The total cryptocurrency market size peaked above USD 2 Trillion in 2021. Cryptocurrency, as the name suggests is a form of currency that uses encryption and is native to the digital internet. The currency is fully digital, there is no physical bills or coins, and, it can be stored both online and offline in digital wallets.
Bitcoin is considered the "King" of cryptocurrencies and its market cap crossed USD 1 Trillion in 2021.
The next logical question is, what can you do with cryptocurrencies? The answer is that it varies and is different for the different cryptocurrencies. Each cryptocurrency has its own use case(s) and is traded in the crypto market against regular currencies as well as against certain other cryptocurrencies, and so, the market decides the value of the currency.
Comparison with Fiat Currencies
Fiat currencies are issued by sovereign governments and each fiat currency is used within geographic regions. Cryptocurrencies are native internet money backed by blockchain and cryptography technologies.
- Traded in exchanges.
- Liquidity exists for top currencies.
- Can be converted from one currency to another.
- Can earn passive income via interest.
- Decentralized, not backed by any central issuing authority.
- Digital money that can be transacted from peer to peer without an intermediary.
- Is not a legal tender accepted by sovereign governments.
- Cannot be used freely for purchasing goods and services.
There exists a number of cryptocurrencies and new ones are in the works in a variety of domains. Let's take a look at the top cryptocurrencies by market cap.
Bitcoin is the first successful cryptocurrency that was created after the 2008 financial crisis by a person (or group of people) with the pseudonym Satoshi Nakamoto. Satoshi's real identity remains unknown as of 2021, and Bitcoin has grown leaps and bounds to become the king of all cryptocurrencies.
There are only a maximum of 21 Bitcoin that can be mined and hence the bitcoin has evolved into a store of value and has been dubbed "digital gold".
As of 2021, Bitcoin has gained mainstream acceptance with several merchants accepting Bitcoin for payment, ETFs in Canada, C
- Fixed maximum supply of 21 Million Bitcoin.
- 1 Bitcoin = 100 Million Satoshis.
- All the bitcoin will be mined by year 2040.
- Uses the proof-of-work algorithm based on the SHA-256 hashing function.
- Store of value.
- Listed on exchanges under the symbol BTC.
Several high speed Layer 2 solutions are being built on the Bitcoin Lightning network that extend Bitcoin beyond the store of value use case.
Ethereum is an open source blockchain founded in 2013 that has the smart contract functionality. Ether (ETH) is the native token of the Ethereum blockchain.
Ethereum has evolved to become the most favorite chain for DeFi apps due to its revolutionary smart contracts feature.
Each transaction recorded on the blockchain is charged a fee called the gas fees that is to be paid using Ether the chain's native currency.
- Second largest cryptocurrency by market cap.
- Most actively used blockchain.
- Smart contract functionality.
- Uses the proof-of-stake algorithm.
- Listed on exchanges under the symbol ETH.
- Popular blockchain for NFTs and DeFi
ETH is the native token of the Ethereum blockchain and ERC-20 is the standard that can be used to create other tokens. BAT, MKR and OMG are some examples of ERC-20 tokens.
Binance coin is the native cryptocurrency of the Binance exchange and can be used to pay the trading fees in the Binance exchange. It can also be traded or exchanged for other crypto and fiat currencies.
Binance coin, the native token of the Binance cryptocurrency exchange, was launched in 2017.
Binance is a cryptocurrency trading exchange and BNB token holders get discounted fees on trading fees if paid with BNB.
- Created in 2017 using the ERC-20 standard.
- ERC-20 tokens converted in 2019 to native tokens on the Binance chain.
- 153 M coins in supply as of Apr 2021.
- Uses proof-of-work with the Scrypt algorithm.
- Listed on exchanges under the symbol BNB.
- Accepted as a form of payment by select online merchants.
Binance launched the Binance Smart Chain (BSC) in 2019 and BNB tokens work with both Binance Chain (BC) and Binance Smart Chain (BSC).