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The Top 5 Blockchain in the Cryptocurrency World
Blockchain is often seen as a revolutionary technology, much like the internet was regarded two decades ago. Granted, the technology is still in the early stages, plus there is a tremendous amount of work required to foster awareness of this ground-breaking technology. As it stands, more than 2,000 cryptocurrencies exist in the open market that use blockchain technology for a wide variety of applications and use cases. However, before examining the top five blockchains in the cryptocurrency market, it is important to understand the various different types of cryptocurrency.
The cryptocurrency market can be divided into three major categories:
- Cryptocurrency Coins: These are coins that are used as a transfer of value or a medium of exchange. The main purpose of a cryptocurrency coin is to function as digital cash. Cryptocurrency coins have their own native blockchain, for example, Bitcoin (BTC), Monero (XMR) and Bitcoin Cash (BCH).
- Protocol Coins: Coins that are native to a protocol blockchain that retain additional functionalities for the development of decentralized applications (dApps) and the use of smart contract technology. Like cryptocurrency coins, protocol coins also have their own native blockchain.
- Tokens: Tokens are digital assets that are built on top of another blockchain protocol. Tokens do not have their own blockchain.
Over 90% of cryptocurrencies in the market are classified as tokens, since they leverage existing blockchain platforms to issue their own coins. When discussing the different blockchains available in the cryptocurrency world, protocol coins are the most referenced cryptocurrency category. To clarify: although blockchain represents the underlying technology, and cryptocurrencies are the manifestation of value, we are referencing protocol coins as synonymous with protocol platforms, since a public blockchain platform always has its own native coins. Therefore, when protocol coins are discussed, the protocol underlying these protocol coins are native and synonymous to the coins themselves.
Top 5 Blockchains
Blockchains are initially conceived as a decentralized, public ledger that is open to everyone. Although private blockchain solutions do currently exist in the market, we are keeping the original vision of blockchains as a public platform, and omitting ‘permitted’ blockchains from the list, looking at the top five blockchain solutions that function as a protocol. Blockchain protocols can be viewed as the underlying infrastructure on which applications are built and stand to profit from any growth in the ecosystem.
Founding Blockchain: Bitcoin Blockchain
Bitcoin is regarded as the ‘founding father’ of decentralized cryptocurrencies, with its creation back in late 2008 spearheading the development of a vibrant ecosystem of coins and tokens that we see today. Although Bitcoin functions as a medium of exchange rather than a blockchain protocol, the underlying technology that powers almost all of today’s cryptocurrencies mirrors Bitcoin’s blockchain. The creation of Bitcoin kickstarted the entire cryptocurrency industry, and its blockchain represents the holy grail for all other blockchains.
The Bitcoin blockchain is extremely secure due to its distributed nature; there is no single-point of entry and the cryptographic functions within its blockchain mechanics ensures that transactions are recorded and stored in an extremely secure manner. Bitcoin’s blockchain uses a Proof-of-Work (POW) mechanism to establish consensus across its distributed network. POW requires the use of tremendous energy consumption and sophisticated computer hardware to secure Bitcoin transactions all over the world. Bitcoin’s POW consensus mechanism is considered to be the crowning jewel in the field of distributed computing, since it allows a distributed and decentralized network to agree to a single truth that is accepted by everyone, something which had not been accomplished in the field of computer science and cryptography prior to the advent of Bitcoin.
Bitcoin’s supply is fixed at 21 million and is considered a deflationary currency since there can be no more Bitcoin minted after reaching the 21 million cap. It takes an average of 10 minutes for a single block of transactions to be secured on the blockchain, amounting to over 2,000 transactions within a single block. Therefore, the Bitcoin blockchain has the capability to execute four to seven transactions per second.
Ethereum is the first blockchain protocol to allow the creation of decentralized applications (dApps) and smart contracts. Launched in 2015, Ethereum is a decentralized blockchain platform that enables the creation of Smart Contracts and Distributed Applications (ĐApps) without any downtime, fraud, control, or interference from any third party. Smart contracts are a revolutionary feature of blockchain that facilitate the creation of pre-programmed contracts that are automated and self-executed. Ethereum represents the first decentralized blockchain that enabled smart contract functionality, which has tremendous applications and use cases in the real world. Ethereum was founded by Vitalik Buterin to expand the applications of blockchain technology.
“Bitcoin is great as a form of digital money, but its scripting language is too weak for any kind of serious advanced applications to be built on top.”
– Vitalik Buterin, founder of Ethereum, on the limitations of Bitcoin
Ethereum has its own native programming language called Solidity, helping developers to build and publish distributed applications on the Ethereum blockchain. Ethereum is the second biggest cryptocurrency after Bitcoin, but unlike Bitcoin, it allows other dApps to build on top of its blockchain. Currently, Ethereum runs on a POW consensus mechanism. Down the road however, Ethereum plans to transit to a newer consensus mechanism called Proof-of-Stake (POS). POS attempts to acquire consensus in a randomized way, requiring participants (miners) to stake a certain amount of native coins to be able to mine transactions. POS tries to significantly reduce the carbon footprint of POW whilst maintaining the security and integrity of the blockchain. Ethereum has the ability to process much more transactions as compared to Bitcoin, with the capacity to handle approximately 15 transactions per second.
NEO, formerly known as Antshares, is a blockchain platform designed for a scalable network of decentralized applications, with a particular focus on digitizing assets on the blockchain. NEO is China’s first blockchain platform, and is part of a much bigger strategy by the Chinese government to establish itself as a leader in the blockchain industry. Unlike Ethereum, NEO positions itself as a project that focuses on the smart economy by fostering the digitization of real-world assets that enables registration, depository, transfer, trading, clearing, and settlement via a peer-to-peer network. In other words, NEO is trying to build an organic ecosystem for a digital economy.
The native currency of the NEO blockchain is the non-divisible NEO token, which generates GAS tokens that are used to pay for transaction fees generated by applications on the network. NEO uses a Delegated Byzantine Fault Tolerance (dBFT) consensus algorithm, where mining nodes are chosen by the NEO community and must adhere to a definite performance requirement, and also simultaneously maintain a minimum amount of NEO coins. An advantage of the dBFT system is that it consumes fewer resources, compared to other consensus mechanisms, and can also support a much higher number of transactions, measured at approximately 1,000 transactions per second. However, it comes at the cost of centralization, where trust must be given to consensus nodes to act within the network’s best interest.
WAVES is a decentralized blockchain platform that focuses on providing a simple interface for users to create their own custom tokens. By leveraging WAVES, users can easily launch Initial Coin Offerings (ICOs) and crowdfund their projects without having to undergo a technical learning curve. A unique proposition of the WAVES platform is the multiple integration of fiat currencies in their native wallet, thereby allowing users to easily trade cryptocurrencies into fiat. On the technical front, WAVES is built on the modular Scorex platform, a system designed to address several major issues in cryptocurrencies, namely scalability, ease of use, and utilizing fiat gateways on the blockchain.
WAVES uses a variant POS consensus algorithm called Leased Proof-of-Stake (LPOS). LPOS allows holders of WAVE coins to participate in the mining process and secure the network while earning more coins by staking their coins. The mining and staking process is a user-friendly and efficient procedure for holders. WAVES also has their own decentralized exchange (DEX) where users can trade their newly created coin in a trading pair with any other WAVES coin. Currently, WAVES can support 100 transactions per second.
EOS takes the crown as the project that raised the highest amount of money, totaling a whopping $4 billion. Similar to the Ethereum blockchain, EOS is a blockchain platform that focuses on providing an interface for the development of decentralized applications and smart contract functionality. The main difference is that EOS focuses on building a decentralized operating system that is able to support enterprise-level applications with a tremendous capacity to scale. In fact, the EOS blockchain architecture can be scaled to handle millions of transactions per second without transaction fees, which is a huge feat given Ethereum’s TPS of 14 on average. EOS is the brainchild of Dan Larimer, the creator of Bitshares and Steem, who invented the consensus mechanism called Delegated Proof-of-Stake (DPOS). It is no surprise that EOS itself uses the DPOS consensus mechanism that allows for tremendous scalability and flexibility.
Stellar is a distributed blockchain that serves as a payment network focused on instantaneous and cheap cross-border transactions, similar to that of Ripple. Stellar’s main differentiator is that it also supports ICOs on its platform, allowing projects to seamlessly raise funding via an ICO format. Stellar is a non-profit network, as opposed to Ripple’s profit entity status. Stellar was founded by Jed McCaleb, a prominent figure in the industry, who founded the Mt. Gox exchange and the Ripple project. Stellar uses a native consensus mechanism called ‘Stellar Consensus Protocol’, which is a consensus algorithm based on Federated Byzantine Agreement (FBA).
One of the core functions of Stellar’s native currency – called XLM – is to facilitate multi-currency transactions, acting as a bridge between currencies. The supply of XLM is in-built, and has an inflationary mechanism that expands annually by one per cent.