“Cryptocurrency will do for money what the internet has done for information.”
–Yoni Assia, eToro Founder & CEO
Growing incredibly in popularity in recent years, cryptocurrencies have become the go-to investment option for many traders. With an ever-growing selection of cryptocurrencies added to the platform, plus a Crypto CopyPortfoliosTM offering balanced exposure and managed by eToro’s expert investment committee, eToro presents many options for those who wish to trade and invest in the crypto market.
Cryptocurrencies display extremely high volatility, and it is quite common to see double-digit percentage fluctuations within a single day. In a broader view of their longer-term performance, however, the top digital currencies have shown significant overall gains.
eToro’s cryptocurrency offering includes:
Bitcoin is the pioneer of blockchain, and the standard by which all other digital currencies that follow are measured. Bitcoin remains the cryptocurrency market leader after breaking new ground in data management and payment transfer. Inspired by Bitcoin’s success, countless other digital currency initiatives and start-up projects have since cropped up.
Bitcoin (BTC) became the first real-world application of blockchain, a technology that essentially enables data to be distributed rather than copied. In 2009, a group of programmers under the alias ‘Satoshi Nakamoto’ unveiled Bitcoin as an open-source software. Many in the global tech community quickly jumped on board, recognizing the great potential for the future of digital transfers and payments. The term “decentralized” as applied to digital currency was first used to describe Bitcoin, with the need for an intermediary between parties is eliminated. The democratic nature of the blockchain system itself is what keeps the process in check and secure.
Bitcoin is more than just a theoretical use of a ground-breaking technology — it is a currency with genuine, transferable value which can be exchanged for other currencies, as well as used to purchase products and services in legal markets. Bitcoin can also arguably be dubbed the investment craze of the decade. From just a few cents in 2009, its value skyrocketed to close to $20,000 in 2017.
While Bitcoin has managed to remain the champion cryptocurrencies thus far, many believe that Ethereum is the coin with the best chance of matching, and perhaps even surpassing, the success and community acceptance of Bitcoin.
Ethereum uses the same innovative blockchain technology as Bitcoin, but its potential goes far beyond transfer of payments. In addition to operating its own digital currency – called Ether – Ethereum also supports ‘smart contracts’, basically agreements written in computer code and automatically executed when conditions for the transactions are met.
Ethereum is laying the foundations of a whole new way for developers to utilize blockchain, applying the technology to a variety of systems that would remove the need for a centralized intermediary. For example, such applications could include loan contracts that don’t require a bank, or property contracts that don’t require estate agents.
In June 2016, Ethereum divided into Ethereum (ETH) and Ethereum Classic (ETC), following a a hacker attack on the platform. There was disagreement within the Ethereum community of how to handle the breach, which resulted in a new version splintering off from the original, commonly known as a ‘hard fork’ in crypto circles.
Ethereum Classic (ETC)
Following the attack on Ethereum in 2016, when a technical loophole was exposed leading to large amounts of money being stolen, the Ethereum community was divided on how to handle the breach. Ethereum Classic (ETC) was created by part of the original Ethereum community who rejected the solution that was ultimately reached.
That solution proposed switching the platform to a new blockchain, introducing a certain ‘smart contract’ and integrating security measures so as to avoid similar breaches in the future — a plan that intended to refund the money which had been taken in the attack. The proposal caused a lot of controversy, but the majority, including many of the big players in the community as well as founders Vitalik Buterin and Gavin Wood, did end up adopting this plan.
Those that rejected the proposal stayed with the original platform, changing its name to Ethereum Classic, or ETC. These ‘crypto-idealists,’ as they are sometimes called, pride themselves on remaining true to the decentralized and democratic vision of cryptocurrency regardless of the loss incurred.
Dash is a digital currency based on Bitcoin’s software, yet has differentiated itself by solving many of the problems inherent to Bitcoin, such as lagging transactions and limited scalability. From its inception, Dash was specifically designed to be a scalable, quick, and user-friendly currency platform for mainstream usage.
Bitcoin runs on a single-tier network with an average blocktime of ten minutes. Six of these increments are required to fully confirm a transaction, meaning that a single Bitcoin transaction can take up to an hour to complete.
By contrast, Dash operates on a two-tier network. The first tier works similarly to the Bitcoin network but the second tier, made up of special servers known as masternodes, allows for additional features such as instant transactions (InstantX), private transactions (Darksend), and decentralized governance and budgeting. In addition to the rewards for mining Dash, users are also rewarded for running and maintaining these masternodes, which provide much of Dash’s network infrastructure. These additional features and incentives are what may make Dash an attractive option to users.
XRP, by Ripple Labs
XRP, also known as the Ripple Transaction Protocol (RTXP) or Ripple protocol, is a real-time payments and settlements system which, much like other Bitcoin competitors, has focused on creating greater transaction speed. Yet Ripple’s ability to also significantly lower processing costs and ultimately deliver better overall customer experiences are what have drawn some big names in banking and payment networks.
Ripple operates as a currency exchange with its own native currency known as (XRP), one of the top cryptocurrencies in the world by market cap and actively used by a range of well-known financial businesses. There has been cautious optimism in promoting widespread application of Ripple in the industries of finance and commerce, though it is still to early to tell what the future of this cryptocurrency will be.
Litecoin is another cryptocurrency similar to and based on Bitcoin. Litecoin, however, delivers greater efficiency and speed of transactions, and provides more supply for the market with a limit of 84 million coins (as opposed to Bitcoin’s 21 million) while still being inflation-proof. Consequently, some argue that Litecoin has greater potential for everyday purchasing of goods and services.
Litecoin also has many attractive qualities for investors. Pricewise, compared to Bitcoin, Litecoin is far cheaper to invest in. Bitcoin may have more experience and reputation at this point, but Litecoin’s greater ease of use could make it an attractive option for mainstream retailers and merchants, particularly those involved in global transactions, in the long run.
Bitcoin Cash (BCH)
In August 2017, Bitcoin underwent a ‘hard fork,’ creating a new currency called Bitcoin Cash (BCH). Bitcoin was experiencing increased popularity, and its 1 MB block size limit resulted in a backlog of transactions placing the entire Bitcoin network under tremendous strain. Many investors, miners, and engineers in the community grew frustrated with the platform’s inability to cope efficiently with the enormous demand.
Various proposals attempted to offer solutions to the problem, and Bitcoin Cash has been one of the most popular. It introduced a larger block size (eight times that of Bitcoin’s), as well as an improved hash rate, enabling faster transaction speeds at lower rates.
Stellar Lumens (XLM)
The Stellar Network, with its digital currency Lumens, was created based on Ripple but operates on a unique consensus algorithm rather than mining. This process requires minimal computational power and the average confirmation time for a transaction is extremely fast — a mere few seconds to complete — at an extremely low cost.
Another of Stellar’s strengths is its ability to facilitate transactions between multiple currencies, whether fiat or digital, and do so very quickly. Although lumens is the network’s native asset, Stellar supports many different types of assets.
While there are many similarities between Stellar and Ripple, the main difference is that Stellar seems aimed to help simplify payments between individual users, whereas Ripple aims to provide solutions for financial institutions.
Created in 2014, NEO is also known as the ‘Chinese Etherium,’ being closely based on ETH, as well as the first cryptocurrency to be launched in China. Like Ethereum, NEO enables the use of smart blockchain contracts which could be implemented in a variety of ways beyond money transfer, such as digital identity recognition. The NEO digital assets can be used both for executing applications on the NEO platform and as an investment vessel, and is the smallest unit that can be transferred (it cannot be divided).
NEO had a breakout year in 2017, rising 10,000% and establishing itself as a top ten cryptocurrency by market cap. The overall supply of NEO is hard-capped at 100 million tokens, to be released gradually into circulation.
Similar to Ethereum in its function, EOS was designed for faster transactions and extreme scalability, and aims to ease the way for developers to incorporate blockchain technology into other user-friendly apps. As an open-source platform claiming to be the most powerful infrastructure for decentralized applications (DApps), EOS could potentially support thousands of commercial-scale DApps in the future.
EOS offers a toolkit for interface development and the only cost involved in building on the network is the purchase of EOS tokens, which give users a proportionate share in the network bandwidth, storage and processing power. Rather than a mining-based blockchain, EOS uses a Delegated Proof of Stake (DPOS), which allows the creation of blocks.
Cardano first launched in September 2017, emerging within the crypto market’s great bull run and quickly reaching a multi-billion dollar market cap. Cardano is one of the networks inspired by Ethereum’s platform, along with NEO and EO, which is not surprising as its development was actually led by a former co-founder of Ethereum.
Cardano aims to utilise blockchain technology for far more than just payments, enabling developers to create their own blockchain apps using the platform, as well as supporting cryptocurrency transactions. By operating in both digital currency and tech development, Cardano has the potential to innovate on both fronts. One of these innovations that helps differentiate Cardano is its dual-layer structure, which runs each layer separately, as opposed to Ethereum, where both layers are intertwined.