Blockchains are perhaps one of the most difficult concepts to grasp when it comes to cryptocurrencies. Once you wrap your head around the concept of blockchains, you learn that they come in many forms. All of them are programmed for different purposes in support of different digital assets and technologies. So let’s take a quick look at some of the other blockchains.
You may already be familiar with the Bitcoin blockchain. It was the first cryptocurrency on the scene and it’s blockchain is arguably the simplest of them all. That blockchain is simply a ledger containing all of the transactions that have been agreed upon by the majority of nodes collectively administering the blockchain. It is decentralized, it allows for anonymity, and it value is derived from its popularity which makes it democratic in theory. However, it does have some disadvantages. It is slow. A transaction on the Bitcoin blockchain takes at least 15 minutes to register. Its anonymity has been used by hackers. The recent ransomware attacks reported in the media have usually involved Bitcoin payments.
Ethereum and Ether, its token, were primary invented by Vitalik Buterin in response to the shortcomings of Bitcoin. Buterin thought that Bitcoin needed a scripting language to provide for programmed transactions called smart contracts. Smart contracts run exactly as programmed and don’t require third-party oversight. They are extremely fast. A typical Ethereum transaction takes only 10 seconds. Ethereum is the platform that generates the Blockchain that tracks Ether, or “gas,” which is used to compensate nodes for their computational work – mining.
As you learn about cryptocurrencies, you’ll find that many are actually derived from other currencies. Usually this occurs to address specific shortcomings of the original crypto. Litecoin is a spinoff of Bitcoin. Litecoin is nearly identical to Bitcoin. It’s blockchain operates in basically the same way as Bitcoin. But its proof of work algorithm is programmed in a different way. It boasts a much faster transaction speed – 2 and a half minutes versus 15-30 minutes for Bitcoin. Its main disadvantage is its total anonymity as it has been used for nefarious purposes on the dark web.
Sia is a decentralized data storage platform. It has a blockchain that records transactions in Siacoins. It was originally conceived of as a way to utilize the world’s unused storage to host file storage. The rents paid for storage generates the Siacoin and anyone can allocate any amount of storage space for rent. The more space you offer, the more coins you can make. Space providers use competitive pricing to attract renters, so it offers cheap storage solutions. Its blockchain creates the storage marketplace and tracks Siacoin transactions. The main disadvantage is that it is not very user-friendly for non-technical people. But it is a promising platform and once it becomes more widely accepted, there’s every reason to believe it will become easier to set up and use.
Zcash is all about anonymity. Users can opt to make transactions transparent like Bitcoin, or they can be shielded. Because of this, the developer has had to go on record stating that Zcash was not designed to “facilitate illegal activity.” It’s blockchain is effectively the same as that of Bitcoin. All transactions are posted to a public blockchain. Users’ personal information is kept completely confidential. But it allows for completely private transactions. In fact, users can select which information can be shared, say for auditing purposes. This anonymity allows for flexibility and effectiveness. The main downside to Zcash is – as you may have guessed – the legal issues surrounding the high level of anonymity.
Of course, this is just a brief primer on some of the blockchain currencies that are out there. There are currently around 2,000 cryptocurrencies, each of them with their own blockchain core. That’s far too many to get into here. Feel free to research for yourself and learn about all the upcoming cryptos and the blockchain it supports.
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