for your company using coins. Only you have the power to decide what you want to do with your crypto. The only condition is to own some. Ready?