Whenever a new technology comes out, there are always people who try to take advantage of the uninformed. Unfortunately, this is also true for Bitcoin and other cryptocurrencies. So before you invest your life savings into Bitcoin or any other cryptocurrency, it’s essential to learn about the different types and what they can offer.
Firstly, you need to know what a bitcoin is. Secondly, you need to know how they work. Thirdly, you need to know where they came from and how they were created.
Don’t fret if you have been living under the rock as we will explain the real deal with all six types of Bitcoins:
1st Type: Bitcoin (BTC)
The perfect definition for bitcoin: Bitcoin is a type of digital currency in which encryption techniques regulate the generation of units of currency and verify the transfer of funds, operating independently from a central bank.
Bitcoin is decentralised, meaning it doesn’t require banks to operate but relies on peer-to-peer transactions and cryptography. This type has the most extended history, and there is probably more than 1 million bitcoin in circulation currently.
They can be used for trading with other currencies through bots like Bitcoin Code as an investment alternative to stocks or gold because they offer some price stability. They offer low transaction costs but can sometimes experience significant fluctuations in value due to market forces like speculation, new regulation, or exchange hacks.
2nd Type: Bitcoin Cash (BCH)
Bitcoin cash is a hard fork of the cryptocurrency Bitcoin. As a new way to transact, bitcoin cash has the potential to dramatically change what we think of when we think of money.
Bitcoin Cash was created in August 2017 to create a new version of bitcoin with higher network capacity and lower transaction fees. It was developed to offer an on-chain scaling solution to transactions.
The bitcoin cash protocol has significant changes in the block size, the block times, and the difficulty adjustment algorithm and transaction fees. The size of blocks was an issue because transactions were taking too long to process, and it was getting harder for miners to compete with each other. Transaction fees were an issue because they were too expensive.
The original rules of Bitcoin state that all blocks (a set number of transactions) must be 1MB in size or smaller. But due to how large the blockchain has gotten, this doesn’t work anymore – so when Bitcoin cash was created, it allowed for more giant blocks up to 8MB in size that prevented delayed transactions and higher transaction fees. Bitcoin cash also has Replay Protection which means increased protection.
3rd Type: Bitcoin Gold (BTG)
Bitcoin Gold is a fork from the Bitcoin blockchain that happened at the block height of 491407 on October 24, 2017. Bitcoin Gold attempts to restore the mining functionality of the original bitcoin protocol before additional features such as Segwit and Lightning Network are activated.
Forks are created when there is not a single consensus about how to update the blockchain in a way that satisfies all stakeholders. This leads to two chains evolving separately with different sets of rules.
Bitcoin Gold uses an entirely different mining algorithm called Equihash, which cannot be mined using ASICs designed for solving problems with SHA256 hash puzzles.
4th Type: Litecoin (LTC)
For those of you who are not as familiar with litecoin.
Litecoin is a type of cryptocurrency that was created in 2011. It’s called “lite” because it was developed focusing on speed and efficiency.
Litecoin is a cryptocurrency coin. It enables instant, near-zero cost payments to anyone in the world, which is more often than not used by people in need of quick and less expensive transactions. It was developed to address some of the shortcomings of bitcoin, specifically slow transactions, and high transaction fees.
Litecoins can be mined at home or in a “pool.” Users are given 50 litecoins for every block they solve. Mining for litecoins is no more or less difficult than mining for bitcoins.
Though Litecoin is one of the most popular cryptocurrencies globally, it’s not as broadly accepted as bitcoin. For example, you cant use them to buy things on Amazon or Starbucks.
5th Type: Ethereum (ETH)
Ethereum is a blockchain-based platform that makes it possible to build decentralised applications where no one company or person controls what information people share. It also facilitates peer-to-peer contracts between individuals as well as companies without intermediaries.
Russian-Canadian programmer Vitalik Buterin proposed Ethereum in 2013. Since then, this technology has gained momentum with increased adoption and interest on commercial and public sector levels. Ethereum has two types of coins: ether coins, which are used for payments, and utility services and gas, which are used to pay for computations on the Ethereum network like smart contract executions or transferring ethers from one account to another.
Ether tokens are generated by mining. Mining can be done with algorithms like Proof-of-Work (POW) or Proof-of-Stake (POS). The algorithm used will depend on how long you want to mine and how much computing.
6th Type: Ripple (XRP)
Ripple is a payment protocol where transactions can easily be made and completed. Ripple is designed to allow seamless transfer of value across the internet with minimal transaction fees.
Ripple was created to work with all existing fiat and cryptocurrencies and online banking systems. It allows for almost instant cross-border payments. This includes transactions that have any currency attached to them, including those in Euros, Yen, and US Dollars.
Bitcoin is a digital currency that is generated by the process of mining. It can be said that it is a decentralised form of money. There are six different types of bitcoins, each having its own set of advantages and disadvantages.