A key factor in the launching of Bitcoin and other digital currencies are the communities which comprise the user base of the individual cryptocurrencies. In fact, the community surrounding Bitcoin was a major contributing factor to the success of Bitcoin.
Yesterday I had mentioned how Bitcoin was created by Satoshi Nakamoto who later received assistance from a second individual by the name of Hal Finney. Later, anonymous users referred to as zombie nodes joined the network and from there others participated in mining operations and began using the cryptocurrency. Because Bitcoin was not founded or supported by a centralized organization, a passionate word of mouth community was critical for its success. Word has spread fast as today there are nearly 16 million Bitcoins in circulation with a market capitalization of approximately 7 billion USD within 7 million Bitcoin wallets.
One of the interesting features of digital currency communities is that there seems to be something for everyone in terms of the digital currency itself. Each currency has a nuanced culture and attracts a certain following. Presently there are 692 cryptocurrencies and the top ten as reported by Crypto-Currency Market Capitalizations are shown below:
As you can see Bitcoin has by far the highest level of engagement when measured by market capitalization. I will briefly address the top three digital currencies outside of Bitcoin.
Ehereum. At nearly $1 billion in market capitalization, Ethereum could overtake Bitcoin as the leading cryptocurrency. More than just a currency, Ethereum is touted as a platform for making commitments. One intriguing feature is the Decentralized Autonomous Organization (DAO). According to Ethereum, a DAO exists solely on the blockchain and “can do anything that a simple account would be able to.” Ethereum further explains that “The organization has a central manager that decides who are the members and the voting rules” which may also be changed. It will be interesting to see how this plays out as the DAO could remove personality bias with a group management or arbiter setting.
Ripple. Ripple is a cryptocurrency geared towards banks. It is a distributed financial technology that allows for banks around the world to directly transact with each other without the need for a central counterparty or correspondent. Ripple states it benefits as enabling “banks to compress operational costs and offer new services for cross-border payments.”
Litecoin. Litecoin is a peer-to-peer Internet currency that enables instant, near-zero cost payments to anyone in the world. Litecoin states similar benefits as Bitcoin, but claims faster transaction confirmation times and improved storage efficiency. Whereas Ripple is geared towards banks, Litecoin targets individual consumer remittances.
When considering the top three digital currencies outside of Bitcoin it is interesting to note that each one addresses a different niche or community. Etereum seems to be focusing on blockchain technology to securely document commitments within their blockchain while adding an artificial intelligence element through the DAO. Ripple focuses on creating efficiency for banks. Finally, Litecoin improves upon the Bitcoin concept while improving upon a couple key performance aspects.
To learn more about digital currency communities refer to The Age of Cryptocurrency by Paul Vigna and Michael J. Casey.
Image Credit: Susanne Posel