Ever wonder how cryptocurrencies work under the hood? You’ve probably heard of Bitcoin, but there are actually hundreds of digital assets out there powered by different blockchains. Blockchains are the open-source platforms that enable crypto transactions in a secure and transparent way without the need for a central authority.
If you’re curious to learn about the major players enabling the crypto revolution, here’s your guide to the top blockchains to know. Whether you’re looking to diversify your crypto portfolio or just want to sound smart at the next dinner party, understanding the blockchain basics will help you navigate the world of digital assets with confidence. Strap in, we’re headed down the blockchain rabbit hole.
What Is a Blockchain?
A blockchain is a digital ledger of transactions distributed across a network. Instead of a central authority, blockchain networks rely on cryptographic proof and network consensus to verify transactions and update the shared ledger.
How Does a Blockchain Work?
Blockchains store data in encrypted “blocks” that are chained together chronologically. New blocks are added through a process called mining, where specialized computers called nodes solve complex math problems to discover a new block. The node that discovers a new block is rewarded, typically with cryptocurrency.
Once a new block is discovered, the other nodes must verify it before it can be added to the chain. If a majority of nodes verify the block, it is added to the chain in a process called consensus. The chain is replicated across the network, so there is no single point of failure and no one entity controls the data.
Top Blockchains
Blockchains are transparent, secure, and decentralized digital ledgers that power cryptocurrencies like Bitcoin. They allow multiple parties to have a shared and trusted record of all the transactions in a network without the need for a central authority.
Public vs Private Blockchains
Public blockchains have open access and anyone can join the network, whereas private blockchains require an invitation to join. Public blockchains offer more transparency but less privacy, while private blockchains offer more privacy at the cost of some transparency.
Blockchain technology allows us to cut out middlemen and facilitates trustless cooperation between network participants. Although still nascent, blockchains have the potential to disrupt and improve many industries. The future is decentralized!
Ethereum: The Leading Smart Contract Platform
Ethereum is the leading blockchain for decentralized apps and smart contracts. Launched in 2015, Ethereum allows developers to build and deploy decentralized applications that run on blockchain technology.
Unlike Bitcoin’s blockchain which tracks digital currency transactions, Ethereum is programmable, meaning developers can build and deploy decentralized applications that run on top of it. These apps, called dapps, can have a front end that looks like a regular app, but have a backend that runs on thousands of nodes on the Ethereum blockchain.
Some popular dapps built on Ethereum include:
- Cryptokitties: A game where you collect and breed digital cats.
- MakerDAO: Allows you to borrow and lend cryptocurrency.
- Uniswap: A decentralized exchange for swapping Ethereum tokens.
To use Ethereum, you’ll need Ether (ETH), Ethereum’s native cryptocurrency. ETH is used to pay for transaction fees and computational services on the network. You can buy ETH on any major cryptocurrency exchange and store it in an Ethereum wallet.
Ethereum is an open, global platform for decentralized applications that can’t be censored, fraudent or shut down. Although complex, Ethereum could ultimately change how we interact and do business on the internet by cutting out middlemen like banks, tech giants, and governments. The future is bright for this leading smart contract platform.
Bitcoin: The First and Most Valuable Cryptocurrency
Bitcoin is the first and most well-known cryptocurrency. Created in 2009 by an anonymous person or group named Satoshi Nakamoto, Bitcoin pioneered blockchain technology and demonstrated its potential.
Bitcoin’s blockchain is a public, distributed ledger where all Bitcoin transactions are recorded. New transactions are bundled into “blocks” that are added to the chain approximately every 10 minutes by Bitcoin miners. Miners use powerful computers to solve complex math problems and discover a new block, receiving newly minted Bitcoins as a reward.
Bitcoin is scarce by design. Only 21 million Bitcoins will ever be created, with the final Bitcoin expected to be mined around the year 2140. This scarcity, combined with speculation, has led Bitcoin to gain value rapidly at times, though the price is volatile. Despite price swings, Bitcoin aims to act as “digital gold” — a store of value that is scarce, durable, portable, divisible and fungible.
While Bitcoin’s blockchain was groundbreaking, its technology has some significant limitations. Bitcoin transactions are slow, expensive and energy intensive. The Bitcoin network can only process about 7 transactions per second. Compare that to networks like Visa, which handles thousands of transactions per second. Bitcoin also requires an immense amount of electricity to secure the network. This has led newer blockchains to develop more scalable and eco-friendly alternatives.
Still, Bitcoin remains the most valuable and recognized cryptocurrency, with a market capitalization of over $1 trillion. For its pioneering role in demonstrating the potential of digital currencies and blockchain technology, Bitcoin earns a place as a top blockchain platform. Though imperfect, Bitcoin has ignited interest in cryptocurrencies and inspired countless other blockchain projects. The digital currency space would look very different today without the first successful cryptocoin.
Solana: High-Speed and Low-Cost Transactions
Solana is a high-performance blockchain that aims to solve some of the scaling issues faced by other blockchains. It utilizes an innovative hybrid consensus model that combines proof of stake and proof of history. This allows Solana to handle over 50,000 transactions per second, with fast block times of 0.4 seconds and transaction fees of $0.00001.
Speed and Cost
Solana’s lightning fast transaction speed and extremely low fees make it appealing for building scalable dApps and marketplaces. Transactions on Solana settle instantly for a fraction of a penny, enabling new blockchain use cases that weren’t previously possible or cost-effective. The network’s high throughput also minimizes congestion, even under heavy usage.
Hybrid Consensus
At the core of Solana’s speed and scalability is its hybrid consensus mechanism. Proof of stake is used to validate transactions and maintain security, while proof of history is a clock before consensus that provides a timestamp for each transaction. This timestamp is used to verify the order of transactions, allowing the network to process an immense number of transactions in parallel without sacrificing decentralization or security.
Growing Ecosystem
The Solana ecosystem has been growing rapidly, with over 400 projects building on the blockchain. DeFi platforms, NFT marketplaces, wallets, and infrastructure tools are being developed to utilize Solana’s high performance and low costs. Major crypto exchanges like FTX and Binance have also listed Solana’s native SOL token, which powers the network.
Solana represents an evolution in blockchain technology that could enable mainstream adoption of decentralized applications. With its unparalleled speed, tiny transaction fees, and innovative architecture, Solana is a platform to watch as crypto continues moving into the mainstream. The blockchain’s thriving ecosystem and support from major industry players suggest Solana could become a dominant force in the world of digital assets and decentralized finance.
Polkadot: Interoperability and Scalability
Polkadot is a blockchain platform focused on interoperability and scalability. Created by Ethereum co-founder Gavin Wood, Polkadot enables independent blockchains to exchange information and transactions in a secure, trustless fashion.
Interoperability
The Polkadot “relay chain” allows specialized blockchains called “parachains” to connect and communicate with each other. This interoperability opens up possibilities for cross-chain apps, smart contracts that run on multiple chains, and seamless exchange of assets and data between platforms. Instead of isolated “island chains”, Polkadot envisions an internet of blockchains.
Scalability
Polkadot uses parachains to achieve scalability. These parachains are customizable blockchains that can run in parallel while still connecting to the main Polkadot relay chain. The relay chain handles security and consensus, while parachains focus on their own specific use cases. This modular framework could allow for thousands of transactions per second across the network.
Polkadot also has a shared security model where the relay chain secures all parachains, eliminating the need for parachains to establish their own validator set. This makes it more feasible for developers to build and launch their own chains.
Polkadot aims to solve some of the biggest obstacles facing blockchain adoption. By enabling interoperability and massive scalability, Polkadot could unlock the true potential of decentralized apps, finance, and web services. The relay chain launched in 2020, and parachain auctions where projects can bid to launch their chains were introduced in 2021. Polkadot continues to build out its vision of a multi-chain future.
Conclusion
So you’ve learned about some of the most popular blockchains enabling cryptocurrencies and digital assets. The technology behind these platforms is truly groundbreaking but still quite complex. As with any new innovation, there will be ups and downs along the way. But if blockchains can achieve their promise of providing more secure and transparent methods for exchanging value, they have the potential to positively impact nearly every industry.
The future of finance, business, and society as a whole looks bright with these blockchains paving the way. Now that you understand the basics, you can start exploring how to get involved and stay up to date with the latest blockchain innovations. The future is decentralized – be part of the revolution!
