What are cryptocurrencies and what are the most prominent ones?

 What are cryptocurrencies and what are the most prominent ones?

What are cryptocurrencies and what are the most prominent ones
What are cryptocurrencies and what are the most prominent ones

What are cryptocurrencies and what are the most prominent ones?

In this article, we will discuss the following elements:

  • What are cryptocurrencies?
  • What is mining?
  • The difference between digital currencies and cryptocurrencies
  • Types of Cryptocurrencies.
  • The World's Top Cryptocurrency Exchanges.
  • Features and Drawbacks of Cryptocurrencies.
  • Cryptocurrency risks.

Recently, the fame of so-called cryptocurrencies has spread in the business world, among governments, and the general public. They are similar to other paper currencies like the dollar and the euro in terms of their value in purchasing, as well as to some extent in terms of their manufacturing and usage.

What are cryptocurrencies?

 The simplest definition of cryptocurrencies is that they are digital money that allows the owner to conduct business transactions, such as online purchases. Unlike physical currencies, they exist only online. These cryptocurrencies are decentralized, meaning they are not subject to any governments or central banks for their creation or circulation. This means that the users themselves control them and the process of their production, which gives them some drawbacks and features that we will discuss in this article.

 These cryptocurrencies are traded directly between users on the internet, without any intermediaries. The currencies are stored in digital wallets, either on cloud-based platforms or on personal computers. These currencies are sent and received from one user to another through computers or mobile smartphones. These transactions are recorded using blockchain technology, which allows the holders of these electronic currencies to view the records of these transactions.

 Cryptocurrencies are also known as digital or virtual currencies designed to function as a medium of exchange, just like physical money in real life. These cryptocurrencies serve us in paying for products, services, and work, just like we do with physical money.

 However, the use of virtual money can involve risks, including the risk of hacking and theft. This is where encryption comes into play. Encryption is the science responsible for encrypting a message in a way that it can only be read by the intended recipient.

Therefore, cryptocurrencies are digital money protected through encryption, ensuring that they reach their destination without being intercepted or stolen along the way.

What is mining?

 Well, after getting to know about these cryptocurrencies, how can we obtain them? Traditional currencies are manufactured in a specific way in central banks. But how does it work with these digital currencies? These cryptocurrencies are generated through a process called mining or encryption, which is done through specialized computers by solving a highly complex mathematical puzzle known as a hash.

 People around the world compete to solve such complex puzzles, and when a person manages to win a certain amount of these cryptocurrencies, the mining process is completed. However, this process requires advanced and high-capacity computer hardware to perform such complex operations. If you don't have such capabilities on your device, don't waste your time.

 However, there are other ways to obtain cryptocurrencies where mining is not the only method. Instead, you can buy them online using your regular local currency on dedicated online markets. It is also possible for you to sell them to other users, which is known as trading, similar to stock and gold markets. The value of the currency is determined by supply and demand, making it volatile over time.

The difference between digital currencies and cryptocurrencies:

 Digital currencies: They are digital money or electronic currency, which is a type of currency available only in digital form and not physically like banknotes and coins. Digital currencies include virtual currencies and cryptocurrencies, as well as digital money issued by central banks. Digital currencies can be exchanged for physical goods and services, and they can be used to purchase products through platforms like PayPal, for example.

 Digital currencies are known as the money used online and exist only in a digital form. They have no physical existence in the real world. However, they possess all the characteristics of traditional money, such as banknotes. They can be obtained, transferred, or exchanged for another currency. 

 They can also be used to pay for goods and services, such as mobile and internet communications, and in online marketplaces. Digital currencies have no geographical or political boundaries, but they require some identification documents and personal information.

The difference between digital currencies and cryptocurrencies:

  • Digital currencies are centralized, where there are entities that regulate the transaction process within the network. Users need some documents issued by governmental authorities. On the other hand, cryptocurrencies are decentralized and do not require any personal documents, allowing for anonymity. However, all transactions can still be traced.
  • Digital currencies do not allow tracking of financial transactions made through them. Such information is considered confidential and provided through customer service. On the other hand, financial transactions of cryptocurrencies can be accessed by anyone in a general and transparent manner.
  • Digital currencies have centralized authorities that deal with their specific issues and can cancel or freeze transactions upon request from users or authorities if there is suspicion of fraud or money laundering. Cryptocurrencies, on the other hand, have no control or surveillance, and large-scale hacking incidents can occur.
  • There are legal differences between digital currencies and cryptocurrencies. Most countries have specific laws regarding digital currencies, such as Section 4A of the Uniform Commercial Code in the United States. This is not available for cryptocurrencies, and there is no specific law concerning them in most countries. The official status or legal framework for this process has not been determined.

Types of Cryptocurrencies:

The truth is that the market for these cryptocurrencies is growing, with approximately 1,600 highly profitable cryptocurrencies currently available, although it is estimated that there are over 10,000 innovative cryptocurrencies. However, cryptocurrencies and digital tokens with real significance can be narrowed down to a shortlist of 15, which includes the cryptocurrencies that have enough operational capacity to achieve high liquidity and are the most widely used and popular.

1. Bitcoin (BTC):

Bitcoin was created in 2009 by Satoshi Nakamoto, a pseudonym that could belong to an individual or a group, as their true identity has never been revealed. It was created using blockchain technology and its original goal was to be a decentralized form of payment unaffected by government supervision, transaction delays, or transaction fees. This cryptocurrency is considered the original one.

Bitcoin is the first functional cryptocurrency ever created, to be an alternative to the traditional monetary system, known in the crypto world as "fiat currencies." It's worth mentioning that the fiat monetary system, controlled by central banks and a small number of financial institutions, has led to the centralization of wealth and power. 

This has hindered financial and social mobility, resulting in the middle and lower classes being affected by inflation. Bitcoin's goal was to solve this problem and set a maximum limit on the number of units that can be created. By doing so, it aims to avoid inflation caused by money printing.

With blockchain technology, there is no need for any financial institution to facilitate transactions and verify ownership. Today, Bitcoin is mostly used as a form of investment. Its characteristics resemble those of commodities more than traditional currencies. However, its high volatility prevents it from being a legal substitute for physical money, as the value of one BTC is currently very high, making it impractical for use as a currency.

Being the first functional cryptocurrency, Bitcoin remains the most popular and its value has a strong impact on the rest of the crypto market. Throughout its history, it has experienced significant ups and downs. It went from being technically worth $0 in 2009 to reaching $60,000 per unit in February 2021. This means that currently, Bitcoin is not purchased in whole units but rather in fractions of it.

2. Ethereum, Ether (ETH):

After Bitcoin, we have Ethereum as one of the highest-capitalized cryptocurrencies in the market. The currency itself is called Ether, while Ethereum is the name of the blockchain platform that supports it. Ethereum is a blockchain platform for "smart contracts."

While Bitcoin aims to be an alternative to traditional currencies, the purpose of Ether is to be used as a means of payment for utilizing the Ethereum platform. This cryptocurrency serves as a utility token rather than an investment currency.

3. Dogecoin (DOGE):

Dogecoin is a digital currency that was created as a humorous online joke. It was created by modifying the Bitcoin protocol to reach a larger audience than Bitcoin itself.

Despite being considered a "joke" currency, there are currently around 28.2 billion DOGE coins in circulation. Each coin is divided into 100,000,000 decimal places. The advantage of this cryptocurrency lies in its low price, currently valued at only $0.306652.

4. Binance Coin (BNB):

Binance Coin (BNB) is a cryptocurrency issued by the world's largest cryptocurrency exchange, Binance. It has become an attractive payment method that offers the ability to reduce transaction fees for individuals who hold BNB tokens in their accounts. Additionally, you can receive special tokens of this currency as a reward for referring others to use it.

5. Ripple (XRP):

Ripple XRP is one of the largest and most well-known cryptocurrencies today. It is traded on various cryptocurrency exchanges worldwide. Ripple also functions as a payment network for banks, to make your international payment transactions more efficient and cost-effective.

The project is specifically designed for payment transactions between regions that use different fiat currencies, aiming to increase efficiency. Ripple XRP has close ties with the support of many traditional banks since its launch, making it an institutional cryptocurrency.

6. NEO:

NEO is the first open-source Chinese blockchain project. Originally known as AntShares, it was launched in 2014 with a total of 100 million coins already issued. NEO aims to improve upon existing systems by providing a more advanced blockchain technology. In 2017, the project rebranded to NEO.

7. Cardano (ADA):

Cardano is a cryptocurrency that can be used by users worldwide as a secure value exchange without intermediaries. All transactions on the Cardano blockchain platform are permanently recorded, secure, and transparent.

8. Litecoin (LTC):

Litecoin is an open-source cryptocurrency that has emerged as a prominent competitor to Bitcoin. Its creators hope that over time it will become a widely accepted method of payment for goods and services. The source code for this cryptocurrency is open and accessible to anyone. It is a global, fully decentralized payment network and transaction system that allows for instant payments and provides high transparency, illustrating how your project works at each stage.

9. BitBay:

BitBay was launched in March 2014 and is a centralized exchange system based in Estonia. It supports fiat and cryptocurrency pairs and offers low trading fees, with 0% fees for trading in cryptocurrency markets. It allows deposits and withdrawals of four fiat currencies and over 30 cryptocurrencies.

10. Polkadot (DOT):

The philosophy of Polkadot is to solve the problem of interoperability between different blockchain chains at present. It challenges the way blockchains work by allowing external interaction, which is a feature that ensures a high level of security.


IOTA is an open-source distributed ledger platform that utilizes a Directed Acyclic Graph (DAG) structure. Its cryptocurrency was created as a technology for data and device integration, specifically designed to work with Internet of Things (IoT) compatible devices.

12. Stellar (XLM) Lumen:

Stellar Lumens (XLM) is the digital currency of the Stellar network. Stellar is a payment protocol that connects banks, payment processors, and individuals. The platform enables instant, low-cost money transfers regardless of currency or location. XLM serves as a payment method within the network.

13. Chainlink (LINK):

Chainlink is a decentralized platform built on the Ethereum blockchain. Its primary goal is to solve the problem of smart contracts accessing external data sources. The project has its utility token called LINK, which data providers use to charge fees for smart contract interactions.

14. Monero (XMR):

Monero is one of the emerging cryptocurrencies. It is digital, decentralized, and privacy-focused. Unlike Bitcoin, Monero does not allow transaction tracing. It aims to enhance user privacy and anonymity.

15. Tether (USDT):

Tether (USDT) is one of the most widely used cryptocurrencies. It is designed to maintain a value pegged to the U.S. dollar at a 1:1 ratio. This makes it a highly useful cryptocurrency for trading purposes, as it allows operators to avoid market volatility by using it as a stable reference currency equivalent to the primary fiat currency, the U.S. dollar, at all times.

The World's Top Cryptocurrency Exchanges:

1. Hcoin:

30-day trading volume: $39.1 billion

Reflecting the primary interest in cryptocurrency trading outside the US market, the largest exchange by trading volume is HCoin, a new trading platform registered in Seychelles. Launched in August 2018, the company focuses on the Chinese markets and operates as a global platform for fiat and digital currency trading. HCoin users can trade a wide range of cryptocurrencies, including Bitcoin, Ether, XRP, Litecoin, Bitcoin Cash, EOS, USDT, and HKDT. Bitcoin remains dominant despite strong competition.

2. Coinsbit:

30-day trading volume: $35.6 billion

Coinsbit has quickly risen to become one of the most popular cryptocurrency trading platforms today. This exchange prioritizes customer trust and is considered one of the safest options for cryptocurrency trading. Coinsbit has been classified as having a high level of security for its underlying system, especially since November 2019. The exchange also distinguishes itself with InvestBox, a low-risk tool for developers and clients to explore new alternative coins. It provides an easy way to use code-creation mechanisms to facilitate transactions.

3. BitForex:

30-day trading volume: $32.3 billion

BitForex is a Singapore-based exchange registered in Seychelles. It supports over 180 countries and 300 trading pairs, making it one of the largest and most comprehensive trading platforms globally. This contributes to the platform's high liquidity, and there are also numerous other features. BitForex stands out as one of the top cryptocurrency exchanges, with a capacity of processing 1.6 million orders per second.

4. International Lebanon Bank (LBank):

30-day trading volume: $32.0 billion

LBank was established in October 2016 and is one of the oldest exchanges on this list. However, the digital currency trading platform has maintained its appeal to an international customer base thanks to hundreds of trading pairs. LBank also works towards innovation in the cryptocurrency field. The company recently launched the "LBK Voting List," where eight cryptocurrency projects compete for votes to be listed on LBank for free.

5. P2PB2B:

30-day trading volume: $31.8 billion

P2PB2B offers trading in over 700 trading pairs, including 300 or more cryptocurrencies or tokens, along with a daily trading volume approaching one billion dollars. The platform can process 10,000 transactions per second and serves an international customer base. Additionally, P2PB2B stores the vast majority (over 95%) of all cryptocurrency reserves in wallets to provide the best possible protection against hacking and theft.

Features and Drawbacks of Cryptocurrencies:

 One of the prominent advantages of cryptocurrencies is that they allow you to use a pseudonym. Although every transaction is publicly recorded, you are not obligated to use personal information such as your full name and address when sending or receiving these currencies.

 One of the major drawbacks of cryptocurrencies is their association with criminal organizations. These currencies are commonly used in illicit transactions where it becomes challenging to trace the funds held by these organizations and the exchanges they engage in. Consequently, governments do not consider themselves major supporters of this type of currency. They strive to establish laws and regulations to make cryptocurrency usage, transactions, and trading more transparent and accountable. However, it's worth noting that criminal organizations also use traditional fiat currencies.

 Cryptocurrencies have certain advantages that can be added to their list. For instance, cryptocurrencies cannot be counterfeited, unlike physical currencies and banknotes. Additionally, they are easy and inexpensive to handle and trade, despite the presence of some fees. These fees are generally lower compared to those imposed by financial institutions and banks.

 On the downside, cryptocurrencies are susceptible to fraud and pose a threat to the security of your digital wallet. Numerous hacking and security breaches target banks' websites and people's accounts. There is also a threat to accounts that store funds in cloud-based storage, as they can be hacked, and the stored funds can be seized. To mitigate these risks, storing cryptocurrencies on your personal computer away from hackers is a recommended solution. However, there is still a risk if the device itself is stolen, malfunctions, or becomes inoperable.

 When dealing with cryptocurrencies and engaging in transactions, it's important to understand that there is no recourse. If you make a purchase from an online merchant and want to return the goods and get a refund, you cannot do so due to the lack of monitoring and control services for these transactions. In contrast, other payment methods such as credit cards enable you to recover your funds in case of any issues.

Cryptocurrency risks:

Recently, there has been increased interest in digital currency, with several major companies starting to engage with it. However, there are still many concerns regarding the security and legal implications of these currencies.

Governments worldwide, regulatory bodies, central banks, and other financial institutions are working to understand the nature and significance of digital currencies. Individual investors can potentially earn significant profits by investing in this new space. However, on the other hand, investors bear some legal risks when buying and selling cryptocurrencies, as well as security-related risks.

While some people confuse digital currencies with traditional electronic money, the two are not the same. Cryptocurrencies cannot be physically owned and transferred between parties. It is crucial to understand the risks of digital currencies before deciding to purchase them.

Legal Risks of Cryptocurrencies:

One of the most important legal considerations for any cryptocurrency investor is how the central authority in their country views digital currencies. In the United States, for example, the tax authority considers cryptocurrencies as property rather than currency. This means that individuals or investors in cryptocurrencies must comply with capital gains tax laws when spending or selling them. They are required to report the value of their cryptocurrency gains and pay annual taxes on them, regardless of where they purchased the digital currencies. This adds layers of complexity and confusion for U.S. taxpayers.

Decentralized Nature of Cryptocurrencies:

The decentralized nature of many cryptocurrencies is also an attractive factor for many investors, but it can also pose potential risks. Bitcoin paved the way for other cryptocurrencies by being decentralized, meaning it has no physical existence and is not backed by any central authority. 

While governments worldwide have intervened to assert their regulatory authority in various ways, Bitcoin and other cryptocurrencies remain disconnected from any jurisdiction or institution. On one hand, this frees investors from being indebted to those institutions. On the other hand, it can lead to legal complications.

 The value of cryptocurrencies depends entirely on the value attributed to them by owners and other investors. This is true for all currencies, digital or fiat, but without a central authority backing the value of digital currency, investors may face complexities in transactions or ownership.

Fraud and Money Laundering:

There is a common belief among governments and some individuals that cryptocurrencies provide criminal organizations with new means to commit fraud, money laundering, and other financial crimes. This may not directly affect most cryptocurrency investors who do not intend to use this new technology for such crimes. However, investors who find themselves in an unfortunate position of being victims of a financial crime likely do not have the same legal recourse as victims of traditional fraud.

This issue also relates to the decentralized nature of digital currencies. For example, if someone manages to hack a cryptocurrency exchange and steal customers' assets, there is often no standard practice for recovering the lost funds. As a result, cryptocurrency investors bear a certain amount of risk by purchasing and holding cryptocurrency assets that are significantly greater than the risks associated with buying traditional currencies.

Business Registration and Licensing:

An increasing number of companies are benefiting from cryptocurrencies as a form of payment. Similar to other financial fields, some countries may require companies to register and obtain licenses for specific authorities and activities. Due to the complex and evolving legal status of digital currencies, this area is significantly less clear for companies operating in the cryptocurrency market.

 Companies that solely accept cryptocurrencies, for example, may not need to register or obtain licenses at all in some jurisdictions. However, they may still be required to adhere to their specialized considerations. Ultimately, the responsibility falls on business owners and managers to ensure they follow the appropriate legal procedures for their operations at the local or international level.

Security Risks of Cryptocurrencies:

Cryptocurrencies are computer protocols that harness advanced encryption to create unique digital tokens. For example, Bitcoin is the token of the Bitcoin protocol. The security of cryptocurrency networks relies on a large number of independent computers continuously running the protocol. When the number of validators increases, it provides more security against malicious attacks. Validators are incentivized to participate through token rewards specific to each protocol.

However, there is no trusted third party that can reverse any damage if it is discovered that the protocol or any other software tool contains vulnerabilities. For example, in 2016, a vulnerability in an application designed to run "smart contracts" on the Ethereum cryptocurrency, the second-largest cryptocurrency by value, was exploited to steal $50 million worth of Ether tokens. This disrupted the Ethereum blockchain itself, ultimately resulting in a split in Ethereum.

Cryptographic issues not only harm the direct victims of attacks or direct hacking but can also lead to a significant loss of trust in a specific protocol. This prompts users to move their assets elsewhere. With the decrease in economic activity on that currency, the rewards for validators dedicating computational power to secure the network also diminish, making them less likely to participate in securing the currency.

Other Risks Associated with Cryptocurrencies:

Price Volatility Risk:

The price of cryptocurrencies constantly fluctuates. It can suddenly increase or decrease, and there is a possibility that the value of a cryptocurrency may drop to zero. This is something to consider when making a purchase.

Trading Hours Risk:

Cryptocurrency markets may operate at specific times and close at specific times. You may not be able to trade those cryptocurrencies during market closure hours, regardless of the magnitude of price changes.

Risk of Losing Your Wallet Password:

If you lose the password to your wallet, you may not be able to access your funds again.

Server Downtime or Hard Fork Risk:

A hard fork is a new software update implemented by a blockchain network or a cryptocurrency that is incompatible with the current blockchain protocol. It results in a permanent split into two separate networks that operate in parallel, unlike soft forks, which are essentially updates compatible with previous versions. Hard forks create a permanent change in the rules of the blockchain protocol, with each version deploying its transactions and blocks. When a hard fork occurs, there may be significant price fluctuations, and trading in subsidiary markets may be suspended if there are no authenticated prices in the primary market of the currency.

 Thus, we find that the cryptocurrency market is not as simple or entirely secure as some may believe. Like any trading market, it involves numerous risks in addition to its features and benefits. Ultimately, the decision to invest in this market or not remains in your hands. If you prefer a more traditional form of investment, that is also a valid choice.


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