The Technology Behind Top Crypto Currencies
Cryptocurrency adoption increased in recent months for Ethereum, Bitcoin, Cardano, Polkadot, and more. A breakthrough happened in the industry when giant companies like Tesla and Paypal started to accept digital currencies in their payment.
For many crypto owners, it is just another currency or new investment, however, there is great technology behind many of the top cryptocurrencies.
Although the majority of cryptocurrencies use blockchain technology, however, there is more into the ways it is utilized and the use cases for each currency. Additionally, some of the currencies use tangle technology, a scalable alternative comparing to the blockchain.
Ethereum is a programmable blockchain that provides the ability to build decentralized applications (Dapps) using the Solidity programming language. The Dapps are controlled by the logic written into a smart contract instead of a person or central authority.
The digital currency allows sending peer-to-peer transactions using a consensus protocol, where multiple nodes in the network must agree to validate the transaction. Ethereum uses proof of work for consensus where the network nodes compete to execute the transaction and the race is won by the fastest computer to solve the math puzzle. An (eth) fee is paid for each transaction called gas.
Etherium 2.0 is a new version under development that uses proof of stake, which saves lots of energy by selecting the validator nodes randomly based on the provided proof of stake. The proof of stake requires you to allocate a minimum of 32 Ethereum to participate in the mining, the more you allocate the more likely you are to be selected to validate the transaction.
Website | Code | Stake Eth2
Chainlink is a decentralized oracle network built on top of Ethereum. It provides a secure and quality connection to blockchain technology.
Any external application or API that wants to access the information of any blockchain can use the chainlink network as a middleware connection. The same for the smart contract can access any API through the chainlink nodes.
The operators that run the network will be paid using Link cryptocurrency which is the reason behind it is value. Additionally, the data providers can sell their APIs to the chainlink network.
Website | Code | Become Operator
The listing will not be complete without the first decentralized currency that started the adoption of blockchain technology. Bitcoin is called the gold of the internet due to the maximum number of supply causing price increase each period. There is a maximum of 21,000,000 coins that will ever exist.
Bitcoin is a currency that does not require a central authority and uses peer-to-peer technology to send the transactions. It is built using a blockchain concept where each block stores a unique identifier hash (like a fingerprint) and the hash of the previous one. This makes it harder to hack, any change in the block will change the hash value and break the chain.
Bitcoin mining — multiple compute machines participate to solve complex mathematical problems in order to create a new bitcoin or validate a transaction. The fastest minors that execute the transaction will be paid a fee by the network users.
Website | Code | Mining Tool
Cardano is a blockchain platform that can be used to send and receive funds with focus on environment sustainability and efficiency. The team behind Cardano published multiple papers that improve the proof of stake concept.
Proof of stake is based on the consensus protocol where the network nodes participate to produce blocks and validate the transactions. Each participant node provides an ADA stake to increase the likelihood to be selected to execute the transaction.
Cardano built with the external world in mind, it can connect with other blockchains and entities without the need for middleware.
Website | Code | Stake & Earn
Polkadot is a network protocol to transfer any data to any blockchain whether it is public or private. It is an open-source framework that allows building services using the Substrate framework. The development with substrate is beyond smart contracts, it allows to build scalable blockchain based on your business use case and utilise the network security/speed.
The benefit of Polkadot is the consistency across different technology in a secure, scalable, and fast ecosystem. Dot is the native token of the Polkadot network and the smallest unit of account called Planck.
Website | Code | Polkadot Stake Video
Stellar is a decentralized payment network focused on moving different currencies fluently and cheaply. It aims to be the middle language between cryptocurrencies and fiat money transactions, providing SDKs and APIs for the financial institutions to utilize the network.
Lumens (XLM) currency is the asset of the stellar blockchain network. Stellar transfers the money by exchanging any currency to XLM, sending it using the decentralized network across the globe and then exchange to the target currency in return for a minor fee.
Transaction fee = # of operations * base fee
Participating in the Stellar network with a validator node does not generate direct income like Ethereum and Bitcoin. The intensive more toward businesses and exchanges to build their secure network and accessing the historical data and accounts states.
Web based blockchain that provides open infrastructure to build decentralized applications (Dapps) using smart contracts. The network use proof of history to validate the transactions which make it faster and scalable by giving each event a unique hash and count referring to the time.
Solana is a high performance layer1 blockchain, which means it does not require another layer or solution to scale and handle large transactions. Sealevel is one of the technologies that come with Solana to provide parallel smart contracts, allowing non overlapping transactions to execute concurrently.
Website | Code | Become Validator & Earn
IOTA is designed for connected devices and handles huge amounts of data between internet of things (IoT). It is different from the transitional blockchain by using Tangle which is based on directed acyclic graphs (DAG).
DAG is block-less technology meant to eliminate the waiting time to generate a block or mining activities. Each new transaction builds on previous ones and does not require verification across all the ledger. When a user issues a transaction will validate two random previous transactions which validate another two.
Other cryptocurrencies with their DAG variance:
- Nano: low latency digital money.
- Hedera Hashgraph: decentralized governance model for enterprise applications with a native cryptocurrency called HBAR.
How to buy cryptocurrencies
Cryptocurrency is a fluctuating market and you should be careful if you don’t have previous experience. Timing is important to avoid purchasing the top of the bull run.
Some of the trusted centralized exchanges:
- Coinbase: is a popular crypto market, it is easy to use and provides mostly the trusted currencies. It is one of the easiest to transfer fiat money from your credit card or the bank.
- Binance: Largest cryptocurrency exchange and available in many countries. It includes many new altcoins that might be riskier to trade. The transaction fee is fairly low.
- Kraken: modern user experience for digital currency with low fees.
- Official cryptocurrencies websites.
- Public companies owning Bitcoin: link
Update 28 May 2021: Tesla accepted bitcoins for a while, then postponed this decision; however, it owns cryptocurrency as a company asset. Although, this article focus on technology not trading, adding this update to make the data complete.