While you're probably at least passingly familiar with Bitcoin, what the heck is Dogecoin?
With all the noise -- and it's fair to say, craziness -- associated with cryptocurrency, we thought you might like a bit of an overview. Like the off-the-rails GameStop stock hack, the cryptocurrency Dogecoin has been on a bit of an undeserved roll. And, because what's a fake currency without a bonkers billionaire, much of Dogecoin's recent moment (and that of Bitcoin, too) can be attributed to Elon Musk and his fondness for tweeting.
In this article, we'll take a quick look at the 12 cryptocurrencies we find most interesting. If you haven't heard of many of them, you're not alone. There are, of course, a whole lot more than twelve cryptocurrencies out there. Some of these are, well, let's just say that if you read the whole article, you'll find a currency based on the market value of weed. Need I say more?
When Bitcoin and the blockchain concept exploded onto the internet in 2009, it took the speculative world by storm. It offered a way to transact money, protect identity, and move value across the world virtually instantaneously and free from government, banking, and central oversight.
This freedom provided great value to many different types of individuals and organizations, ranging from activists stuck in repressive countries, to organized crime organizations hiding transactions, to individuals and massive corporations interested in exploring a new data management paradigm.
Today, there are thousands of different cryptocurrencies. Some are mere "forks" of the original Bitcoin concept, while many others have been coded from the ground up. Most leverage the architectural benefits of the blockchain concept, which allows transactions to be added to a central, yet distributed data store.
Bitcoin's blockchain is particularly interesting because, while the identity of each person conducting transactions can be hidden, every single transaction ever conducted in Bitcoin is available for anyone to review and analyze.
Bitcoin also introduced the concept of coin "mining," the practice of using computer hardware to solve challenging problems as a way of creating new digital coins. Mining exploded over the past few years, transforming from a program running on a spare PC to giant mining complexes built into the sides of mountains in frigid climates in order to control the heat generated by mining computers.
It's important to note I am not recommending any of these cryptocurrencies. Investing in cryptocurrencies is speculative, at best. Their values can fluctuate wildly, their underlying management is often unknown, and the question of how governments will react and regulate is always top of mind.
That said, cryptocurrencies are fascinating, and it's possible you'll transact business using one or another at some point in the near future. It's almost guaranteed that you'll transact business using blockchain technology, whether because you're specifically using a cryptocurrency, or because one of the businesses you encounter has adopted it as an underlying technology.
With that, we present a dozen fascinating cryptocurrencies, starting with the one that started it all: Bitcoin.
Bitcoin is the famous cryptocurrency that set off the entire digital gold rush. Launched on the internet in 2009 by a mysterious figure calling himself Satoshi Nakamoto, the Bitcoin code introduced blockchain technology and solved many challenging technical problems about transaction security.
Bitcoin kicked off a rush of investment, jumping in value from $100 per Bitcoin to more than $60,000 in mid-March. You can even buy a Tesla with Bitcoin.
Unfortunately, Bitcoin also set off a race for so-called mining of the digital coins. The core Bitcoin algorithm requires more and more resources for each coin mined, as a way to add friction into the production of the currency. The inevitable side-effect of that design is an ever-increasing energy footprint.
Scientists estimate that worldwide Bitcoin mining consumes somewhere between 500 megawatts and 3.4 gigawatts, or more than enough to keep an entire coal-powered electrical plant busy. A typical electrical plant generates about 600 megawatts. Some writers have even postulated that Bitcoin's mining operations will consume the world's entire energy supply. This is unrealistic for many reasons, but there's no doubt Bitcoin (and other cryptocurrencies) are consuming energy at a disturbing pace.
All this is to say that the days of running Bitcoin mining software on a spare PC are long gone. Today's Bitcoin miners are so sophisticated, they're building mining operations in very cold countries like Iceland, where the cooling costs for all those computers can be offset by the naturally cold conditions.
Because Bitcoin was the first major cryptocurrency, some inherent limitations have become apparent over time, including the cost and time of mining a single coin, and the limits to its scalability. To improve upon the original Bitcoin, there is a whole slew of alternative currencies.
One such is Bitcoin Cash, which is considered a "hard fork" from the original Bitcoin code. It uses a different verification mechanism and a larger block size. There are also Bitcoin Gold, Bitcoin Dark, Bitcoin Plus, BitcoinZ, Bitcoin Scrypt, and Bitcoin Red. If you're looking for the original Bitcoin, verify that it is the currency trading as BTC.
Litecoin is the less-filling alt currency. Litecoin is one of the most popular Bitcoin-alternative currencies out there, with a market capitalization well into the billions of dollars.
It's important to understand that, at its core, each cryptocurrency is essentially a software application. Therefore, the underlying code of the application greatly impacts the behavior of transactions in the currency.
Litecoin's primary claims to fame revolve around three key elements. First, it is API-compatible with Bitcoin, so all software that talks to Bitcoin can theoretically talk to Litecoin. Second, blockchain updates (the actual transaction processing itself) are substantially faster, leading to quicker transaction confirmations. Finally, Litecoin was founded by a former Google engineer who now works at Coinbase, a leading currency exchange. This means that access to Litecoin through Coinbase may be more efficient.
Litecoin can be mined, but instead of using the SHA-256 algorithm, it uses Scrypt. This algorithm is far more memory-intensive than compute-intensive, so the custom ASIC chips that have been developed to mine Bitcoin aren't suited for Litecoin. The prevailing premise is that this reduces the so-called "arms race" in mining technology that's caused such a frenzy in the Bitcoin world.
Ethereum, which originated in Russia, takes the currency-as-software concept even further. Ethereum is considered an application platform, rather than merely a digital analog of money. This will undoubtedly give you a headache, but it's worth paying some attention.
The underlying architecture of Ethereum was designed to decentralize computing processes, to take the storage resources of cloud apps out of a single entity's hands (like Google or AWS) and to distribute the storage resources across the entire internet. If this seems to you to have the flavor of the old peer-to-peer music sharing services, you aren't wrong.
Since these resources, even if they're on individuals' computers, aren't free, they're paid for by a currency called "Ether." Ether is the actual cryptocurrency, while Ethereum is the platform. The idea is for web apps to be built on top of Ethereum, and for Ether to pay for their use.
One very interesting aspect of this idea of currency-as-platform is that you can add intelligence to transactions. This opens the door to smart contracts, which are contracts built into the DNA of software rather than negotiated by lawyers. Once a certain condition is met, the currency itself can decide to spit out payments.
Royalties are a good example. A smart contract can be built into a royalty currency app that decides that once a month, a certain amount of Ether would be distributed, based on some pre-programmed criteria.
Ether can be mined, essentially by providing the resources for the Ethereum platform. There is no top-end circulating supply of Ethereum, so inflation is definitely possible.
It should be noted that you might run into something called ETC, which is Ethereum Classic. This uses the so-called original Ethereum blockchain but is subject to considerable controversy. If you're trading in Ethereum, do so in ETH, not ETC (unless you are very, very sure you know what you're doing).
Ripple is another very popular cryptocurrency, with an overall market value of over $25 billion at the time of this writing.
What makes Ripple different from most of the other cryptocurrencies profiled in this directory is that Ripple is built entirely around the centralized control of one company, Ripple Labs, Inc. The company, which has deep ties to the banking industry, controls nearly 60 percent of the overall supply of XRP, the Ripple currency. XRP can't be mined.
This means that the company can either keep or dump that supply, which could result in possibly problematic company-initiated sell-offs and value fluctuations, outside of the influence of the market as a whole.
What makes Ripple interesting is that it's a blockchain technology being adopted by some very blue-chip banking companies, including Bank of America and UBS. This technology is being used to fuel-secure international transactions, with relatively high speed and low transaction fees, making it interesting to those who are looking at new generations of banking and transaction technology.
While most cryptocurrencies support anonymous trading, there are limits to the privacy afforded. In Bitcoin's case, for example, while the owner of a given wallet's identity can be kept private, all the transactions associated with a given Bitcoin wallet are actually a matter of very public record. If you can be connected to a given Bitcoin identifier, all your transactions can be traced through your entire transaction history.
This has been a concern for privacy advocates and has given rise to what is considered "private" currencies. These are, essentially, blockchain-based currencies where the identity information of both the sender and recipients can be concealed through "zero-knowledge" cryptographic security.
Zcash implements zero-knowledge in its blockchain algorithm. While it competes with other private currencies, none other than the NSA-records fugitive Edward Snowden has declared, "Zcash's privacy tech makes it the most interesting Bitcoin alternative. Bitcoin is great, but if it's not private, it's not safe."
Zcash also protects transactions through a blockchain mechanism that is almost the polar opposite of Bitcoin's. While Bitcoin's proof of security is the availability of every transaction in history for verification, Zcash does not link older transactions to currently trading coins. It is a mineable currency. Many miners are actively using commercial gamer GPUs to mine this currency, whose valuation at the time of this writing exceeds $1.5B.
Dash has been something of a digital currency in search of an identity. A portmanteau of "digital" and "cash," Dash was originally launched as XCoin (XCO). Its developers then changed its name to Darkcoin, and then, finally, they settled on Dash.
Dash is a fork of the Litecoin code but provides nearly instantaneous transaction speeds and private money transfers. Unlike Bitcoin and Litecoin, the blockchain of Dash is tiered. One tier, the one used for block creation, is utilized by currency miners. The second tier, the "masternodes" tier, is used to perform transfer and governance functions.
Dash (the organization behind the currency) fashions itself to be a decentralized autonomous organization (or DAO). What this means is that its governance is not conducted by a human board of directors, but rather is encoded in a series of smart contracts embedded in its own software program.
Masternodes become masternodes when they're loaded with 1,000 DASH, or -- at today's trading rate -- roughly $200K. In other words, if you didn't start with a pile of DASH, and want to be part of the DAO's governance, you'll need to have nearly a quarter-million bucks in DASH equivalent.
We've managed to go almost 2,000 words without coming back to Elon Musk. You're welcome. Musk, it seems, has been tweeting about Dogecoin. It started with this:
And he's gone on to tweet more about it. Apparently, there was some discussion about an SEC investigation of that tweet, in which Musk responded it would be "awesome." So, there's that. Seriously. You can not make this stuff up. He's like what would happen if you merged the psyches of Bruce Wayne and the Joker into one high-tech executive. And, of course, "Space Karen."
But I digress. There's Dogecoin. Which is, itself, quite the story.
When a currency is based on the image of a Shiba Inu dog, derived from a Reddit joke, which in turn was based on Strong Bad's nickname "Doge" in the Homestar Runner animated cartoon series, you might not be inclined to take it seriously. But somehow, despite its odd origins, Dogecoin has a market cap north of $7 billion (with a "b") and therefore is worthy of attention.
It's a very odd currency with a very dedicated fan base. Although it experienced a serious hack in 2013 resulting in the theft of coins, members of the Dogecoin community jumped in and covered the losses of those affected.
Dogecoin has been used over the years to collect donations for the Olympics, to sponsor a NASCAR driver, and to build a well in Kenya. It's also become very popular in certain online circles as a way to send tips to content producers and gamers.
Monero takes the privacy concept promoted by Zcash and ups it a notch. Zcash allows transactions to be triggered as anonymous, but that's not the default behavior. By contrast, all of Monero's transactions start anonymous, by default.
The currency uses a number of mechanisms to preserve the anonymity of the transacting parties, as well as of individual coins themselves. This is in strong contrast to Bitcoin, which allows individual coins to be identified as part of given transactions. With Bitcoin, it is possible, therefore, to trace which coins were involved in criminal behavior, possibly tainting those coins for future trading, or subjecting those coins to blacklisting from vendors and exchanges.
By contrast, Monero mixes various keys and identities, so it's not possible to identify either the coins or the participants in any individual transactions. Unlike many of the other cryptocurrencies, the original Monero designers did not block off a set of coins for themselves. Instead, the entire pool of digital coinage was released for public use.
Unfortunately, the deeply secure and anonymous nature of Monero has found an appeal among criminals. In late 2017, Europol (the EU's equivalent of the FBI) released a report indicating that Monero, along with Ether and Zcash, has been adopted by darknet operations. Monero, in particular, has proven popular with darknet operators, even to the point that malware has been found to be mining Monero.
Bytecoin is, in many ways, functionally similar to Monero. Both Monero and Bytecoin were derived from the open-source CryptoNote application protocol. Like Monero, Bytecoin has default transaction privacy. Like Monero, Bytecoin has mixed coins, making tracking individual coins theoretically impossible. Like Monero, Bytecoin has full participant security, providing anonymity to both parties in a transaction.
As with some other alt currencies, there is some controversy about the nature and anonymity of Bytecoin. While the coin is mineable, we do find it curious that the maximum supply (at least according to CoinMarketCap.com) and the circulating supply are quite near each other, indicating that all the available Bytecoins may soon be mined and in circulation.
Bytecoin provides an interesting lesson in cryptocurrency: these alt currencies are, essentially, software and can be cloned. Like various open-source projects, there are often unique features in an implementation forked from a single originating code source. But, like many open source projects, some forks exist merely to be forks or to meet an agenda of the forking developer and may not provide a unique value to users of that technology compared to other available implementations.
Until mid-2017, Neo was known as Antshares and originated in China. At first glance, Neo shares many of the characteristics that defined Ethereum as a currency platform, most notably the idea of smart contracts.
But while Ethereum smart contracts can be coded in specialty languages like Solidity, Serpent, LLL, and Mutan, Neo contracts can be coded in C#, Java, and Python. Additionally, while a focus of Ethereum is on the creation of new coin types on top of the Ethereum platform, Neo focuses on using the blockchain platform as a method of linking tangible assets to cryptocurrency and algorithmic operations. An example of this is a domain name marketplace operated entirely based on the blockchain and smart contracts.
Neo may well be worth watching. As one of the few blockchains originating in China, it has the potential to appeal to a giant, growing market. According to some reports, Neo has already established some level of support from the Chinese government, and partnerships with giants like the Alibaba Group (the world's most valuable retailer) and Microsoft.
With a focus on accessible programming languages, smart contracts aimed at real-world uses, and a strong foothold in what will be the world's largest market, Neo seems to have a great deal of potential.
Medical use of cannabis (with a doctor's recommendation) is legal in 36 states, plus Guam, Puerto Rico, and the District of Columbia. Recreational use of cannabis is legal in eight states. An additional 15 states have decriminalized use. But because the federal government still classifies cannabis as a Schedule I substance, the business of legal weed remains in a sort of limbo.
Banks generally won't accept or provide accounts to businesses in the legal cannabis industry. The same is true of credit card processors. As a result, the cannabis industry, which Bloomberg estimates will be worth $50 billion by 2025, has been an almost entirely cash business.
As you might imagine, the ability to send payments over a distance is difficult with cash. That's where cryptocurrencies come in. Most cryptocurrencies don't abide by general banking regulations. As a result, there is definitely cannabis trade in Bitcoin, Litecoin, and other currencies. Where there's a need, there's a currency, and the weed business is no different.
In 2014, PotCoin was launched as an open-source cannabis-industry-oriented alt currency. Since then, the currency has established relationships with some dispensaries and medical marijuana organizations and has reached a market cap of almost $6 billion at the time of this writing. There are other cannabis-oriented alt currencies as well, including CannabisCoin (CANN), DopeCoin (DOPE), HempCoin (THC), and CannaCoin (CCN).
Waves is another currency platform on the par with Ethereum and Neo, but this time initiated in Russia. What makes Waves interesting beyond its basic feature set is the partnership it's developed with Deloitte CIS in Russia, a unit of the big-four financial services firm Deloitte.
"Blockchain technologies are gaining ground, already allowing start-ups, investors, and other stakeholders to quickly raise significant funds in cryptocurrencies. However, the cryptocurrency market is relatively young, and not all the regulatory mechanisms are in place," states Artem Tolkachev, Director of Legal Services for Technology Projects at Deloitte CIS. He continues, "This is why we are glad to cooperate with Waves Platform and are confident that our joint effort will help create the necessary conditions for putting together the legal framework for blockchain projects both in Russia and the CIS."
Whether Waves will make waves outside of Russia and the Commonwealth of Independent States remains a question. Even so, the partnership with Deloitte makes Waves worth watching.
As I said way back at the beginning of this article, we've looked at just twelve of the many cryptocurrencies out there. Investopedia estimates there are more than 4,000. But even though we've only scratched the surface, this will hopefully have given you an idea of what's available and what's happening in this ever-growing tulpenmanie-like market.
What do you think about blockchain technology and cryptocurrencies? Do you have a favorite? Share your thoughts in the comments section below.