Today’s goal is to get familiar with some of the most well-known cryptocurrencies and their unique characteristics. This will give you a sense of the different types of crypto assets, their purposes, and how they fit into the cryptocurrency ecosystem.
Steps for Day 3
- Research Bitcoin (BTC)
- Background: Bitcoin was the first cryptocurrency, launched in 2009 by an anonymous figure known as Satoshi Nakamoto. It remains the largest cryptocurrency by market cap and is often referred to as “digital gold” because of its limited supply (21 million coins).
- Use Case: Bitcoin primarily functions as a store of value and a medium of exchange. It’s favored for its decentralized nature and strong security.
- Learn About Ethereum (ETH)
- Background: Created by Vitalik Buterin in 2015, Ethereum is a platform for decentralized applications (DApps). Unlike Bitcoin, it’s not just a digital currency but a platform where developers can build and deploy their own applications.
- Use Case: Ethereum’s main innovation is smart contracts—self-executing contracts with the terms directly written into code. These contracts automate and secure various transactions and agreements, enabling applications like decentralized finance (DeFi) and non-fungible tokens (NFTs).
- Explore Other Notable Cryptocurrencies
- Litecoin (LTC): Often called the “silver to Bitcoin’s gold,” Litecoin was developed in 2011 to offer faster transaction times and lower fees than Bitcoin. It’s often used for smaller transactions.
- Ripple (XRP): Unlike most cryptocurrencies, Ripple focuses on enabling real-time, cross-border payments for financial institutions. It uses a different consensus mechanism than proof of work, making transactions faster and cheaper.
- Cardano (ADA): Known for its focus on sustainability and scalability, Cardano uses a proof-of-stake system and aims to support decentralized applications while being more energy-efficient than proof-of-work systems.
- Understand the Differences Between Coins and Tokens
- Coins: Cryptocurrencies like Bitcoin and Litecoin that run on their own independent blockchains.
- Tokens: Digital assets that exist on another blockchain (e.g., ERC-20 tokens on the Ethereum blockchain). Tokens can represent various assets or utilities, from governance rights in projects to unique digital art (NFTs).
- Reflect on How Different Cryptocurrencies Serve Different Purposes
- Each cryptocurrency has a distinct purpose and use case, from functioning as digital currency to powering complex decentralized applications. This diversity highlights how cryptocurrencies are evolving to meet various needs and how they are more than just “digital money.”
