Many people think that cryptocurrency just means bitcoin and that it’s a small number of enthusiasts involved. They are wrong on both counts. The digital currency market is growing rapidly, and so are the platforms and technology surrounding it.
Bitcoin was the first decentralized cryptocurrency created in 2009. It remains the most popular and accounts for 46% of total crypto market value. The currencies that subsequently followed bitcoin’s model are collectively known as altcoins.
As of April 2021, over 100 million people hold cryptocurrency, and there are over 10,000 different types of digital money. However, they vary considerably in design, popularity and purpose.
How do cryptocurrencies differ from one another?
There are four main types of cryptocurrency: Proof of Work (PoW), Proof of Stake (PoS), Tokens, and Stablecoins. Understanding in any detail would require a lot of studying, but as a brief introduction, a good start is the original and still the most popular type – PoW.
Bitcoin is the most famous digital currency and is a PoW. It uses blockchain technology that allows users to make transparent peer-to-peer transactions visible to all, but only the owner can decrypt a Bitcoin with a unique key.
One of the main issues with Bitcoin and PoW is the sheer processing power needed. It does not scale well, and the power usage is unsustainable. To make things more efficient, Litecoin was released in 2011 as an alternative, and so were others like Bitcoin cash. These function in a similar way but were designed to have faster transaction times.
Probably the best-known altcoin is Ethereum, launched in 2015 and roughly 19% of Bitcoin’s size. Ethereum’s focus is more of an open-source platform that uses blockchain for decentralized applications. The currency used by the app developers and users is a token called Ether.
However, the power requirements demanded by the PoW blockchain system, (equivalent to a small country like Sweden,) are proving problematic.
The PoS system is more scalable. Proof of Stake gets its name because participating nodes use their own cryptocurrency holdings as a deposit for transactions. This makes processing speeds faster and should avoid some of the bottlenecks of PoW. At present, only smaller cryptocurrencies use PoS, but as Ethereum is currently shifting from PoW to PoS, that will soon change.
These two currency types are defined by the technology used. Tokens are different in that they aren’t used as a general-purpose currency. They exist as part of an existing blockchain, such as an Ether token for Ethereum. They represent value but only in the system for which they were created. This makes them vulnerable to the problems with their ecosystem. There are thousands of tokens currently in existence.
Finally, there are Stablecoins. These exist to combat one of the main drawbacks of cryptocurrencies – volatility. Stablecoins are linked to fiat currency or gold for stability. They are a hybrid between standard cryptocurrencies and tokens.
Where can you learn more about cryptocurrencies, and how can you get involved?
To an outsider, cryptocurrency can be confusing and seem overly complex. However, organizations and platforms are springing up that are trying to help people enter the crypto world. Some of them even include online academies, a market with the major currencies, and a secure wallet to store the coins.
An excellent example of this all-in-one approach is Spanish-based Bit2Me. To help those who want to be involved but don’t know where to start, the platform created an academy. The platform’s VP of Expansion, Koh Onozawa, is a firm believer in learning about cryptocurrencies before taking the plunge.
Onozawa explains, “We understand that taking the first steps into the world of cryptocurrency can be daunting, but with a deeper understanding and knowledge, those fears soon dissipate. So, we started our own academy. We now have over 50 hours of online courses, face-to-face workshops and a database of knowledge, articles and materials.”
The idea is that rather than take a gamble and be anxious about price swings, an informed investor will understand the market and know what is driving the volatility. The approach is proving popular. The Bit2Me Academy is free and had over 1.7 million students in 2020 alone.
When someone wants to invest, they can remain within the platform to make their purchases. “Our platform allows users to trade over 50 cryptocurrencies,” Onozawa says, “including Bitcoin, Ethereum, Cardona, Ripple and even Dogecoin. It is hard to give an exact number because new currencies are being added all the time.”
Another advantage of using a platform like Bit2Me is that wallets and security all come as part of the platform. “We take security very seriously. There have been some famous cryptocurrency thefts, so we ensure safety by implementing Second Authentication Factor (2FA) and instant notifications of transactions. We also keep 98% of digital currency in cold storage and are insured for more than the total amount we hold,” Onozawa adds.
Platforms are making entry into the world of cryptocurrencies a lot easier
Even those who have been trading in digital currencies since the start may use such platforms to stay current with new altcoin developments and connect with others in the community.
For everyone else, they are increasingly becoming a necessity. The sites help people understand and keep on top of the rapidly expanding world of cryptocurrencies and provide a market for trading a vast number of currencies in a very safe environment. As the sector grows ever larger and more complex, digital currency platforms will only get more popular.