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Cryptocurrencies

Ethereum, the platform for decentralized apps

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Ethereum (ETH) is a cryptocurrency and a distributed computing platform notable for its use of smart contract technology.

Launched in 2015, Ethereum is distinguished from other cryptocurrencies in part by the Ethereum Virtual Machine (EVM), a Turing-complete system that uses a global network of public nodes to run scripts assigned to it by users. (1)

Ethereum also features a cryptocurrency token called “ether” and an internal transaction pricing mechanism named “gas,” both designed to facilitate transactions on the network and combat spam. (2) (3)

Ethereum’s stability and complexity have made it popular both as a cryptocurrency and as a foundational technology for various apps and financial services, inspiring other cryptocurrencies like NEO and EOS.

Ethereum is a worthwhile investment for those looking for a cryptocurrency with a complex set of features that go beyond anything else on the market.

Overview

Ethereum was originally conceived in 2013 by Vitalik Buterin, a Russian-Canadian Bitcoin developer who sought a system for creating decentralized applications. In a white paper, Buterin argued that Bitcoin should incorporate a scripting language to facilitate app development. (4) (5) (6)

Buterin’s suggestions were not implemented, so in 2014, he formed a programming team with the intent of forming a new platform that would embody his ideas. Ethereum development began later that year, under the aegis of Switzerland-based corporation Ethereum Switzerland GmbH and the non-profit Ethereum Foundation, both funded through a Bitcoin-powered crowdfunding drive. (7) (8)

After a year of development, a beta incarnation of Ethereum, codenamed “Olympic,” was released to the public in May 2015. The first complete version of the program, named “Frontier,” was later released in July of that year. Beginning with the release of the “Homestead” edition on March 14, 2016, Ethereum is now regarded as 100 percent stable. (9) (10)

Also in 2016, the DAO, a decentralized autonomous organization, successfully raised $150 million dollars in a crowdfunding campaign to develop a set of smart contracts for Ethereum. In June of that year, the DAO collapsed in chaos after a hacker stole $50 million of the funds. (11) (12)

In response to the theft, the Ethereum community opted to perform a hard fork with the intent of reclaiming the stolen funds. Supporters of the DAO were opposed to this, and as a result, on July 20, 2016, the Ethereum blockchain was divided between Ethereum and Ethereum Classic (ETC), an entirely different cryptocurrency. (13) (14)

Since then, Ethereum has committed two more hard forks with the intent of improving DDoS protection and thwarting spam attacks. (15)

Ethereum is differentiated from other cryptocurrencies due to the Ethereum Virtual Machine (EVM), a runtime environment that governs all transactions within the system, specifically its unique system of smart contracts. The EVM is sandboxed and separated from other aspects of the Ethereum network in order to protect it from cyberattack. (16)

Smart contracts are Ethereum’s method of guaranteeing the integrity and safety of transactions. Smart contracts are responsible for carrying out the transaction of value between untrusted agents and are also capable of combating attempted collusion, censorship, and other forms of fraud on the network. (17)

While smart contracts have made transactions over Ethereum more safe and efficient in certain respects, they also possess some security vulnerabilities. For example, smart contracts make bugs and exploits publicly visible on the blockchain, potentially allowing hackers to take advantage of them before they can be fixed. This was how the DAO was hacked and had a third of its crowdfunded capital stolen. (18)

In addition to these features, Ethereum also has several programming languages built in, including Solidity, LLL, Mutan, and Serpent. This allows for easy app development in comparison to Bitcoin and other cryptocurrencies. (19)

Due to Ethereum’s breadth of features, many developers have created or proposed many different uses for the network, including online gambling, electricity pricing, prediction markets, and social media platforms. J.P. Morgan Chase and the Royal Bank of Scotland have also used Ethereum to develop custom systems based on the cryptocurrency’s smart contract technology. (20) (21) (22)

To facilitate Ethereum’s development and use in mainstream banking, the Ethereum Enterprise Alliance (EEA) was formed in March 2017. The EEA includes a large number of Fortune 500 companies, including Microsoft, MasterCard, Intel, and the National Bank of Canada. (23)

Ethereum’s stability, versatility, and credibility have helped it become one of the most popular cryptocurrencies on the market, second only to Bitcoin.

Mining

Unlike Ripple, a cryptocurrency with similar features, Ethereum can be mined, though there are a number of caveats involved.

In contrast to other popular cryptocurrencies such as Bitcoin and Litecoin, it is still possible to mine Ethereum with a GPU and get decent results. Keep in mind that excess heat generated by GPU use may cause wear-and-tear to the computer, so a cooling pad or other cooling solution is recommended if you use GPU mining. (24)

GPU mining is also best attempted with a graphics card that has at least 2 GB of VRAM, as anything lower means that it will take too long relative to electricity and heat costs to generate a single coin. AMD cards are also superior to nVidia cards for the purpose of mining Ethereum. (25)

Like with other cryptocurrencies, Ethereum mining rigs are also available for sale at varying price points, and enterprising miners can also build their own. (26)

Also like other cryptocurrencies, the income generated from mining Ethereum needs to be measured against the cost of electricity in your area. If electricity is too expensive, mining Ethereum is a bad idea because it will never turn a profit. (27)

Despite all this, Ethereum is worth mining because of its popularity and because the overhead for doing so is considerably lower compared to other leading cryptocurrencies.

FAQ

1. What is Ethereum? Ethereum is a public, blockchain-based financial and computing network noted for its “smart contract” features. While often regarded as a cryptocurrency, Ethereum extends beyond merely serving as a means of exchange and is in fact a fully functioning decentralized computer system that can be used for a myriad of functions, from app development to online banking. The core of Ethereum is “Ether,” a digital token that can be used as a cryptocurrency in its own right or as the basis for any number of computing projects that the user desires. Because of this, Ethereum is considerably more versatile than Bitcoin and has seen widespread adoption in a number of fields.

2. What makes Ethereum different from Bitcoin? There are many differences between Ethereum and Bitcoin, but chief among them is that Ethereum extends the use of blockchain technology in ways that Bitcoin does not. Both Bitcoin and Ethereum are based on the same fundamental technology: a global, decentralized ledger that functions via network consensus. While Bitcoin merely functions as a digital currency, Ethereum functions as a global computer network, allowing programs and computer code to be distributed and executed on a peer-to-peer basis. This enables Ethereum to be used as more than cryptocurrency, with users implementing Ethereum in maintaining medical records, monitoring elections, and managing supply chains.

3. Who invented Ethereum? Ethereum was conceived by Russian-Canadian computer programmer Vitalik Buterin in a white paper published in 2013. Prior to the publication of the white paper, Buterin had been an advocate for incorporating a scripting language into Bitcoin so that the cryptocurrency could be used for software development. The team maintaining Bitcoin rejected this, so Buterin instead proposed a separate platform that would accomplish his goals. Buterin would later announce Ethereum in January of 2014, with the first release of the network coming in May of 2015. The network has since been updated with new features and security enhancements, which are organized into periodic “milestones.”

4. What was the DAO hack? In 2016, the DAO (Decentralized Autonomous Organization), a venture capital fund, raised a record $150 million on the Ethereum network for the purpose of developing a series of smart contract programs. In June of that year, however, an unknown hacker used a security exploit in the network to steal $50 million of the DAO’s funds. This fueled an intense debate over how Buterin and Ethereum should respond to the security exploit and theft. Eventually, Buterin chose to use a hard fork to recover the stolen money, resulting in the Ethereum network being split in two: Ethereum and Ethereum Classic, the latter of which retained the use of the original Ethereum blockchain. This decision was extremely controversial and led to a rivalry between supporters of the hard fork and supporters of the original blockchain.

5. What is Ether? Ether is the cryptocurrency that undergirds the Ethereum network. While Ethereum is often referred to as a cryptocurrency, this is technically incorrect; Ethereum refers to the network as a whole and Ether refers to the network’s currency. Ether can be bought, sold, and traded in a fashion similar to Bitcoin and other cryptocurrencies, but it also has a large number of uses in computer programming and other fields.

6. What makes Ether valuable? Like other cryptocurrencies, Ether’s value is derived in part from the value that users give it. Due to Ethereum’s usefulness as a computing platform and its smart contract functionality, it has rapidly become one of the world’s top cryptocurrency systems.

7. What determines the price of Ether? Like any other currency, Ether’s price is governed by supply and demand. Unlike Bitcoin, Ether is not inherently deflationary, as new Ether tokens are generated at a consistent rate, so the supply of Ether is not artificially constrained.

8. Where does Ether come from? 60 million Ether tokens were created when Ethereum originally launched in 2015. Subsequently, Ether has been produced by miners in much the same fashion as other cryptocurrencies. Miners are high-powered computers connected to the Ethereum network that generate new Ether by solving complex math problems, receiving a share of new Ether created as an incentive for them to mine. In contrast to Bitcoin, Ethereum uses the Ethash algorithm for proof-of-work (the mechanism by which the network determines a miner’s contribution to Ethereum), which makes specialized mining hardware (ASICs) less effective and creates a more equal playing field for miners using less advanced equipment

9. How does one obtain Ether? In the same way as other cryptocurrencies, Ether can be bought and sold via an Ethereum wallet and crypto exchanges. Transactions are conducted in a similar fashion as Bitcoin; if you want to send Ether to another user, you merely obtain their wallet address and send the currency. Like Bitcoin, Ethereum wallet addresses consist of random strings of letters and numbers that are difficult for many to remember, so wallet applications and exchanges allow you to substitute the actual wallet address with a QR code that can be scanned with a smartphone or tablet. Ethereum can also be mined with specialized computer hardware.

10. What is Gas? Gas is a representation of the smallest amount of work that needs to be performed to execute a task on the Ethereum network. Gas is a numerical representation of the amount of work that Ethereum miners must execute in order to process transactions, calculated separately to reflect the greater complexity of the Ethereum network compared to Bitcoin and more traditional cryptocurrencies. Gas is further subdivided into fractional units referred to as “gwei.”

12. How does Gas affect transactions on the Ethereum network? When executing any task involving Ethereum, a Gas cost is calculated. Calculating a higher Gas price will result in the transaction being processed faster. Ethereum wallets typically calculate a Gas Limit automatically, which defines the maximum amount of Gas that can be charged to process a transaction. This also protects users from spending too much on transaction fees. A Gas Limit that is too low can result in the transaction being lost or rejected, and any Gas spent in the process is lost. If the Gas Limit is too high and the transaction is processed before it is reached, any excess Gas is returned to the wallet that initiated the transaction.

13. What are the upsides of using Ethereum? The Ethereum network carries with it the advantages of other cryptocurrencies, including decentralization, payment freedom, worldwide availability, and low fees. However, Ethereum’s smart contract functionality adds an additional layer of security, as they can be programmed for additional verification and trustworthiness in financial transactions. The versatility of the Ethereum network has allowed it to be used for a wide variety of purposes, and web developers have also used it to create DApps (decentralized applications), further adding to Ether’s value. A number of major corporations, including JPMorgan Chase, Microsoft, IBM, Barclays, Credit Suisse, and many more have been exploring the use of the Ethereum network for various purposes, helping make Ether an attractive investment prospect.

14. What are the downsides of using Ethereum? Ethereum shares many of the disadvantages of Bitcoin and other cryptocurrencies, including price volatility, slower transaction speeds compared to credit and debit card transactions, obscurity among the general public, and unpredictability as to how the network will change with future software updates. Ethereum is also considerably more complex than Bitcoin and other cryptocurrencies, which hobbles its adoption as a form of digital payment. Finally, incidents such as the DAO hack have undermined public confidence in Ethereum, as the hack occurred due to conflicts between the smart contract system and the greater Ethereum blockchain. While Ethereum has not suffered any similar incidents since, it is impossible to rule out security breaches in the future, as is the case with any computing system.

15. What is an ERC20 token? An ERC20 token is an Ethereum token that functions similarly to Ether but can be reprogrammed for a wide variety of uses. It is short for Ethereum Request for Comment, with “20” serving as the proposal identifier. ERC20 tokens can be programmed to hold a specific set of rules, which allows them to be turned into ad hoc cryptocurrencies on their own, powered by the Ethereum network but separate from it. This is a popular choice for developers who seek to use blockchain technology in various projects but don’t want to create a separate blockchain of their own, which is time-consuming and expensive. ERC20 tokens expand the use of the Ethereum network in ways that few cryptocurrencies can match.

16. What are smart contracts? Smart contracts are executable computer programs that allow for the creation of agreements between Ethereum users without human intervention. They represent a major innovation in both cryptocurrency and finance technology because they allow fair transactions to be conducted without the intervention of a human mediator. For example, public smart contracts have been used by Ethereum-based online casinos to show their fairness to potential users. Banks, hospitals, and other institutions have also used smart contract technology in areas where accuracy and trust are vital. Smart contracts are executed via the Ethereum Virtual Machine, which is also responsible for managing the blockchain-based consensus system that defines the Ethereum network.

17. What are some other differences between Ethereum and Bitcoin? Ethereum has a considerably faster block time than Bitcoin, processing blocks in 14 to 15 seconds as opposed to ten minutes, which means that Ethereum transactions occur much more quickly than Bitcoin transactions. Ethereum mining also functions consistently, generating new tokens at an even rate, whereas the rate of Bitcoin coin creation continuously slows over time to prevent inflation. Transaction fees are also much lower on Ethereum than on Bitcoin.

18. Is Ethereum safe? No computer system is 100 percent safe, but Ethereum is recognized as one of the most secure cryptocurrency systems in the worldwide, which is why banks and other firms have begun using it for various tasks. While the DAO hack represented a major breach in security, it and other security holes have been fixed through continuous upgrades to the Ethereum network in a series of soft forks. However, due to the varying nature of projects developed on the Ethereum network, individual ERC20 projects may not have the same level of security as the network as a whole. Always exercise sound judgment before you get involved in any kind of financial transaction.

19. Is Ethereum a scam? Absolutely not. Much like Bitcoin, Ethereum is a transparent, consensus-oriented computing platform, meaning that no one person or entity can take control of it and profit at the expense of other users. Indeed, Ethereum’s smart contract functionality gives it an additional layer of security that other cryptocurrencies lack. Ethereum has also been continuously updated to make it more secure, particularly after the DAO hack.

20. If Ethereum is so much more advanced than Bitcoin, why don’t people use it instead of Bitcoin? Bitcoin and Ethereum have two different purposes. Bitcoin was designed purely as a currency, a means of storing value and exchanging it, while Ethereum was designed as a computing platform with a wide variety of functions. While Ethereum is more feature-rich than Bitcoin, this complexity is off-putting to some users, who merely want to use cryptocurrency to invest or make transactions. The simplicity of Bitcoin helps separate it from Ethereum and gives it a role in the economy. Furthermore, Bitcoin, having been around for much longer, has much more name recognition than Ethereum. Considerably more merchants accept Bitcoin compared to Ether, which also gives it staying power. Ultimately, the value of a currency is determined by whether people find it to be valuable, and Bitcoin and Ethereum both have value because people around the world find them useful in their own ways.

Recap

Ethereum is likely to remain one of the most popular and recognized cryptocurrencies for a long time to come due to its value, ease of use, and unique suite of features.

More than a cryptocurrency, Ethereum’s virtual machine and smart contract system has given it flexibility and security far beyond what other competing cryptocurrencies can offer.

Additionally, Ethereum’s inclusion of scripting languages is a boon to software developers, who can use the system to design decentralized, open-source apps.

Ultimately, Ethereum is a worthy investment due to its visibility, its truly unique features, and the relative ease in mining it.

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Cryptocurrencies

EOS, the blockchain for commercial scale

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EOS is a smart contract cryptocurrency platform that has attracted attention for two claims: it seeks to completely eliminate transaction fees as well as allowing users to conduct millions of transactions per second.

Launched in 2018, EOS is superficially similar to other smart contract platforms such as Ethereum and Ripple, but it promises to supersede them through the aforementioned features.

The ultimate goal of EOS is to provide a platform that supports industrial-sized decentralized application hosting, decentralized enterprise storage solutions, and smart contract capability, combining existing smart contract functionality with cloud computing for an all-in-one technology solution.

While EOS has technically not launched yet, it is currently possible to buy EOS tokens on the Ethereum blockchain, the sale of which will fund the launch of the EOS blockchain itself later in 2018.

EOS’ developers are making bold claims, but they have shown themselves capable of backing those claims, making EOS a worthwhile investment for crypto investors interested in smart contract platforms.

Overview

EOS launched on January 31, 2018 by Block.one, a cryptocurrency development firm based in the Cayman Islands. The specifics of EOS were revealed in a white paper published in 2017, with the full platform set to launch as open-source software on June 1, 2018. To fund development, Block.one initiated a sale of EOS tokens on the Ethereum blockchain. EOS also boasts one of only two B-ratings from U.S.-based financial rating agency Weiss, with the other being awarded to Ethereum. (1, 2, 3)

As mentioned above, Block.one seeks to use EOS to solve two of the biggest problems with cryptocurrencies: transaction fees and transaction speed. Most cryptocurrencies have slow transaction times due to the nature of blockchain technology, with Bitcoin speeds in particular becoming increasingly slow due to the size of its blockchain. Fees are used to speed things up by paying miners to prioritize certain transactions, but these too have become increasingly expensive with certain cryptocurrencies such as Bitcoin. (4)

EOS aims to solve the scalability problem of currencies like Bitcoin by using multi-threaded technology, allowing it to run on multiple computer cores. Additionally, EOS uses a decentralized proof-of-stake system for its consensus protocol, making it similar to systems such as Cardano and Stellar that utilize all machines connected to their network to verify transactions, keeping the network from becoming centralized. (5)

EOS also seeks to function as an operating system, much like Windows or OS X, allowing programmers to develop decentralized applications. Two examples of platforms that utilize EOS technology are Steemit, a Medium-like blogging and content creation platform that is based on blockchain technology, and BitShares, a fully decentralized cryptocurrency exchange. (6) (7)

In addition to this, EOS’ native token, in additional to serving as currency, also doubles as bandwidth and storage, allowing anything contained on the EOS network to be instantly delivered to anyone who is connected to it. How much storage and bandwidth is allocated to each EOS user is determined by how many tokens they own. EOS tokens will allow users to participate in governing the blockchain, also in proportion to how many tokens the user owns. (8) (9)

Although not formally released, EOS has become popular among cryptocurrency enthusiasts and developers. As mentioned above, both Steemit and BitShares are being developed with EOS technology. Everipedia, a Wikipedia-like online encyclopedia, is also using EOS technology to incentivize content creation on its platform as well as defeat censorship. By using decentralized EOS tokens to store and deliver their site, Everipedia will be able to evade censorship from countries such as Turkey and Iran that ban Wikipedia and similar sites. (10) (11)

EOS is effectively positioning itself not merely as a cryptocurrency, but as a software development suite and content delivery system. EOS’ potential to host decentralized websites and applications as well as combat online censorship have made it a hot commodity among traders and a worthwhile investment.

Mining

EOS cannot be mined due to the proof-of-stake system it will use to verify transactions.

Much like Cardano, EOS’ proof-of-stake system verifies transactions not through mining, but through achieving consensus from all users on the network. This is part of what makes EOS’ claims of faster transaction speeds and no transaction fees possible, but it precludes users from being able to mine their own EOS. (12)

While it is technically possible to mine EOS at the moment, this is because the EOS tokens available for sale right now are based on the Ethereum blockchain, meaning that EOS miners are technically mining Ethereum. Once EOS’ own blockchain launches, this will no longer be possible. (13)

FAQ

1. What is EOS? EOS, or EOS.io, is a smart contract-based cryptocurrency platform that is focused on providing laser-fast transactions and eliminating transaction fees. It purports to do this through the use of multi-threaded technology, which will greatly speed up computing bottlenecks. This feature distinguishes it from other cryptocurrencies and has spurred interest on the part of investors and developers.

2. What makes EOS different than Bitcoin or Ethereum? EOS is primarily distinguished through its aim to eliminate transaction fees and speed transaction times, two issues which have long plagued cryptocurrencies. Aside from this, EOS is functionally similar to Ethereum because it aims to be an all-encompassing computer platform and not just a cryptocurrency.

3. Who created EOS? EOS was developed by private company block.one based off a white paper published in 2017. The actual EOS platform was not released until 2018, but EOS tokens based on the Ethereum blockchain were made available for sale before the launch of the actual EOS blockchain, with the intent of funding EOS’ operations. Released as open source software in June of 2018, EOS was intended to solve scalability problems present in existing cryptocurrencies such as Bitcoin. Its speed and reliability have led to it being adopted by various websites and services, such as Steemit, a popular blogging platform, and Everipedia, a Wikipedia-like encyclopedia. EOS’ nature allows for the creation of decentralized websites and platforms that do not rely on a central server, making them resilient to cyber-attacks and Internet outages as well as routing around country-level censorship.

4. Why was EOS created? EOS’ developers were inspired by scalability problems with existing cryptocurrency technology. Bitcoin and other cryptocurrencies can only process a limited number of transactions per second due to the fact that each transaction results in the creation of additional blocks on the blockchain, a process that takes time. Additionally, because new blocks are generated through mining, cryptocurrency users must pay a mining fee in order to incentivize the processing of their transactions. As cryptocurrencies grow in popularity and more people begin using them, transaction times lengthen and mining fees skyrocket. This in turn hinders the cryptocurrency’s growth, as users are reluctant to use a currency that takes a long time to process transactions and charges outrageous fees for doing so. While a number of solutions have been proposed to increase transaction times, such as increasing block size and implementing technologies such as segwit, no cryptocurrency has yet managed to eliminate fees entirely and make transactions instantaneous. EOS is the first cryptocurrency to solve this problem.

5. How does EOS speed transaction times and eliminate fees? Unlike other cryptocurrencies, EOS’ blockchain is designed to use the RAM, CPU, and network bandwidth of computers that are connected to its network; indeed, it cannot function without using these resources. While this makes running and EOS-enabled system more taxing in terms of computer power, it greatly speeds transactions through the use of all available power. EOS utilizes multi-threaded technology, which allows it to be run on multiple computer cores simultaneously, greatly increasing the amount of computing power it has access to. To incentivize users to contribute computing power to the EOS blockchain, EOS periodically rewards users with additional EOS tokens proportionate to the amount of EOS that they hold. This is known as “proof-of-stake” due to the fact that EOS users are “staking” tokens as part of the network’s operation. In effect, this eliminates user fees and replaces them with inflation, allowing users to send and receive money for free at the cost of a potentially infinitely expanding supply of coins.

6. Who controls EOS? While EOS’ development is guided by block.one, its open-source nature means that anyone can contribute to its evolution. EOS users who stake their tokens are also allowed to participate in governing the network through a form of direct democracy, with each user having a vote proportionate to the amount of EOS that they own. This also makes it impossible for any one user to gain disproportionate control over the network, preserving the currency’s nature as a decentralized, worldwide computing system.

7. What is proof-of-stake? Proof-of-stake is a system for generating new tokens on a cryptocurrency blockchain by using the computing power of existing users. It is distinguished from proof-of-work, also known as mining, in that users of a proof-of-stake cryptocurrency merely need to stake their tokens in a wallet in order to benefit. As such, proof-of-stake cryptocurrencies do not require specialized, expensive computing hardware in order to use. Individuals who stake their tokens will receive additional tokens periodically in proportion to the amount of tokens that they have staked, in a fashion similar to how a savings account will accrue interest over time. Many proof-of-stake cryptocurrencies require a minimum stake amount in order to receive benefits, with this amount varying over time due to the size of the blockchain.

8. Is EOS safe to use? EOS has become a popular cryptocurrency because its fast transaction speeds and lack of mining fees guards it against many common cryptocurrency attacks, such as double-spending attacks. A double-spending attack is when a user spends the same digital token twice, akin to how some people will tie a string to a coin before putting it in a vending machine, allowing them to pull the coin out and spend it again while still fraudulently getting something from the machine. Double-spending attacks take advantage of the period of time when a cryptocurrency transaction is initiated and when it is completed. EOS’ instant transaction times mean that double-spending attacks are effectively impossible. While no computer system is 100 percent perfect, EOS has proven itself to be a safe and useful cryptocurrency.

9. Is EOS better than Bitcoin and Ethereum? “Better” has little meaning when it comes to cryptocurrencies with widely different functions and feature sets. EOS may be faster and cheaper to use than other cryptocurrencies, but it has other downsides that inhibit its utility in some situations. Bitcoin, as the most well-known cryptocurrency in the world, has an advantage in that it is accepted by more vendors and used by more people. Ethereum is a computing platform on which a large number of applications are built. Ultimately, you will need to determine what you are planning to use cryptocurrencies for before you can determine which one is best for your needs.

10. How do I get EOS? Like other cryptocurrencies, EOS can be purchased on an exchange using fiat currency or other cryptocurrencies. You can also receive it in transactions. If you already possess EOS, you can stake it in the EOS wallet to earn more of it, though you may have to stake a minimum amount in order to receive any benefits.

11. How do I send or receive EOS? Similar to other cryptocurrencies, EOS is kept in wallets, which can be digital or physical constructs. Wallets are identified on the EOS blockchain through wallet addresses, which are random strings of letters and numbers. To send EOS to another user, you need their wallet address; to receive EOS, you need to give your wallet address to the person sending it to you. Like other cryptocurrencies, EOS wallet addresses can be generated as QR codes that can be scanned with a smartphone or tablet.

12. What are the upsides of using EOS? As a cryptocurrency, EOS shares many advantages with other cryptocurrencies, such as total payment freedom, international availability, and 24/7 transactions. Unlike other cryptocurrencies, EOS lacks payment fees entirely, meaning you can make transactions for free. EOS transactions are also much faster than other cryptocurrencies, making it a useful investment for those who are interested in speed. Finally, EOS’ smart contract functionality, when combined with its speed, has made it popular among app developers.

13. What are the downsides of using EOS? EOS carries with it many of the disadvantages of other cryptocurrencies, such as price fluctuations. EOS also cannot be mined, unlike other cryptocurrencies, and is not as popular as Bitcoin and other competing currencies, meaning it is accepted by fewer vendors and is thus not the best when it comes to financial transactions. This may change in the future if EOS’ lack of transaction fees and fast transaction times become a selling point for more users.

14. Can I make money with EOS? Like any other investment, it is possible to make money trading EOS, though nothing is guaranteed. EOS’ primary selling point is its lightning-fast transaction times and lack of transaction fees, which have helped it carve out a significant niche in the world of cryptocurrency. However, like with any investment, there is no guarantee of what will happen in the future. Ultimately, it is up to you to determine whether EOS’ feature set makes it a good investment.

15. Can EOS be mined? No. Unlike most cryptocurrencies, EOS generates new coins through a proof-of-stake system instead of proof-of-work, aka mining. The primary difference between proof-of-stake and proof-of-work is that while proof-of-work requires machines to solve complex math problems to create new coins, proof-of-stake requires that users use their existing coins to contribute computing power to the network. Using proof-of-stake is why EOS lacks transaction fees; individuals who stake their coins (and thus contribute to the network’s functionality) are rewarded with additional coins as an incentive. This also means that in order to make money with EOS, you must already own EOS coins in order to stake them. While it was possible to mine EOS prior to its formal launch, this was because EOS was still operating on the Ethereum blockchain, meaning that EOS miners were technically mining Ethereum. Since the launch of the EOS blockchain, mining EOS is impossible.

16. Where does EOS’ value come from? EOS is like any other currency or commodity: its value is determined by the usefulness that its users find in it. As a cryptocurrency that has solved the problem of scale with fast transaction times and no fees regardless of how many users are on the network, EOS has carved out a place in the cryptocurrency economy. As long as users find EOS valuable in this regard, it will have monetary value on the market.

17. How is the price of EOS determined? Like any other commodity, EOS’ value is determined by the laws of supply and demand. Unlike other cryptocurrencies, EOS’ proof-of-stake system gives the currency continuous inflation, meaning that the supply of EOS will not level off in the future like Bitcoin’s will. This will have an effect of controlling how expensive individual EOS tokens get.

18. Could EOS ever become worthless? Yes. Any currency or commodity has the potential to become worthless if people stop seeing it as valuable or useful. While cryptocurrency users have embraced EOS due to its ability to solve problems of scale, there is no guarantee that it will grow in the future. It is a relatively young cryptocurrency that lacks the longevity of Bitcoin and other competitors. All investments are a risk, meaning you should be prudent with where you invest your money and how much of it you invest.

19. Is EOS a scam? No. EOS has proved itself to be a useful and adaptable cryptocurrency that is capable of fulfilling a wide variety of needs in the modern economy. Additionally, due to the decentralized consensus system that EOS users, all users have a say in the governance of its blockchain. Like other cryptocurrencies, it is virtually impossible for any single user or entity to gain control of the network, since doing so would require taking control of the majority of systems using the network. Indeed, one could argue that cryptocurrencies are less of a scam than regular fiat currencies due to their decentralized nature, lacking central banks and governments that can manipulate interest rates and currency supplies.

Recap

EOS represents a unique niche in the smart contract ecosystem: an all-in-one system for creating, hosting, and delivering Internet content.

EOS makes it possible to host any kind of web content—from blog posts to videos to podcasts and music—in a decentralized form that is impossible to censor. This makes it a valuable commodity in an era in which social media and the Internet is increasingly centralized and censorship is arguably becoming a problem.

Furthermore, EOS pledges to solve the problem of cryptocurrency scalability, which has dogged the growth of Bitcoin and other cryptocurrencies. By eliminating expensive fees and shortening transaction times, EOS could easily become as useful and indispensable as traditional financial systems.

EOS’ one major problem is that a good deal of what it promises is just that: a promise. Because the EOS blockchain has not launched yet, there is no definite way of seeing how the platform can live up to its claims. While Steemit and other platforms have achieved success through using EOS technology, there are no guarantees that EOS will work as advertised when it finally becomes available to the public.

Having said this, EOS has the potential to become one of the leading cryptocurrencies on world markets. Its unique niche of offering content creation and delivery services that can’t be censored by governments or corporations sets it apart from its competition, and its pledge to eliminate transaction fees and speed up usage have plenty of appeal to all crypto users.

Because of this, EOS is worth keeping an eye on for both smart contract enthusiasts and traditional investors alike. No other major platform is doing what it is doing.

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Cryptocurrencies

Monero, the blockchain of anonymity

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Monero (XMR) is an open-source cryptocurrency that emphasizes privacy and decentralization above all else.

Debuting in 2014, Monero’s main selling point is total anonymity. Unlike other cryptocurrencies such as Bitcoin or Ethereum, Monero transactions cannot be traced or tracked, making it ideal for users who value their online privacy above all else. Monero’s focus on privacy has made it popular on the black market and other people looking to keep their financial activities hidden from the prying eyes of police.

In addition to this, Monero’s egalitarian mining structure makes it one of the easiest and most lucrative coins to mine, with even low-end users able to get in on the action.

Monero’s unique features and potential for growth make it one of the most important cryptocurrencies for any investor to own.

Overview

Monero was launched in April 2014 by a pseudonymous BitcoinTalk forum user called “thankful_for_today” under the name “BitMonero,” a reference to both Bitcoin and “monero,” the Esperanto word for coin. The name was shortened to “Monero” not long after. (1) (2)

Monero is based on the CryptoNote protocol, a cryptocurrency design created by pseudonymous author Nicolas van Saberhagen in 2013. CryptoNote was designed to fix a fundamental flaw in Bitcoin and similar cryptocurrencies: while they promise anonymity, it is still possible to track transactions due to the ledger keeping a public record of everything that happens on the network. (3) (4)

Monero fixes this by using ring signatures to obscure spenders’ addresses with a randomly selected group of other spenders, making it far more difficult to narrow down who has conducted which transaction. Additionally, Monero also uses stealth addresses to make it impossible for anyone other than the sender and the receiver to uncover the destination address of a transaction. These features make Monero all-but impossible to trace and track through the network. (5)

Monero saw much of its growth in the year 2016, largely due to its adoption by black market traders, who were interested in its anonymity features. In particular, the popular darknet website AlphaBay used Monero as its primary currency until its shutdown in July 2017. (6)

In 2017, Monero further enhanced its privacy with the adoption of the RingCT protocol, based off of Confidential Transactions, an algorithm created by Bitcoin Core developer Gregory Maxwell. RingCT adds additional protections to Monero transactions by hiding the amounts of money being transacted in each exchange. This change further enhances Monero’s reputation as one of the most secure and anonymous cryptocurrencies available. (7)

Additionally, Monero has gained steam as a means of transaction due in large part to Bitcoin’s increasingly slow transaction times and high fees. Many online vendors that already accept Bitcoin have begun accepting Monero as well. Due to Monero’s unique features, cryptocurrency experts assert that it is one of the most important currencies and the most likely to survive a hypothetical crash in the market. (8) (9)

Even if you have no interest in black market transactions, Monero’s privacy features are worth considering. Given that online anonymity is fast becoming a thing of the past, Monero stands alone among cryptocurrencies in guaranteeing security to the vendors, traders, and buyers who use it.

Mining

Monero is perhaps the easiest major cryptocurrency to mine due to its unique, egalitarian design.

In contrast to Bitcoin and Bitcoin-derived currencies, Monero is based on the CryptoNight proof-of-work algorithm, which was explicitly designed to be accessible to a much larger range of computer hardware. While it is still possible to form and join mining pools like with other cryptocurrencies, Monero’s low barrier to entry means that pools cannot monopolize mining like they do with other coins. (10) (11)

Monero is notable in that it is one of the only major cryptocurrencies where CPU mining is still profitable. The official Monero client even includes a CPU miner built in, allowing casual users to mine coins without much effort, though users with access to GPU-enabled computers or an ASIC miner will be able to mine more coins more quickly, as is the case with all other cryptocurrencies. (12)

The egalitarian architecture of Monero allows websites to mine coins by installing services such as Coinhive, which pool the CPU processing power of all users who access the site. Both well-known sites such as Salon and black market ones such as The Pirate Bay have used Coinhive in order to mine Monero by taking advantage of their users’ CPU power. In particular, Salon has sold Coinhive as an alternative to ads, which most users block through the use of browser ad-blocking plugins. (13) (14)

Website Monero mining has come under fire due to the fact that many sites that use it do not inform their visitors of what is happening. Furthermore, cybersecurity experts have cited the possibility of hackers using Monero mining scripts to insert malware into websites and attacking users’ computers. Because of this, many anti-virus and anti-malware programs block Coinhive and other website mining scripts, and script-blocking browser plugins block them as well. (15)

FAQ

1. What is Monero? Monero is an anonymous cryptocurrency targeted at consumers who want to make transactions in total privacy. While functioning similarly to other cryptocurrencies, its unique anonymizing features have made it popular among those who want as much privacy in their financial life as possible.

2. What makes Monero different from Bitcoin? Unlike Bitcoin, Monero transactions are completely anonymous and are not publicly viewable on the blockchain. Monero wallets are also anonymous and no users other than those who have access to the wallet itself can tell how much money is a Monero wallet or what transactions it engages in. Given the greater popularity of and scrutiny towards Bitcoin, this has led to Monero being adopted by privacy-conscious consumers.

3. Who created Monero? Monero launched in 2014 under the name “BitMonero” by Bitcointalk forum user “thankful_for_today.” The launch was poorly received due to severe problems with block time, block reward, and other issues, with “thankful_for_today” leaving the forum and ceding development to a team lead by “Johnny Mnemonic.” In 2016, Monero experienced rapid growth due to its adoption by darkweb markets such as AlphaBay and Hansa Market, who were attracted by its privacy features. In 2017, it experienced further growth after adopting Gregory Maxwell’s Confidential Transactions algorithm, which masks the amount of Monero in transactions.

4. Who controls Monero? Monero is still managed by the same development team that took over in 2014, but it is an open source cryptocurrency and anyone can contribute to its development.

5. How does Monero’s anonymity work? By default, cryptocurrencies are more anonymous than credit or debit card transactions because crypto transactions do not contain any identifying information other than the wallet addresses involved. However, in the case of Bitcoin and similar cryptocurrencies, all transactions are publicly logged on the blockchain and are visible to anyone who knows at least one of the wallet addresses involved. Moreover, it is possible to see how much Bitcoin is in a Bitcoin wallet by using publicly available information on the blockchain. This means that if someone knows your wallet address, they can track all of your Bitcoin transactions. Monero allows anonymous transactions through the use of ring signatures, which group multiple transactions together, making it much more difficult to determine which transaction is going to which wallet. Monero also uses “stealth addresses,” individually-generated addresses that make it impossible for anyone to determine the destination of a transaction. Finally, as mentioned above, Monero obscures the actual amount of money exchanged in transactions. Because of these features, Monero offers near-total anonymity in the realm of financial transactions, and is popular for primarily these reasons.

6. What is CryptoNote? CryptoNote is the proof-of-work hash algorithm that Monero is built upon, distinct from SHA-256, the algorithm that Bitcoin uses. It is because of CryptoNote that Monero has all of the privacy features that it is known for. Additionally, CryptoNote allows Monero mining to be more egalitarian than Bitcoin mining since it cannot be mined easily with dedicated hardware; the vast bulk of Monero mining is done with consumer-grade computers.

7. Is Monero safe to use? Monero has retained its place in the cryptocurrency economy due to its unique anonymity features. In a world in which people’s information is constantly being tracked, many users are looking for ways to protect themselves from unwanted snooping, be it governmental or from the private sector. Monero is one means by which these users are taking back their privacy from the prying eyes of social media sites and other online entities. While Monero is more difficult to obtain and use for newbie crypto users, its unique features make it worthwhile for those who want to minimize the risk of being snooped on while engaged in commerce.

8. Is Monero better than Bitcoin? “Better” is a subjective term. If your goal is to keep your transactions from being spied upon by outside forces, Monero is certainly better than Bitcoin. However, if you are looking to engage with the widest possible number of vendors and consumers, Bitcoin is a better option due to its greater popularity. Ultimately, Bitcoin and Monero serve entirely different functions and whichever one is better is based on what you want to accomplish.

9. How widely is Monero used? As mentioned above, Monero picked up steam in 2016 and 2017 due to its popularity among dark web markets, for whom privacy and anonymity are paramount. However, it has since been adopted by a wide variety of exchanges and vendors. It has also gained popularity because its transaction times are considerably faster than Bitcoin’s. However, Monero’s reputation as a “black market” cryptocurrency has impeded its adoption in certain markets due to the fear of being associated with illegal activity.

10. How do I get Monero? Like other cryptocurrencies, you can purchase Monero at an exchange using other cryptocurrencies or fiat currency, receive it as part of a transaction, or mine it using computer hardware.

11. How do I receive or send Monero? Much like other cryptocurrencies, Monero is kept in a wallet and sent and received via wallet addresses. Wallet addresses identify particular wallets on the Monero blockchain and consist of a string of random numbers and letters; for reasons of security, Monero addresses are much longer than other cryptocurrency addresses. Additionally, some Monero transactions require a payment ID, a separate string of letters and numbers that acts to further secure and anonymize the transaction. To send Monero to another user, you simply need their wallet address and a payment ID if necessary; if you are receiving Monero, the other person requires your address and ID. Much like other cryptocurrencies, Monero addresses can be generated as QR codes which can then be scanned by smartphones or tablets for ease of use.

12. What are the upsides of using Monero? As a cryptocurrency similar to Bitcoin, Monero shares many of that cryptocurrency’s upsides, including total payment freedom, low fees, and 24/7 transactions. In addition to this, Monero’s built-in privacy features make it ideal for those who require anonymity in their financial transactions. All Monero transactions are anonymous by default and there is no way to turn this feature off, meaning that you cannot accidentally expose yourself when using the cryptocurrency. If you want to take back control of your online life, Monero is an easy means to do so.

13. What are the downsides of using Monero? Like other cryptocurrencies, Monero is vulnerable to price fluctuations and other issues. Additionally, Monero’s anonymity features have led to it becoming associated with the black market, which has limited its penetration among merchants, who do not want to be seen as being affiliated with illegal activity. This stereotype is unfair, as there are many reasons why users might want to make purchases with an anonymous currency, but as long as it persists, Monero will have difficulty gaining acceptance in the wider world economy.

14. Can I make money with Monero? Like all investments, it is possible to make money if you are careful and do your research. As the only truly anonymous cryptocurrency in circulation, Monero has retained its value in the face of competition from other cryptocurrencies. As with all investments, this could change in the future, so always do your homework before you begin spending money.

15. Is Monero truly anonymous? While no computer system or online interaction is ever 100 percent anonymous, Monero’s anonymity features make identifying users on its blockchain next to impossible. As such, Monero can be regarded as anonymous, making it ideal if you want to conduct transactions without being tracked. However, even if individual Monero transactions cannot be tracked, if you are careless with personal security, all the anonymity protections built into Monero won’t protect you. Always safeguard your wallet information and make sure that your passwords for Monero-enabled exchanges and other platforms are hard to guess. By practicing basic security protocols, you can ensure that your transactions and money remain safe.

16. Is it legal to use Monero? Yes. Despite its reputation as a black market cryptocurrency, Monero is perfectly legal to use, though some countries have passed laws regulating the use of cryptocurrencies in general.

17. Can I use Monero for illegal transactions? Because of Monero’s anonymity, many individuals choose to use it to purchase drugs, weapons, and other illegal goods via dark web merchants. This is because it is nearly impossible to track Monero transactions with existing technology. Having said this, engaging in illegal activity is always risky and wrong, no matter how you do it. While we cannot control how you use Monero, we cannot advocate that you use it for illegal activity.

18. Can Monero be mined? Yes, and Monero is much easier to mine than other cryptocurrencies. This is because Monero’s proof-of-work algorithm is designed to work inefficiently on ASIC hardware, dedicated mining hardware that is used to mine Bitcoin and other cryptocurrencies. This means that Monero must primarily be mined using consumer-grade hardware. Modern CPUs and GPUs are the best ways to mine Monero; if you own a reasonably modern computer, you can likely use it to mine Monero in your spare time. Keep in mind that mining cryptocurrency is taxing on your computer, causing increased heat output; if your computer is inadequately ventilated, you could cause permanent damage to its internal hardware through Monero mining. Additionally, mining takes advantage of unused CPU or GPU cycles, meaning that it will naturally slow down when you are using the computer. Finally, mining Monero or any other cryptocurrency will increase your computer’s electricity usage, which will increase your electric bill. Depending on how much electricity costs where you live, mining Monero may not be worth the higher power costs, so check your local power supplier to see if the investment is worth it.

19. Is it possible to mine Monero through a website? Yes. Beginning in 2017, services such as Coinhive began offering JavaScript Monero miners that can be embedded in websites. These miners run on the CPU of anyone who accesses the site, allowing the administrator to earn Monero by utilizing the collective computer power of all the website’s users. The Pirate Bay, a popular website for pirated movies, music, and other media, is one of the most prominent sites using a Monero miner. However, using a Monero miner on a website is considered unethical by many users due to the fact that the miner is using computer processing power from other people without permission. Additionally, Monero miners have been used to distribute malware and viruses. Because of this, many browser adblockers now block Monero miners from running, and antivirus software is programmed to recognize web Monero miners as a threat. There are some websites that choose to use Monero miners as an alternative to advertisements; users are allowed to choose whether they view ads on the site or run the Monero miner to ensure the site makes money from their visit. While we cannot tell you how to run your website, we do not recommend surreptitiously running Monero miners on it for various reasons.

20. Where does Monero’s value come from? Monero derives its value from the same place all currencies do: its utility. Countless users rely on Monero to perform transactions all around the world, and Monero’s anonymity has allowed it to carve out a position for itself in the cryptocurrency ecosystem. While there’s no way to predict the future, Monero has established a strong track record over the course of its life, and it has proven itself to be a worthwhile means of storing and exchanging value among consumers and individuals.

21. How is the price of Monero determined? Like any commodity, Monero’s price is determined by supply and demand. Similar to Bitcoin, Monero is relatively limited in supply, meaning that the price frequently fluctuates.

Recap

Monero is easily one of the most important cryptocurrencies available today due to its rising popularity and original architecture.

In a world in which users are increasingly paranoid about their online security, Monero provides total privacy to its users, allowing people to conduct transactions without worrying about others spying on them. Monero has continuously added to its security features over the years, allowing it to stay one step ahead of attempts by hackers to crack its code.

While Monero originally had a shady reputation due to its popularity among black market vendors, its privacy and ease of use have made it increasingly popular among the general population. Due to Bitcoin’s increasingly high fees and lengthy transaction times, Monero is rapidly gaining traction as an alternative currency among vendors and merchants.

Monero’s privacy features set it apart from virtually every other cryptocurrency available today and make it a must-have investment for any crypto trader. Its resiliency in the face of a potential market crash makes it one of the top cryptocurrencies available, and its anonymity will further boost its popularity in an era where online privacy is increasingly under siege.

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Cryptocurrencies

Ripple, the blockchain for banks

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Ripple (XRP), also known as the Ripple Transaction Protocol, is a cryptocurrency and real-time gross settlement system designed to make financial transactions simpler and easier.

Launched in 2012, Ripple was designed not merely to function as a cryptocurrency, but an all-in-one payment processing and remittance system for banks, businesses, and consumers. (1)

Ripple was created with the express purpose of replacing existing payment infrastructure with a model that is decentralized, open source, and accessible to all. Additionally, Ripple allows users to create various types of custom cryptocurrency, fiat currency, and other types of currency via its token system. (2) (3)

Ripple has been adopted by numerous banks, financial institutions, and other major banking organizations due to its reliability, flexibility, and functionality. (4)

Ripple is an effective and worthwhile investment for anyone looking for an all-in-one cryptocurrency and payment processing system.

Overview

Development on Ripple began in 2004, inspired by the RipplePay.com system created by Canadian web developer Ryan Fugger. Fugger designed RipplePay.com with the intent of creating a decentralized monetary system that allowed users to invent their own currencies for any purpose they wanted. (5) (6)

Developers Jed McCaleb (who later found Stellar), Arthur Britto, and David Schwartz saw RipplePay.com and sought to expand it through the use of Bitcoin’s blockchain technology, fulfilling Fugger’s dream. (7)

Ripple was conceived as a solution to several problems Bitcoin possessed: excessive electricity usage, slow transaction speed, and excessive centralization. Unlike Bitcoin, Ripple would verify transactions through a community-wide consensus instead of relying on miners. (8)

After being joined by developer Chris Larsen in 2012, McCaleb, Britto, and Schwartz obtained Fugger’s consent to continue developing RipplePay.com into a full-fledged cryptocurrency and monetary system. Ripple would launch that same year. (9)

Forming the corporation OpenCoin (later renamed Ripple Labs), Ripple’s developers focused their efforts on creating the Ripple Transaction Protocol, a system that allows instant, direct transfers of money between two separate parties. The protocol was compatible with everything from the U.S. dollar and other currencies to airline miles. (10) (11)

To accomplish this, Ripple was programmed to rely on a central ledger that is maintained by a number of servers that continuously compare and verify transaction records. (12)

To facilitate transactions, OpenCoin created XRP, a cryptocurrency that allowed users of the Ripple protocol to transfer money without the wait times and fees of traditional banking networks. Ripple also linked Bitcoin to their system, allowing people to use the Ripple protocol to send a payment in any currency to a Bitcoin wallet. (13) (14)

In 2013, Ripple Labs released Ripple’s reference server and client as open source software, allowing anyone to contribute to Ripple’s future development. (15)

Beginning in 2014, Ripple shifted their focus to the banking market, with hopes that their system could replace the existing, outmoded systems that banks rely upon to make transactions. (16)

That year, Munich-based Fidor Bank became the first bank to adopt the Ripple Transaction Protocol. Cross River Bank in New Jersey and CBW Bank in Kansas would also adopt Ripple that year. (17) (18)

In December of 2014, Ripple announced a partnership with Earthport, a global payments service whose clients include Bank of America and HSBC. Since then, more banking clients have joined the Ripple system, including Western Union, the Commonwealth Bank of Australia, and the Royal Bank of Canada. (19) (20) (21) (22)

In 2015, the Financial Crimes Enforcement Network fined Ripple Labs $700,000 due to violations of the Bank Secrecy Act. Ripple Labs responded by adding AML transaction monitoring to the Ripple protocol to bring it into compliance with U.S. law. (23)

In recent years, Ripple Labs has expanded globally, opening offices in Australia, the U.K., and Luxembourg, and more and more banking institutions have begun using Ripple in some fashion. (24) (25) (26)

In Ripple, transactions take place when users make cryptographically signed transactions that can be done using either XRP or a fiat currency of their choice. XRP transactions are monitored through the use of Ripple’s internal ledger. (27)

While Ripple originally lacked real-world enforcement of transactions, its integration with numerous banks and payment systems gives it a credibility and security that many cryptocurrencies lack. (28)

Ripple derives its name from the fact that transactions between parties require trust; if two users have not established a trust relationship, the transaction will “ripple” throughout the network until it finds a path in which each link is between those who do have a trust relationship. (29)

Due to its use by many banks and financial institutions, Ripple brings a level of security, stability and trustworthiness that few cryptocurrencies can match, making it a popular option for investors and traders.

Mining

Unlike most cryptocurrencies, Ripple cannot be mined due to its unique design.

In contrast to Bitcoin and other cryptocurrencies, where miners are responsible for processing transactions on the network, Ripple transactions are processed through a system-wide user consensus. Thus, mining is unnecessary to maintain the integrity of the network. (30)

Additionally, Ripple’s designers created 100,000,000,000 XRP when Ripple first came online, and they have steadfastly refused to make more. They have also been criticized for the way in which the currency was originally distributed, with the founders retaining 20 percent of all XRP in circulation. (31) (32)

Because it is impossible to mine Ripple, the currency has had a deeply polarizing response from cryptocurrency enthusiasts, with Bitcoin fans deriding it for being “pre-mined.” (33)

The inability to mine Ripple has limited its use and growth to a certain extent. It is unknown if Ripple’s designers plan to allow mining or to issue new XRP in the future.

FAQ

1. What is Ripple? Ripple is a currency exchange, real-time gross settlement system, and remittance network that is powered by blockchain technology. More than just a cryptocurrency, Ripple aims to be a system to support global financial transactions via a decentralized worldwide network in a fashion similar to Ethereum. Ripple is built on XRP, a cryptocurrency that is used to enable the network’s various functions. Due to the all-encompassing nature of Ripple, many financial institutions have begun adopting it in various forms.

2. What makes Ripple different from Bitcoin or Ethereum? Like Ethereum and unlike Bitcoin, Ripple is not simply a cryptocurrency, but is a fully-functioning financial services platform that can be used for a wide variety of functions. In contrast to Ethereum, which is primarily designed as a computing platform, Ripple was designed from the outset to perform financial functions such as remittances and more. This has led to its adoption by many banking institutions and has given it a stability that is not present in other cryptocurrencies, which were not designed with existing financial laws in mind.

3. Who created Ripple? Ripple was conceived in 2004 by Canadian software developer Ryan Fugger. Fugger created a website called RipplePay.com whose purpose was to allow users to invent currencies for any purpose that they desired. Some years later, RipplePay.com was noticed by developers Jed McCaleb, Arthur Britto, and David Schwartz, who realized that it could be greatly enhanced through the use of blockchain technology, the missing link in Fugger’s original vision. With Fugger’s consent, the developers launched Ripple as we know it in 2012. This deployment of Ripple was noted for the Ripple Transaction Protocol, which greatly expanded RipplePay.com beyond its original scope. Beginning in 2014, Ripple began targeting the financial sector, realizing that its technology could be used to make financial transactions more secure and efficient. As such, Ripple has been adopted by banks worldwide to a degree that other cryptocurrencies have not.

4. Who controls Ripple? Ripple is far more centralized than other cryptocurrencies, with Ripple Labs maintaining a leading role in its development as well as a controlling share of XRP, the platform’s cryptocurrency. However, in 2013, Ripple Labs released Ripple’s client and reference server as open-source software, allowing anyone to take part in Ripple’s future development.

5. What is the Ripple Transaction Protocol? The Ripple Transaction Protocol, also known as the Ripple Payment Protocol, is the unique means by which transactions on the Ripple network occur. In contrast to other cryptocurrencies that use blockchain consensus to process transactions, Ripple uses “trust relationships” to guarantee transactions against fraud. Transactions between two individuals on the Ripple network require a preexisting trust relationship in order to proceed. If two users have not established a trust relationship already, the transaction will “ripple” through the network until it finds a linear path in which everyone involved has a trust relationship, allowing the transaction to occur. This ripple effect is where Ripple derives its name from, and is based on Islamic banking principles, in which banking is conducted through mutual trust relationships instead of through charging interest. The Ripple Transaction Protocol also eliminates the need for mining, as transactions are processed on their own instead of requiring miners to generate new blocks.

6. What is XRP? XRP is the cryptocurrency that powers Ripple, in the same way that Ether powers Ethereum. Like Ether, XRP can be bought, sold, and traded like any cryptocurrency, but it also has a large number of functions that other cryptocurrencies lack.

7. What makes XRP valuable? Like any currency, XRP’s value is determined by whether people find it useful. Due to Ripple’s versatility as a financial services platform, many banking institutions have adopted Ripple in order to enhance the quality and breadth of their services. This has given XRP a value and strength that few cryptocurrencies can match.

8. Where does XRP come from? When Ripple was launched, 100,000,000,000 XRP were created for use in transactions. Unlike other cryptocurrencies, XRP cannot be mined and there are currently no plans to increase the amount of XRP in circulation, with pleas to Ripple Labs to create additional XRP falling on deaf ears. Some cryptocurrency users have criticized Ripple Labs for this approach, as well as for the way in which XRP was distributed upon Ripple’s launch, with the system’s founders retaining 20 percent of all extant XRP. XRP is sometimes referred to as “pre-mined” because of this.

9. How does one obtain XRP? Like other cryptocurrencies, XRP can be purchased from exchanges or as part of financial transactions. Uniquely among top cryptocurrencies, XRP cannot be mined due to the Ripple Transaction Protocol making mining unnecessary. Transactions are otherwise conducted in a similar fashion as other cryptocurrencies, with XRP being stored in wallets and transferred through the use of wallet addresses. To receive XRP, you must give your wallet address to the person who is sending it to you, and to send XRP, you must obtain their wallet address. Wallet addresses appear as a random string of letters and numbers and can also be rendered as QR codes that can be scanned by smartphones or tablets.

10. What are the upsides of using Ripple? As mentioned above, Ripple is backed by numerous financial institutions, such as the Royal Bank of Canada and Western Union. This gives it a security that other cryptocurrencies lack, given their quasi-underground status. Because Ripple was intended to be adopted by banks from the beginning, it does not face the legal rigmarole that other cryptocurrencies have when it comes to government regulation. Ripple can also be used to generate custom tokens in a fashion similar to Ethereum, allowing developers to adopt Ripple for a wide variety of purposes. For example, Ripple has been used to trade frequent flyer miles, cell phone minutes, and even other cryptocurrencies such as Bitcoin. The sheer versatility of Ripple means that new uses for it are being invented every day, allowing it to carve out a unique space in the cryptocurrency ecosystem. On top of this, Ripple retains the advantages that other cryptocurrencies possess, such as low transaction fees, payment freedom, worldwide availability, and decentralization. Finally, Ripple is one of the fastest cryptocurrencies available, many times faster than Bitcoin, which has aided its adoption by global financial institutions.

11. What are the downsides of using Ripple? Ripple’s biggest problem is its limited and finite supply of XRP. Despite pleas from the Ripple community, Ripple’s developers have adamantly refused to create more XRP, which has led to deflationary and supply problems. The fact that 20 percent of XRP was distributed to Ripple’s founders upon creation has put further pressures on the monetary supply. Additionally, the fact that Ripple cannot be mined eliminates a major incentive to use it. Many cryptocurrency fans have shunned Ripple for these issues, which have proven to be an obstacle to its adoption even as it grows in popularity among financial institutions. Ripple Labs has also gotten in legal trouble before; it was fined by the Financial Crimes Enforcement Network in 2015 for violating the Bank Secrecy Act, and it was sued in 2018 for alleged fraud in attempting to create what was called a “never-ending initial coin offering.” These legal problems have created bad publicity for Ripple that have hurt its growth. Another issue with Ripple is that XRP transactions can be frozen by the system, which is what happened to founder Jed McCaleb when he tried to sell $1 million worth of XRP some years ago. The idea that XRP transactions can be halted by a third party runs counter to the spirit of cryptocurrency and has further fueled criticism of Ripple.

12. What are some ways Ripple is used? Ripple has gained popularity as a mediator in fiat currency exchange. Many currencies cannot be directly exchanged with each other and are required to use the U.S. dollar as a middleman, exchanging money for dollars and then the dollars with the desired currency. Ripple fulfills the same function, but at a considerably lower cost than the U.S. dollar. Ripple has also been used to speed up international financial transactions thanks to its speed of four seconds per transactions, which is not only faster than other cryptocurrencies, it is faster than regular banking systems. Finally, because Ripple allows users to create custom tokens that are backed with XRP, it has been used as a means to create custom currencies for easy transactions. For example, collectors of vintage action figures can create a currency using Ripple to represent the figures, making the process of buying and selling them much simpler.

13. Is Ripple safe? No computer system is 100 percent safe, but Ripple’s purpose as a financial services platform meant to be used by banks means that it has a level of security that most cryptocurrencies lack. From the outset, Ripple was meant to exist within the confines of existing financial law, meaning that it conforms to the same regulations that traditional banking institutions do. While recent legal troubles with Ripple Labs are a cause for concern, Ripple’s widespread adoption in the banking industry has lent it an extra patina of security that it will retain for the foreseeable future.

14. Is Ripple a scam? Many cryptocurrency fans have derided Ripple for its centralized nature (relative to other cryptocurrencies), its lack of support for mining, and some of the other actions of its founders. However, because Ripple has adhered to traditional financial regulations from the outset, it has not suffered many of the problems that other cryptocurrencies have. While Ripple will not replace Bitcoin or other, more traditional cryptocurrencies, its usefulness as a financial services platform has given it a certain longevity.

15. If Ripple is more advanced than Bitcoin, why don’t people use it instead of Bitcoin? Ripple and Bitcoin have two entirely different functions. Bitcoin is intended to function purely as a currency, a means of storing value and allowing financial transactions to occur between users. Ripple is designed as a financial services platform to make transactions easier and more secure. While Ripple is considerably more feature-rich than Bitcoin, this richness of features can be disconcerting to individuals who simply want to use cryptocurrency to invest and make transactions. Bitcoin’s simplicity is precisely what allows it to maintain relevance even when systems like Ripple that are technically more advanced are developed. Additionally, Ripple faces an uphill battle in terms of adoption among many vendors due to the radical differences between it and other cryptocurrencies. Ripple’s static supply of XRP and its lack of support for mining have earned it the derision of many cryptocurrency fans, which has helped limit its adoption in certain sectors. Even to this day, far more merchants accept Bitcoin than XRP, which gives the former a certain heft in the cryptocurrency market. At the end of the day, whether a currency has value is determined by how useful it is to the general public. So long as Bitcoin and Ripple remain useful to a large enough number of people, they will both retain their value and carve out their own niches in the economy.

16. Can I make money with XRP? Like with any investment, Ripple does not guarantee a profit to those who invest in it. However, given Ripple’s enduring popularity and its adoption by banks, it has a certain profit potential that other cryptocurrencies don’t. The versatility of the Ripple network means that users are constantly finding new uses for it, which has helped propel it into the ranks of the world’s most traded cryptocurrencies. It is up to you to determine whether Ripple’s advantages as an investment outweigh its flaws. As always, you should do your research before making any big financial decisions, and you should always invest prudently and cautiously.

Recap

Ripple is a cryptocurrency that offers a suite of security and convenience features that few if any other cryptocurrencies possess. Its consensus-based transaction system frees it from reliance on miners and gives it a stability when it comes to sending or receiving money.

Additionally, Ripple’s compatibility with mainstream fiat currencies gives it a flexibility that most cryptocurrencies lack. The sheer number of financial institutions using Ripple for their transactions has further buttressed its reliability.

Because mining Ripple is impossible, the currency may turn off some cryptocurrency users who are looking to make money with minimal effort.

However, those who are looking for a reliable cryptocurrency and transaction system built into a single package will definitely want to check Ripple out.

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