When it comes to influential cryptocurrencies outside of Bitcoin and Ethereum, Ripple (XRP) is often at the forefront of the conversation. Unlike Bitcoin, which aims to serve as a decentralized digital currency, Ripple’s primary purpose is to facilitate rapid, low-cost international money transfers.
Ripple’s protocol, the Ripple Transaction Protocol (RTXP), enables the instant transfer of money between two parties. It achieves this by using a distributed ledger system that verifies transactions almost instantaneously. This is a considerable improvement over traditional banking systems, which can take days to process international transfers.
Ripple was developed by Ripple Labs, a technology company specializing in the development of payment and real-time gross settlement system (RTGS) software. It’s crucial to note that while people often use ‘Ripple’ to refer to the cryptocurrency, the actual currency is XRP, and Ripple is the company behind it.
One distinctive aspect of Ripple is that, unlike Bitcoin and Ethereum, it’s not fully decentralized. Ripple Labs holds a significant portion of XRP and maintains some control over the network, which has led to controversy in the cryptocurrency community.
Despite these criticisms, Ripple has achieved significant commercial success. Several large banking institutions, including Santander and Standard Chartered, have adopted Ripple’s technology to facilitate international transfers, citing its speed and cost-efficiency.
But remember, Ripple is just one example of the many cryptocurrencies out there, each with its unique properties and use-cases. Let’s now turn our attention to Litecoin, another significant player in the cryptocurrency scene.
Litecoin, often considered the silver to Bitcoin’s gold, is another crucial player in the cryptocurrency space. Created by Charlie Lee in 2011, Litecoin was one of the first cryptocurrencies to be developed following Bitcoin’s initial success. Lee, an ex-Google engineer and a former Director of Engineering at Coinbase, created Litecoin with the intention of improving upon the Bitcoin model.
While Litecoin operates on a fundamentally similar blockchain technology as Bitcoin, there are a few key differences that set it apart:
- Speed: Litecoin’s block generation time is approximately 2.5 minutes, compared to Bitcoin’s 10 minutes. This means that Litecoin transactions are confirmed roughly four times faster than Bitcoin transactions.
- Total Supply: The maximum number of Litecoin that can ever exist is 84 million, which is four times as many currency units as Bitcoin.
- Scrypt Hashing: Unlike Bitcoin, which uses the SHA-256 hashing algorithm, Litecoin uses a memory-intensive algorithm called scrypt. This was intended to allow more people to mine Litecoin using consumer-grade computers, though in practice, specialized hardware (ASICs) has also come to dominate Litecoin mining.
Like Bitcoin, Litecoin is primarily considered a digital currency and has seen widespread adoption as a medium for transactions. It’s often used by merchants who appreciate its fast confirmation times.
Litecoin’s creation and success illustrate how cryptocurrencies can adapt and optimize the original Bitcoin model to meet specific needs. But Litecoin is far from the only example of a cryptocurrency innovating on Bitcoin’s groundwork. Let’s look at one more critical player in the crypto space: Cardano.
Cardano, represented by its native currency ADA, is another significant player in the world of cryptocurrencies. Launched in 2017 by Ethereum co-founder Charles Hoskinson, Cardano differentiates itself from other cryptocurrencies by emphasizing a research-driven approach to design and development. Cardano’s development team includes numerous academics and scientists who subject all changes and upgrades to rigorous peer-review processes.
This emphasis on academic rigor is evident in Cardano’s layered architecture, which separates the settlement layer (which handles ADA transactions) from the computational layer (which handles smart contracts and computation). This two-layer system aims to provide more security and scalability than the single-layer designs of Bitcoin and Ethereum.
One of the defining features of Cardano is its proof-of-stake consensus algorithm called Ouroboros. Unlike Bitcoin and many other cryptocurrencies that use energy-intensive proof-of-work mechanisms, Ouroboros enables the network to reach consensus and secure the blockchain in a more energy-efficient way.
While still relatively young, Cardano has ambitious plans. Its roadmap includes developing a self-sustaining decentralized ecosystem and implementing advanced features like a treasury system and decentralized voting.
In exploring Bitcoin, Ethereum, Litecoin, and Cardano, we’ve only just scratched the surface of the cryptocurrency world. The diversity and innovation within this field speak to its potential and the new possibilities it opens up for financial technology.
In the next module, we’ll take a look at how to get started with investing in these digital assets, discussing the basics of cryptocurrency wallets, exchanges, and important considerations for risk management. Get started now!