In the beginning, there was Bitcoin, then came Ripple, and then Ethereum. Along the way, many others came and went as cryptocurrency and blockchain protocols moved from the fringe to the mainstream, but these are still arguably the top three.
Cryptocurrency shares the fundamental definition of all forms of money: it is a medium of exchange, a measure of value, and a store of value. What sets it apart from fiat currency, though, is the following:
It has no physical form and exists solely as a digital bit of data.
It is not issued by a government entity.
It is completely decentralized and clears transactions through network consensus rather than through the authorization of a central bank.
Transactions cannot be reversed or charged back as is the case for those cleared by banks.
Beginning with Bitcoin
Though there had been some plans for a system of digital currency set out in the late 20th century, for the early part of the 21st century, the Bitcoin system and its currency unit, bitcoin or BTC was synonymous with cryptocurrency.
In October 2008, the name Satoshi Nakamoto appeared on the paper, Bitcoin: A Peer-to-Peer Electronic Cash System, which explained how the setup of blockchain technology was used in the cryptocurrency.
A blockchain is a decentralized ledger that allows a peer-to-peer network to obtain confirmation of transactions without waiting on a central clearing authority.
The benefits of having such a system are the following:
The immutable ledger assures accuracy in tracking payment and security that the payment is valid, because digital currency cannot be counterfeited or passed on without the authorization of network consensus.
Universal access and use: as it’s not linked to any country like fiat is, crypto can be used anywhere and is often used as a bridge between different currencies.
Low cost for transactions, cheap enough to even make micropayments worthwhile, which is not the case for a credit card, particularly when the payments involve moving money across borders or changing one form for another—like dollars to Euros.
Faster transaction clearing, measured in minutes rather than days the way financial institution clearing operates.
Some had considered anonymity of payments another advantage, but it’s not true that Bitcoin payments can never be traced to an individual like cash. There is a digital trail in place that actual cash doesn’t have.
The way the Buy Bitcoin Worldwide blog puts it is that the transactions are “pseudonymous” rather than anonymous, meaning that even while maintaining some privacy, an individual's identity may be uncovered by tracing his/her transactions. (Read also: Liberland: The Country on the Blockchain.)
The official launch of Bitcoin took a few more months; Nakamoto announced it in January 2009. Back then, it was relatively easy to mine Bitcoin but no one was willing to pay for them, despite the promise of value from scarcity with no more than 21 million coins ever being released.
As the BTC price history shows, it took over a year for bitcoin to achieve any market value at all. For all of 2009 and part of 2010, it had a market value of zero. It finally arrived as a currency with a value of 39 cents. The first thing it was ever used to buy was two pizzas at a cost of 10,000 BTC in May 2010.
Had the pizza store owner kept them, on February 9, 2021, they would be worth $463,300,000 USD.
There were many peaks and valleys along the way, as BTC has proven so volatile that many regards it more as a speculative investment than a currency to be used to pay for one’s expenses.
In the early years, it was straight up, as it proceeded to achieve the $1 value milestone in 2011 and remained on a relatively slow—if not altogether steady— upward trajectory. It took several more years for crypto to really take off, but even while soaring to new heights and also occasionally crashing, Bitcoin did dominate the market even as countless competing cryptocurrencies started cropping up.
In addition to breaking the traditional paradigm for payments, the blockchain system introduced a whole new world of solutions for a host of industries. It’s been a huge area of growth, expanding “from 1.5 billion in 2018 to an estimated 15.9 billion by 2023,” according to Statista. Last year’s worldwide blockchain spending was 4.1 billion dollars. (Read also: Are Cryptocurrencies the True Future of the World's Economy?)
Bitcoin continues to maintain its top position through 2020, according to Statista. Even though its market share had dropped from its high point of 86 percent in 2015, due to losses to rivals, it still held on to ⅔ “of total market cap of all cryptocurrencies in 2020.”
One of those rivals is Ripple, which had 4 percent of the market share in 2020, according to Statista, and another is Ethereum, which held 8 percent. While Ethereum duplicated the blockchain approach, Ripple took a different approach to crypto.
The Rise of Ripple
Ripple with a capital R is the name of the digital currency (XRP). With a lower case r, it’s the name of an open payment network within which that currency is transferred. While it ranks third in terms of popularity for crypto at present, it predates Ethereum, having launched back in 2012 with the full release of the 100 billion XRPs set for the currency.
Ripple Labs (formerly OpenCoin) created the Ripple protocol as a free way to move money across the globe using the power of the internet. Their position was that Ripple does for money what the internet did for information, breaking through the barriers to movement and access.
Like Bitcoin, Ripple has set a cap on its digital currency, though theirs is much higher: 100 billion. Unlike bitcoins, though, they are not released through computer mining but held by Ripple Labs.
As in the case of Bitcoin, once transactions are confirmed through consensus, they are irreversible. However, Ripple’s system, which is both currency and protocol agnostic, requires comparatively negligible computing power, especially compared to the substantial amounts required for Bitcoin mining. (Read also: Energy (In)Efficiency in Bitcoin Mining.)
Ripple enables transactions to take place much faster and at a lower cost than both the traditional wire transfer used by financial institutions and the Bitcoin blockchain. That makes it more efficient and cost-effective for a business that is based on one set of currency, say the American dollar, to pay another one that uses another like the Euro.
Though it never drew the kind of revolutionary fervor Bitcoin has, Ripple has had its own share of controversy. On December 22, 2020 the SEC announced “an action against Ripple Labs Inc. and two of its executives, who are also significant security holders, alleging that they raised over $1.3 billion through an unregistered, ongoing digital asset securities offering.”
Not surprisingly, that complaint resulted in XRP losing nearly 50 percent of its market value, as investors sold it off. Some of that bounced back, though the suit still casts a shadow over XRP. In its formal response to the SEC, Ripple argues that as a cryptocurrency, it remains outside the SEC's jurisdiction and that the case against them is "unsupported by both the facts and the law."
Launched in 2015, Ethereum is an open-source, blockchain-based, decentralized software platform designed for the cryptocurrency unit called ether (ETH). The concept for it, like that of Bitcoin, was ascribed to a specific name that laid the groundwork of the concept ahead of time, though Vitalik Buterin is the real name of the founder.
Vitalik Buterin was born in Moscow in 1994. He made his mark in the world of crypto even before he conceived of Ethereum in 2012 as a co-founder of Bitcoin Magazine, as reported by CoinDesk.
As a developer who closely studied the workings of Bitcoin, Buterin appreciated its advantages but thought that some areas needed improvement, and that was why he decided to build a better blockchain. Buterin published the Ethereum whitepaper in 2013.
While the whitepaper was retained by Ethereum.org, it recommends that those who want to learn about Ethereum functions now refer to this guide. Buterin is still involved in improving his own creation and has poured significant sums into the development of Ethereum 2.0
Ethereum has more in common with Bitcoin than Ripple does, as it also offers a peer-to-peer network involving mining and blockchain. Its “consensus formation algorithm” is designed to clear transactions more quickly than Bitcoin does, though, as Microsoft explains in context of describing Ethereum Blockchain as a Service now on Azure:
In Bitcoin, all transaction processors (miners) come to a consensus about what happened and when with respect to transmission and storage of the Bitcoin value token.
This happens approximately every 10 minutes.
This requires a slim majority of honest processors.
In Ethereum, all transaction processors (miners) come to a consensus about what happened and when with respect to transmission and storage of the ether value token as well as coming to an agreement about all of the processing that is done in all of the shared programs on the Ethereum World Computer.
This happens approximately every 15 seconds.
This requires a slim majority of honest processors.
Ethereum has followed a fairly parallel trajectory to bitcoin in terms of currency value. ETH remained relatively flat for its first couple of years but then rode the roller coaster market high up in 2017 only to plummet way down in 2018. It took over a year to start to climb up again, and then in 2020, it skyrocketed upward and continues riding the current wave for crypto to new highs, topping $1790 USD in early February 2021.
While the currency only ranks second to bitcoin, Ethereum’s blockchain has the top spot for decentralized applications and draws more developers than any other blockchain. Over two thirds of the companies on the Forbes 2019 Blockchain 50 list had opted for the Ethereum platform.
As mentioned earlier, Microsoft Azure selected the Ethereum blockchain for its blockchain as a service, and it has been joined by other major names like Amazon and JP Morgan.
“Ethereum has attracted some of the largest companies in the world. Countless multinationals, Fortune 100 companies—pick your benchmark of prestige—are building on it.,” reports a Decrypt article.
Decrypt quotes Nicolas Pouard, Ubisoft’s blockchain initiative director, who observed, “No other blockchain network has been as ‘beta tested’ as Ethereum.”
Blockchain has been adopted by many businesses for distributed applications and smart contracts. But the sky is not the limit as the technology breaks the bonds of . NASA adopted it back in 2018, to enable space crafts to drive autonomously.
As explained on the University of Akron site, Dr. Jin Wei Kocsis is working on a “‘Resilient Networking and Computing Paradigm’ (RNCP) that uses the blockchain technology underlying ‘smart contracts’ (self-executing contracts, allowing for unmediated transactions) from the digital currency world to create spacecraft that ‘think’ on their own – allowing them, for example, to automatically detect and dodge floating debris.”
In addition to applying the Ethereum blockchain "to develop a decentralized, secure, and cognitive networking and computing infrastructure for deep space exploration" Wei Kocsis said, she anticipated utilizing its consensus protocols "to improve the resilience of the infrastructure."
In a fast-paced global economy in which electronic payments have largely replaced paper-based transactions, there is a need for better solutions than the ones set in place by financial institutions that were based on 20th-century models. However, the volatility of digital currency has hindered its globals adoption. And so even after over a decade of cryptocurrency in place, we have yet to truly revolutionize mainstream payment paradigms.
Instead, as it turns out, the truly revolutionary technology of blockchain is what is transforming many business processes. Given that the technology was made specifically for financial transactions, it’s no surprise that blockchain has been adopted by the banking industry. Its tracking also is useful for all who wish to thwart counterfeiters.
That’s why blockchain is currently used for the authentication for art, precious coins and bullion, as well as in healthcare to fight counterfeit drugs. (Read also: Countering Counterfeit Drugs with Blockchain.)
The immutable record aspect also is being used to guarantee the safety and sustainability standards of supply chains ranging from minerals and metals used in producing advanced devices to everyday consumables like coffee.
In the future, likely a lot more of the things we rely on for daily life will be on blockchain, so even those who would never dream of using cryptocurrency will still be using the technology that powers it.