Types of cryptocurrencies – list, advantages and disadvantages, ways of earning

The content of the article

• What is cryptocurrency?
• Appearance story
• What is the difference between digital currency and ordinary money
• Types of Cryptocurrencies
• Electronic currency bitcoin
• What are forks
• Distinctive features
• Decentralized Accounting for Digital Counting Units
• Using cryptography
• Independence from government or financial institutions
• Transaction Irreversibility
• The presence of the upper limit of total emissions
• Where to get cryptocurrency
• How cryptocurrency works
• Cryptocurrency mining – what is it
• How to mine electronic money
• Cryptocurrency Exchange Rates
• Advantages and disadvantages
• How to make money on cryptocurrency
• Investments
• Cryptocurrency trading

Just 9 years ago, bitcoin appeared as an innovative financial instrument for payments, savings, mutual settlements and earnings. At first, few seriously took him as a substitute for fiant money. Existing electronic payment systems, bank payments for non-cash payments operate with virtual monetary analogues of paper money. The increase in the number of bitcoins and the volume of transactions with it was proved to all by cryptocurrency – this is an electronic form of the currency of the future, a real replacement for fiat money, especially when making payments between different countries.

What is cryptocurrency?

The usual money for us is issued by the central banks of different countries. Their value is influenced by decisions of governments, economies, international trade. Cryptographic currency is a fundamentally new instrument of mutual settlements. To generate coins, or mining, it is necessary to produce a certain mathematical calculation algorithm. Each crypto-unit is a sequence of blocks, and each of the blocks is a complex mathematical formula. To create a new coin, you need to generate a new chain of transaction blocks.

Appearance story

The emergence of bitcoin was a continuation of the development of the concept of blockchain. This term translated from English means a chain of blocks. A group of programmers, led by Satoshi Nakomoto, introduced the concept of cryptocurrency, based on the principle of generating chains of blocks, each of which is calculated according to a certain mathematical formula. To create a crypt called mining, we use the computing capabilities of computers in which video cards have the most powerful mathematical functionality.

What is the difference between digital currency and ordinary money

Unlike fiat money, the reproduction of cryptographic currencies is independent of countries, governments, and international relations. The cryptocurrency rate in relation to other currencies is affected only by the complexity of their mining and the demand for it to make mutual settlements. Any programmer is able to issue cryptocurrency. Operations with the bitcoin created in 2009 began after 2011, when there were public electronic wallets for storing it and methods of transferring from one owner to another.

Types of Cryptocurrencies

More than 700 of them with a different exchange rate and number of coins have been created and are on the cryptocurrency market. The main one is bitcoin cryptocurrency. The maximum possible amount in circulation is 21 million bitcoins. Its course on May 27, 2017 exceeded the $ 3,000 mark. As of July 21, 2019 (hereinafter) it is equal to 2732 US dollars. Its capitalization exceeded $ 44 billion. All crypts on cryptocurrency exchanges are quoted relative to bitcoin. The most popular cryptocurrencies are:

Litecoin:

• Lightcoin launch took place in 2011;
• Bitcoin derivative by Charles Lee;
• takes second place in the list of btc forks after Namecoin;
• has a limit of 84 million coins.

Peercoin:

• electronic payment system appeared in August 2012;
• based on Bitcoin code;
• developers are Scott Nadal and Sunny King;
• At the heart of Pircoin there is an additional cryptocode called PoS – proof-of-stake.

Namecoin:

• the first issue of coins in April 2011;
• based on Bitcoin code;
• creates its own DNS server;
• it is very difficult to mine namecoins.

Feathercoin:

• appeared on the market on May 3, 2013;
• author unknown;
• identical data hashing algorithm with Litecoin;
• limit 336 million.

Freicoin:

• was created in 2013 based on Bitcoin;
• the maximum number of coins produced can be 100 million units;
• 5% annual tax is automatically deducted in the system from the amount earned.

Ripple:

• established in 2012;
• its creator Jed McCaleb, work continues the company RippleLabs;
• The system is open source;

Nem:

• NEM (New Economy Movement) means “new economic movement” or “movement for a new economy”;
• became known in 2015;
• Original open source
• using the POI (Proof Of Importance) algorithm determines the user who will generate the next block.

Ethereum:

• the launch took place on July 30, 2015;
• authors Vitaly Buterin and Gavin Wood;
• functions are not limited to electronic currency, thanks to the technology of smart contracts, they are used when registering transactions, when exchanging resources;

Zcash:

• in the market since the fall of 2016;
• The team of cryptographers from the most famous universities in the world is engaged in the development;
• based on the new zero-knowledge proof confirmation protocol (zk-SNARK);
• absolute anonymity of this payment system.

Dash:

• renamed from Darkcoin in 2015;
• Security and anonymity of transactions;
• the daily turnover of DASH is 7% of the total turnover of cryptocurrencies;
• DASH mining does not require many resources;

Electronic currency bitcoin

When creating Bitcoin, several ingenious principles of its mining were invented. Seeing how quickly the price and popularity of the first-born grew, many unique services related to it appeared. The independence of Bitcoin and the increase in its value prompted the leadership of several large countries, such as China, to use it as one of the reserve currencies. Now it is more difficult to mine bitcoins, the cost of electricity for their reproduction begins to exceed its exchange rate.

What are forks

One of the advantages of Bitcoin was the openness and public availability of its code. After it became clear about the financial prospects of cryptographic currencies, varieties of digital currency, copies of bitcoin or forks began to appear. Their number is already more than 700. A feature of cryptocurrency forks is an improved cryptographic code compared to bitcoin. They require lower mining costs, therefore they are popular for small mining farms..

Distinctive features

The main feature of most cryptocurrencies is their generation on the basis of the blockchain according to certain procedures. Blockchain implies the continuity of each subsequent coin of information of the entire previous chain of blocks. Cryptocurrencies differ in program code, initial and maximum emission amount, and the complexity of mining electronic gold. Many special exchanges have appeared on the Internet, in which the value of cryptocurrencies is determined by the demand for digital coins.

Decentralized Accounting for Digital Counting Units

All these actions are carried out in a decentralized way – anyone can connect to this process. A real crypto has only a creator, and there is no central authority for accounting and control over mining. All information about the serial number and the entire previous chain is in each block. On the forks market, offers of crypto-like HYIP projects appear, which are described in terms of cryptocurrencies and blockchain technologies, but are financial pyramids. In them, superior partners receive rewards from sales.

Using cryptography

Many people face cryptography when encrypting wallet logins. When generating bitcoin, two types of cryptography are used. As a result of mining, a new coin is created in digital form. A message creation profile (hash) is created with the first type of cryptography. The second type is used to encrypt an electronic digital signature for each part of the entire bitcoin chain. These signatures are stored on the wallets of Bitcoin owners. Signatures are not repeated, while it is easy to verify the authenticity of the amount of crypto that is on the wallet.

Independence from government or financial institutions

The emergence of crypto-money and the growth of their popularity were so rapid that state authorities were not ready to understand and evaluate the extent of what happened. They are completely independent from national governments and banking institutions. This decentralization is one of their main advantages, which encourages many countries to start using cryptographic currencies for international payments and as reserve currencies. Bitcoin operations are increasingly being conducted on global financial markets..

Transaction Irreversibility

Among the few drawbacks of crypto-money systems is the irreversibility of transactions. This follows from their full independence from regulatory authorities. In the operation of transferring bitcoins or other coins, fraud is impossible. The same makes more serious demands on the selection of partners in these operations, verification of their reliability, and the absence of fraudulent activities when advertising goods and services on the Internet.

The presence of the upper limit of total emissions

A tool for preliminary protection of issued crypts against inflation is to limit the limit of their total emission. Miners should pay attention to this characteristic when choosing a fork. If the number of coins issued approaches its limit, this means a rise in price of mining, but also an increase in the exchange rate. Some crypts do not have a release limit. This is an additional possibility for them to issue due to their existing quantity for each miner..

Where to get cryptocurrency

There are several ways to purchase, start using and making money on crypto:

• it is possible to buy, and then, with an increase in the market value, sell coins in exchangers;
• cryptocurrency exchanges are called upon to exchange fiat money for the selected forks and to carry out their trading by buying when lowering, and then selling when their exchange value increases;
• the most financially and energy-intensive way is mining. It will require a decent investment of funds, a constant upgrade of farms, but the income from this will be high.

How cryptocurrency works

First, the client downloads an electronic wallet to a computer or smartphone, in which he stores crypts. Buying is carried out when contacting an exchange office or a crypto-exchange. Having exchanged your fiat currency for a crypt, indicate your wallet, to which it is credited. If you need to pay for goods or services in your wallet, there is a “transfer” function, similar to money transfers. Indicate in it the wallet identifier of the crypto-money recipient, the amount, confirm the transfer. There are no restrictions for wallet owners.

Cryptocurrency mining – what is it

The process by which cryptocurrency is mined is different from the extraction of gold or coal. Mining begins with the assembly of the farm. To accomplish this task, we take the motherboard of a conventional PC, a server or a more powerful power supply, a hard drive, a monitor and several powerful video cards with additional cooling. The speed, quantity, processing power of video cards will determine the mining power of the farm. Install a specialized mining program, launch it, select a pool and fork, start the mining itself.

How to mine electronic money

At the first stage of mining, a fork, or a variety of cryptocurrency, for example, cryptocurrency sync, is selected. The selection criteria are:

• profitability – profitability of reproduction compared with costs;
• market liquidity – the ability to quickly and profitably sell on the exchange or exchanger;
• the complexity of the encryption algorithm makes farm hardware requirements.

The next stage is the selection of the pool, the registration of its workers – mining computers. An important characteristic of the pool is its commission, or the fraction of the price of the block that you will get. Next, a miner is selected – a coin mining program:

• cudaminer – for mining on Nvidia graphics cards (GPUs);
• cgminer – for mining on ATI graphics cards (GPUs);
• pooler cpu miner (minerd) – for mining on processors (CPU).

To start mining, you need to carry out a number of simple operations, the type and sequence of which depends on the chosen miner. The final step will require the conclusion of the crypt. To do this, a wallet is downloaded from the fork’s site, and cryptocurrency earnings are displayed on it for further resale on the exchange or exchanger. The income of people who are engaged in mining forks depends on the use of the computing power of video cards, the power of computers, the correct choice of initial conditions.

Cryptocurrency Exchange Rates

Advantages and disadvantages

The advantages of crypto money are:

• earnings around the clock, accessible to all;
• low transaction fees;
• lack of taxation;
• the use of crypts to pay for goods, settlements with customers of different countries;
• ways to earn cryptocurrency are available to everyone.

The cons include:

• lack of regulators of release and turnover – the client is guilty of errors;
• inability to return an erroneous payment;
• there are risks of bankruptcy of the cryptocurrency exchange;
• all cryptocurrencies have high volatility.

How to make money on cryptocurrency

There are several ways to make money on cryptocurrencies:

• cryptocurrency mining, in which income depends on the capacity of farm equipment;
• their use as an object of profitable investment;
• trading on cryptocurrency exchanges – special services for the sale.

Investments

The increase in the value of the ancestors of all crypts showed their promise as an object of accumulation and investment. The average growth of the main cryptocurrencies for the first half of 2019 was 800%. Such profitability cannot boast of most high-yield investment programs. For miners, it is recommended that 50% of the income be left in the crypt. With an increase in the market value, mining profitability increases several times. This rule increases the efficiency of the entire process..

Cryptocurrency trading

To make money on forks, the traditional method of trading is used. To do this, you need to register on the cryptocurrency exchange. For example, it is proposed to consider the yobit.net exchange. Upon registration, the client creates wallets in rubles, dollars and all crypts, transactions on which are carried out on the exchange. The client replenishes the account in monetary units. Then creates an application for the purchase of bitcoins – indicates the desired purchase rate, the amount of the transaction. When there is a participant in the exchange – a seller of bitcoins at the rate you specified, a transaction occurs. Further bitcoins change to any fork.