- Shreya Chaudhary
A comparative study between 5 Blockchains
Crypto! The latest buzzword of the Genz era, what is it? Is it some abracadabra get me rich overnight spell? Is it some bank that gives loans without us needing to repay? Or is it the hen that gives a golden egg? Well if not this, then what is it?
Well, it isn’t magic. Cryptocurrencies are a digital alternative to going cashless; it is a kind of currency that uses cryptography and some code for their creation and can be used on a decentralized network, the blockchain through transactions. Their existence is purely digital and they are non-tangible, and if you do exchange it with someone the transactions are noted down in the same way it is traditionally done in a ledger. Like every currency, these also have wallets where they can be stored. Every unit is generated by mining or a process that uses computers and their electric power to solve a mathematical problem, which will generate these coins as a reward. Many people prefer mining and many prefer buying these from brokers and storing them for future use.
Let’s compare some of these cryptocurrencies. But before that, we need to understand that these currencies were created at different times and their impact is different. Due to this, there are always speed vs security, security vs scalability, etc factors that should be taken into account. For example, let’s look at Bitcoin and Solana. Solana is the fastest cryptocurrency, but there are many security issues, whereas Bitcoin is one of the safest cryptocurrencies, but is comparatively slower.
Bitcoin is one of the most popular cryptocurrencies, it was invented by Satoshi Nakamoto in 2009. It uses the proof of work consensus protocol for computing, and only a limited amount of bitcoins circulate over the decentralized network. It is considered one of the safest cryptocurrencies. These cannot be seized by any banks or even the government, and it does not cost you anything for transactions. Miners receive bitcoins as rewards for mining a block successfully.
Bitcoin does have some disadvantages to it, Mining takes up a lot of computing power which indeed consumes a lot of electricity, and is also slower as compared to other cryptocurrencies. It is also said to be built in deflation, in simpler words: due to its high volatility and a limited amount in the market, each coin one day would be maxed out and this would cause a spending surge among the miners causing fluctuation in the price. The biggest disadvantage would be the irreversibility of the Bitcoin transaction; which can be disadvantageous to us if we do not get the goods or services in return after the payment is done.
Ethereum was founded in 2013 by Vitalik Buterin, Gavin Wood, Charles Hoskinson, Anthony Di Iorio, and Joseph Lubin. Ethereum is a platform whereas Ether is the currency unit. In terms of market capitalization, Ethereum comes 2nd just after Bitcoin. The platforms provide many more services like the creation of a smart contract, the creation of an NFT, and many applications that are immutable and permanent, and all of these are powered by Ether. Ethereum works on the consensus of Proof Of Work. There is also a project in a process called Ethereum 2.0, that would be using the Proof Of Stake consensus protocol. Just like Bitcoin, Ethereum is decentralized, and the main aim of Ether is to provide monetary services through its applications. They also provide private transactions, wherein enterprises can form an association that will have different transaction layers. But there are some disadvantages to Ethereum as well. The platform offers many services but sometimes having a finger in every pie can be disadvantageous, because this makes the platform more vulnerable to flaws, breakdowns as well as hacks. They also have very high transaction fees compared to other cryptocurrencies. Ether is not capped, this means that if there are new coins entering the market it would lower the value of the current coins.
Solana was founded by Anatoly Yakovenkoin in 2017. Solana is another platform that has its own token SOL. It uses a new consensus called the proof of history that increases the scalability and also keeps a record of time in the data structure while keeping the network security intact. It is known for using a one-layer solution that can support thousands of transactions without the need of implementing any more layers. Solana is known to be the fastest in terms of transactions. Yep! It’s the Usain Bolt of the Crypto world and it is also known for its low transaction fees. The popularity, as well as the prices, boomed after the introduction of NFT’s over Solana’s blockchain since the minting cost is very less and minting is faster.
There are some shortcomings since there are a lot of potential projects on this platform, but they aren’t released for public use and are still in the beta testing phase. This would cause a hindrance in scalability. There are fewer tokens in the market and hence an uncontrolled flow of tokens in the market will increase the volatility.
Cardano, the parent platform of the ADA cryptocurrency, was founded by Ethereum co-founder Charles Hoskinson. It is the largest cryptocurrency that uses Proof of Stake as its consensus, which makes it faster and a more eco-friendly option than the others working on the Proof of Work blockchain. The consensus is called the Ouroboros Praos protocol. It is more energy-efficient than Bitcoin as well as Ethereum. The founders have created it after much research and peer review and every new feature being launched undergoes a series of tests. Miners receive incentives for mining ADA. Cardano is scalable, even more than Ethereum because Cardano can scale horizontally too. Due to the implementation of several layers like the settlement layer and computational layer, a user can perform updates and these will not interrupt their transactions.
Even though it has so many pros, it is still in the development stage and there are many things that can be improved and will attract more people to this platform. The platform is planning on implementing a system where the users can vote and also put forward potential upgrades that will improve the platform, however, this might not yield fruits in favor of the platform, since many users aren’t technically advanced and would not want to step out of their comfort zone, hence hindering further development.
Ripple is a system that uses real-time gross settlement, where we can exchange currency or money transfer for remittance reasons. It is a platform that supports many tokens, like fiat currencies, cryptocurrencies, flight miles, etc. Their native currency is XRP. Founded by Jed McCaleb, in the year 2012. They follow a ledger consensus for keeping a record of transactions. Ranked 8th largest in terms of market capitalization, it is also known to allow first-mover advantage in terms of cross-border platform. It has created successful partnerships, with many big enterprises as well as other currencies.
It’s a rapidly growing platform with a good scalability rate, but it’s stuck in many legal battles and there are a lot of cases pending. If Ripple loses, all the profits earned by XRP might be erased, which might be the primary reason that investors might hesitate to invest. They also do not provide any incentives for mining. The fear of heavy regulation is preventing many investors from utilizing the Ripple platform.
We have looked at five cryptocurrencies and we have tried to understand their advantages and disadvantages. We hope we have helped you get an introduction into the world of cryptocurrencies and tried to peak your interest to learn about the technicalities of every platform, token, and currency.