Different coins are produced and spent differently. Some coins, like Bitcoin, Monero, and Dash are created through a process called mining. Mining is a new way to create Crypto coins using powerful computers that solve complicated cryptographic codes and puzzles.
To understand how cryptocurrencies differ from each other, one must learn what are cryptocurrencies.
Cryptocurrency is a digital money form that enables people and institutions to spend them over the same goods and services that they buy using their traditional fiat currencies – dollars, euros, yen, etc. To note that cryptocurrency’s total value reached almost USD 600 billion at the end of 2017.
Bitcoin, which was created by Satoshi Nakamoto in 2009 and is the world’s first cryptocurrency, was the first to enter the market. Although there have been many failed attempts to create similar cryptocurrencies, Bitcoin’s rise became the beginning of the cryptocurrency’s mainstream.
There are more than a thousand types of cryptocurrencies in use today. They can be divided into various groups such as tokens that are mainly used to purchase services of a specific blockchain-based platform, and coins (such as Bitcoin and other cryptocurrencies known as altcoins). Altcoins provide varying levels of anonymity and speed in transactions. The word “coin” does not actually mean real or tangible coins. It is used as a metaphor, as there are no coins on the blockchain.
The process of “mining” applied to coins like Monero, Dash and Bitcoin, involves the usage of powerful computers that can analyze technical codes and digital pictures. When the cryptographic puzzle is solved, the winner called the “miner” is rewarded with coins. These coins can be bitcoins, dash coins, etc. The owner of these coins has now the ability to sell them in the market.
Other types of coins, like NEM (XEM), have developed their own special algorithms that do not require powerful hardware. On another hand, there are cryptocurrencies like IOTA and ripple that cannot be mined since they are created by an organization that stands behind the currency.
Bitcoin is the most popular cryptocurrency when it comes to spending. Its decentralized nature and its wide acceptance among merchants make it a great choice for everyday transactions. Other cryptocurrencies, like Litecoin and Dash, are working on optimizing their spending possibilities and expanding their daily use. However, some cryptocurrencies are not created for the main purpose to be used on a daily basis. As an example, Ether’s purpose is to be used to pay for services offered by the blockchain-based Ethereum platform, in order to create and use applications on it.
Other important differences between the various cryptocurrencies involve privacy and transaction speed. At the moment, Bitcoin is not as secure as other options like Ethereum. Its transactions are slower and less anonymous than those in Dash or Monero. Bitcoin can definitely enhance its features by increasing its privacy and speed in the future, especially since it currently appeals to the biggest developer ecosystem.