Here we’ll do our best to explain some of the most prominent altcoins (“alts”) in a few sentences. They differ from Bitcoin in a variety of ways:
The second largest cryptocurrency, by market capitalization. Ethereum runs on a completely separate blockchain from Bitcoin. Designed by Vitalik Buterin to serve as “the iOS of blockchain” so that developers can build decentralized applications and smart contracts more easily. The Ethereum blockchain has a native cryptocurrency called Ether. One of the first Initial Coin Offerings (ICOs).
Phew! That was a lot. Let’s simplify a bit:
Ethereum utilizes blockchain technology, just like Bitcoin. It’s written in a special coding language called Solidity, which makes it much easier for developers to code smart contracts and cool apps on top of it (similar to how app developers built Angry Birds on iOS, Apple’s mobile operating system).
Bitcoin and Ethereum have been the biggest two cryptocurrencies for quite a while now, with few exceptions (Ethereum has been briefly displaced by other coins for the #2 spot, but has always reclaimed it). The blockchain and protocol as a whole is known as Ethereum, while the cryptocurrency associated with the project is called Ether.
Wait a minute! Bitcoin Cash? Is that the same thing as Bitcoin? Well, kind of.
During the summer of 2017 a subset of Bitcoin supporters weren’t happy with how long transactions were taking and how expensive they were. So, they initiated a hard fork of the Bitcoin protocol–they took the original code and modified it to create a new cryptocurrency.
Those who held Bitcoin were instantly credited an equal amount of Bitcoin Cash. The main difference between the two is block size–Bitcoin Cash lumps more transactions into each block, which helps to decongest the network.
That said, this change comes with some downsides–the Bitcoin Cash network is far smaller than that of Bitcoin, making it more susceptible to attacks and foul play (see Security & Cryptography). Most cryptocurrency advocates, investors and miners still back Bitcoin over Bitcoin Cash. That being said, Bitcoin Cash often works quicker.
The cryptocurrency community remains divided over the Bitcoin/Bitcoin Cash split...
Keep the two straight! Bitcoin Cash has the ticker BCH, whereas Bitcoin has the ticker BTC. The website of the original Bitcoin software (often referred to as Bitcoin Core) can be found at bitcoin.org.
This coin is an adaptation of the original Bitcoin protocol. Charlie Lee, creator of Litecoin, wanted to create a silver to Bitcoin’s “digital gold.” His alterations were simple but significant:
1. Quarter the time between blocks. Bitcoin targets 10 minutes per block, while Litecoin targets 2.5 minutes. This increases the speed with which transactions are confirmed, making this cryptocurrency more appealing to merchants accepting crypto. This change also quadruples the total supply of Litecoin relative to bitcoin–while there will only ever be 21 million bitcoins, eventually 84 million Litecoin will exist.
2. Make the mining process fairer by changing the encryption protocol. Bitcoin’s code favors specially designed computational chips that give miners owning them a major edge over everyone else (the better your computational machinery, the more likely you are to be rewarded with newly minted bitcoins for your efforts). Lee implemented a different method (scrypt, instead of SHA-256), which evened the playing field somewhat.
Litecoin = faster, cheaper, more evenly mined Bitcoin.
Here we begin to diverge significantly from the rules that govern Bitcoin. Ripple’s system is different from the other cryptos mentioned so far in that it requires trust between parties. Bitcoin assumes that anyone can be a bad actor–that’s why each miner verifies every transaction independently, and is held accountable by the rest of the network. The Ripple network works differently. Here’s a short analogy:
I trust Sally, Sally trusts Ben, and Ben trusts Susy. If I want to send money to Susy, I can send it to Sally. Sally then sends it to Ben, and Ben sends it to Susy. In the end, I can trust that the money I sent ends up in Susy’s account, even though I don’t know or trust Ben personally.
Ripple utilizes complicated subnetworks to verify payment transfers as they move from one party to the next. The upshot? Ripple’s payment transfer system is near instantaneous, orders of magnitude faster than many other cryptocurrencies. However, this system depends on trusted partnerships rather than a decentralized system of miners.
You may also notice that there’s an issue – what if there’s no trusted link between two parties? The chain of trust could be complete on either side of this gap, but no “ripple” effect would be possible. To address this issue, Ripple Labs introduced XRP (Ripple), a coin that acts as an intermediary in case this problem arises. The coin is issued by a trusted party (the Ripple network itself), ostensibly resolving any issues.
In reality, XRP is rarely used by the Ripple network. Instead, Ripple has formed many partnerships with high profile banks and institutions that use this lightning fast payment transfer system. The majority of XRP is held by Ripple Labs itself, which causes much of the cryptocurrency community to view it with suspicion.
Dash stemmed from a Bitcoin fork. A system of masternodes (see Proof of) allows for enhanced security and faster transaction times. Holders can opt for fully anonymous transactions (as opposed to pseudonymous), and pay more for instantaneous transactions. The network allocates a portion of all transaction fees towards a treasury, which is used to expand Dash functionality and promote the ecosystem. The masternode system allows for the community as a whole to efficiently make decisions regarding technical changes and allocation of funds.
NEO functions similarly to Ethereum. It serves as a platform for decentralized applications and smart contracts. Founded in China, with high profile partnerships. The major difference between NEO and Ethereum is highly technical–please visit our Proof of section for more details (in short, NEO utilizes Proof of Stake, while Ethereum is currently Proof of Work based).