Since the birth of Bitcoin 10 years ago, hundreds of imitators have appeared, and even more cryptocurrencies have been created in an attempt to solve different issues we see in society. Whilst Bitcoin is seen as a form of money, you also have smart contract platforms such as Ethereum, data storage platforms such as Siacoin, and even computational power-sharing platforms such as Golem. Here are a few different types of cryptocurrency and how you can use them.
Bitcoin
Bitcoin is the original cryptocurrency. Although it has since split into different versions, on the whole their aims are the same – it’s just that the paths they take to reach that end goal are different. Bitcoin can be used to purchase goods in any outlet that will accept it, but it can also work in a similar way to PayPal if you want to send your money overseas. The benefits of Bitcoin over PayPal are cheaper fees and that there is no centralised company that can stop you from sending your money. Bitcoin doesn’t need a central authority to process transactions.
In the early years of Bitcoin’s life, a lot of people used it to buy drugs on the dark net. Since then, tracing illegal transactions has become much easier for law enforcement agencies. Nowadays, Bitcoin is used for much more traditional transactions, although there is still a long way to go for it to be used in day-to-day life for many.
Smart contract platforms
Cryptocurrencies such as Ethereum and EOS are based upon the idea of smart contracts. In their simplest form, smart contracts can facilitate the nature of a normal contract, just digitally. Smart contracts are nothing new, with Nick Szabo exploring this idea in the 1990s. Ethereum has evolved into its own beast however. Since Ethereum is also a platform that can be built upon, many cryptocurrencies are built on top of the Ethereum network.
This ultimately led to the ICO boom of 2017 which partially turned Ethereum into nothing more than a fundraising platform. With the ICO craze dying down, this trend has since slowed, although competitors such as Tron have jumped on board a similar train.
Ethereum can still be used to send and receive payments, but the possibilities go much further. The plethora of different tokens built upon Ethereum may mean you use the network without even realising it. There are games and gambling apps amongst many other tokens.
Data storage
There are always going to be risks associated with storing files in the cloud via Dropbox or Google. Firstly, although these are gigantic companies with high levels of security, it doesn’t guarantee that your files are safe. If the central database is hacked, then your files could disappear. There is also a slight chance that private documents could be snooped on by those companies charged with protecting your data.
Data storage cryptocurrencies such as Siacoin or Storj aim to decentralise the online storage system. Through them, you share your files with other members of the network (who wouldn’t be able to access them) and pay those hosts in cryptocurrencies. Not only is the system more secure from hacks as it will employ a blockchain, but it also encourages the sharing of money between participants instead of a large central company.
Computational processing
Golem is a platform built upon Ethereum. It shares similar ideas to Siacoin and Storj mentioned above. However, Golem aims to use the spare computational processing power of your computer and harvest it for other uses such as rendering. If I was to have unused computing power, another person could then pay me in Golem to use it themselves. With the vast amount of computers sitting idle for large periods of time, this could be an extremely effective way of reorganising energy.
Privacy coins
Whilst Bitcoin tracing has become more common, there are anonymity coins such as Monero and Zcash that aim to prevent this. They both have similar goals to that of Bitcoin in that they work as a medium of payment. You can purchase goods with both and send money internationally without relying on a third party. It remains to be seen how these privacy coins will come to be viewed by the authorities and nation states however. Until they grow in popularity, it is unknown whether the authorities will attempt to clamp down on them.
Conclusion
Since the birth of Bitcoin and the blockchain technology that accompanies it, there have been numerous ideas on the best ways to utilise this technology. There are many more different types of cryptocurrency aiming to do a variety of things than just the ones listed above. Whether all of them or none of them will achieve success remains to be seen. There are many who believe that anything other than Bitcoin is doomed to failure and others who see a world in the future full of varying types of cryptocurrencies.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.