Cryptocurrency Ocean: review of the top 50 projects with CoinMarketCap
When you look at the endless list of cryptocurrencies on CoinMarketCap, the first question that comes to mind is: how do they all differ? And why are there so many?
The first answer from the audience is all hype and marketing! But conscious people do not succumb to the charm of simple answers. To answer the question, you need to look at the essence of each project.
Reading 2,000+ whitepapers is an uplifting task for an army of college students. There are only two of us with a friend, so we limited ourselves to the list of the top 50 (+ those that interested us).
As a basis for comparison, we chose Bitcoin as the progenitor of all cryptocurrencies. And investigated what each cryptocurrency brought into the industry in terms of technology regarding it.
We draw the reader’s attention to the fact that we are analyzing cryptocurrencies and the technologies they use , and not projects on the blockchain in general.
We have identified 4 areas of cryptocurrency evolution from a business point of view:
This group included projects whose main difference from Bitcoin was a change in terms of decentralization. In our opinion, instead of progress, we are seeing a regression served with a sweet marketing sauce.
Most projects have moved towards PoS, which has a number of shortcomings. For example, in the classic PoS, it becomes profitable for all network participants to fork indefinitely (nothing at stake attack). It is difficult to honestly distribute coins to a wide range of users at the start to avoid their concentration in one hand.
There was an offer from Ethereum to make an insurance deposit and to allow anyone who proves that the owner of the deposit to stimulate forks to be debited (send a valid transaction to the network). But here again there is a problem: you can write off yourself.
Delegated PoS - the problems are the same as regular PoS: in the case of a large number of coins being concentrated in one hand, delegates can be controlled in the same way. Proof of ownership gives additional motivation to accumulate funds in the same hands, which can lead to centralization of the network, without any observed signs of this problem. And no one can prove anything.
PoS is very difficult to implement (is "non-trivial") according to Ethereum developers. There is still no time-tested implementation.
PoS is prone to Stake Bleeding attack: replaying the story allows you to accumulate coins (stake) at the expense of the commission. At a certain point, this gives complete power over consensus on an alternative chain. After that, you can add it to the main network.
PoA is an even more centralized algorithm. We hope you don’t have to explain why.
True, there are also questions to PoW: Bitmain, being the dominant manufacturer of ASIC chips, can have a significant impact on the miners' transaction processing policy.
In general, no one has yet figured out how to replace PoW or implement PoS and at the same time provide at least the same level of decentralization as Bitcoin.
Looking at the trend towards PoS among the top cryptocurrencies, we can say that the “honest” decentralization of the market does not really bother. Or, its participants do not foresee the consequences of its absence.
We included projects here, the main difference between them and Bitcoin, we considered an expanded system of smart contracts (in Bitcoin it is also there, but more primitive). Waves, for example, didn’t get here, because the implementation of PoS, in our opinion, negates the benefit of smart contracts.
The essence of the scalability problem is to optimize three parameters:
The problem of scaling is solved not only by increasing the block and increasing the speed of mining (for example, record 1 block per minute), but also by introducing Lightning and SegWit.
For blockchains that are developing in other directions (see above and below), the problem of transaction speed is secondary, because it is solved differently. In PoS, TPS comes close to being able to record data in a distributed network with the minimum overhead of the PoS consensus protocol itself. In PoA, there is no consensus protocol (decentralization) at all. The more centralized the network, the faster it works.
In addition to projects focusing on scaling, in the same section we added those who did not bring anything to the industry in terms of technology.
The first thing to say here: Bitcoin does not provide privacy transactions by default, like most other cryptocurrencies. There are various mechanisms for solving the privacy problem (such as mixers). But they are an add-on, not a feature of the project. The user needs to take some action to protect their privacy.
In this section, we have collected cryptocurrencies that provide privacy by design.
(Stable Coins, Utility Tokens)
Almost all the tokens from the list below are issued on the Ethereum network and cannot be considered as independent cryptocurrencies. In our opinion, it is worth considering them to be an application that implements any functionality based on the capabilities of Ethereum.
The fact that the project uses blockchain technology and its own coin does not mean at all that it is a cryptocurrency. Just as having money in your Steam account does not mean that Valve is a bank or payment system. Some projects declare their purpose, not related to financial instruments.
The first answer from the audience is all hype and marketing! But conscious people do not succumb to the charm of simple answers. To answer the question, you need to look at the essence of each project.
Reading 2,000+ whitepapers is an uplifting task for an army of college students. There are only two of us with a friend, so we limited ourselves to the list of the top 50 (+ those that interested us).
Classification
As a basis for comparison, we chose Bitcoin as the progenitor of all cryptocurrencies. And investigated what each cryptocurrency brought into the industry in terms of technology regarding it.
We draw the reader’s attention to the fact that we are analyzing cryptocurrencies and the technologies they use , and not projects on the blockchain in general.
We have identified 4 areas of cryptocurrency evolution from a business point of view:
- Decentralization is the most important property of cryptocurrency. If it is not, then everything else is not needed. If the cryptocurrency is managed by a reputable center, then we get a “central bank”, of which there are already a huge number. At the same time, the scalability problem has been resolved, but privacy is out of the question.
- Security - decentralization can be provided by technical means (code) and / or economic motivation (social engineering, game theory). We consider the second option less secure.
- Governance mechanisms are built-in mechanisms for managing the development of a project. Or at least a convenient way to collect the opinions of cryptocurrency users regarding which features to implement in the code in the first place.
- Smart Contracts (Scripting system) is any program on the blockchain, including built-in code of the blockchain itself. ICs give an advantage to cryptocurrency, since digital money needs an appropriate level of automation.
- Scalability If a project cannot be scaled worldwide, it has less chance of success. This is usually due to the maximum number of transactions per second that the network can sustain.
- Privacy is true privacy (not imaginary like Bitcoin), an answer to the needs of the black market.
Decentralization
This group included projects whose main difference from Bitcoin was a change in terms of decentralization. In our opinion, instead of progress, we are seeing a regression served with a sweet marketing sauce.
Most projects have moved towards PoS, which has a number of shortcomings. For example, in the classic PoS, it becomes profitable for all network participants to fork indefinitely (nothing at stake attack). It is difficult to honestly distribute coins to a wide range of users at the start to avoid their concentration in one hand.
There was an offer from Ethereum to make an insurance deposit and to allow anyone who proves that the owner of the deposit to stimulate forks to be debited (send a valid transaction to the network). But here again there is a problem: you can write off yourself.
Delegated PoS - the problems are the same as regular PoS: in the case of a large number of coins being concentrated in one hand, delegates can be controlled in the same way. Proof of ownership gives additional motivation to accumulate funds in the same hands, which can lead to centralization of the network, without any observed signs of this problem. And no one can prove anything.
PoS is very difficult to implement (is "non-trivial") according to Ethereum developers. There is still no time-tested implementation.
PoS is prone to Stake Bleeding attack: replaying the story allows you to accumulate coins (stake) at the expense of the commission. At a certain point, this gives complete power over consensus on an alternative chain. After that, you can add it to the main network.
PoA is an even more centralized algorithm. We hope you don’t have to explain why.
True, there are also questions to PoW: Bitmain, being the dominant manufacturer of ASIC chips, can have a significant impact on the miners' transaction processing policy.
In general, no one has yet figured out how to replace PoW or implement PoS and at the same time provide at least the same level of decentralization as Bitcoin.
- Tron - uses PoS, confirmation nodes are selected by voting coins. 60% of voting coins are in the hands of developers.
- EOS - uses PoS, 50% of the coins are at 10 addresses.
- Cardano - actually use PoA: all transactions are confirmed by the developers.
- Dash - recording is done through PoW, but all transactions go through special master nodes, which are selected by voting. They also validate transactions.
- Decred - a hybrid PoW + PoS algorithm, there is an on-chain voting for features. It turns out a scheme similar to Dash.
- NEO - uses PoS, 5 out of 7 nodes are owned by developers.
- Qtum - pure PoS, 90% of tokens remained with developers after ICO.
- NEM - PoS + transaction history, 100% of tokens are distributed at startup.
- Lisk - Delegated PoS + JavaScript-based Scripting + Sidehains (for example, Plasma in Ethereum; or it can even be a regular database).
- Waves - PoS + VM. ( First by the number of code commits at the moment)
- Tezos is a Michelson programming language with formal verification (one can mathematically prove the absence of errors; as for a nuclear reactor). Also self-amendment, on-chain governance. Tezos is close to Waves and EOS.
- Nano - there is no mining as such. All coins are distributed through the genesis block. In the end, everything depends on voting with PoS, if you need to select one block from several at the same chain height.
Looking at the trend towards PoS among the top cryptocurrencies, we can say that the “honest” decentralization of the market does not really bother. Or, its participants do not foresee the consequences of its absence.
Smart contracts
We included projects here, the main difference between them and Bitcoin, we considered an expanded system of smart contracts (in Bitcoin it is also there, but more primitive). Waves, for example, didn’t get here, because the implementation of PoS, in our opinion, negates the benefit of smart contracts.
- Ethereum - Introduced Turing, a complete smart contract programming language.
- Metaverse ETP - extended the UTXO model with additional attributes and added several built-in smart contracts for working with digital assets. Less open to developers than Ethereum. They plan to switch to DPoS, after the distribution of all coins by mining. Which, by the way, looks like a good solution to the problem of the initial distribution.
Scaling, thrash and burn
The essence of the scalability problem is to optimize three parameters:
- network bandwidth (TPS),
- transaction confirmation delay,
- transaction cost.
The problem of scaling is solved not only by increasing the block and increasing the speed of mining (for example, record 1 block per minute), but also by introducing Lightning and SegWit.
A small digression. One of the principles of PoW in a peer-to-peer network (p2p) is consensus at the same height. Upon receipt of a new block, all nodes must accept it and switch to it. Otherwise there will be forks. It is important that delays in the distribution of the block in the network do not affect (have a minimal effect) on this protocol. Therefore, the longer the average block appearance time (10 minutes in Bitcoin), the more stable the network is in terms of the appearance of forks.
For blockchains that are developing in other directions (see above and below), the problem of transaction speed is secondary, because it is solved differently. In PoS, TPS comes close to being able to record data in a distributed network with the minimum overhead of the PoS consensus protocol itself. In PoA, there is no consensus protocol (decentralization) at all. The more centralized the network, the faster it works.
In addition to projects focusing on scaling, in the same section we added those who did not bring anything to the industry in terms of technology.
- Litecoin, Bitcoin Cash, Bitcoin SV, Bitcoin Diamond - simply increased the maximum number of transactions per second in various primitive technical ways. For example, resizing a block.
- Ethereum Classic - after hacking The DAO due to the reentrancy of the smart contract, some Ethereum developers did not agree to fork to save the stolen money and continued to maintain the version of the code with the vulnerability. Ethereum Classic began to be supported by a separate team that abandoned PoS and canceled the time bomb.
- DigiByte - block time 15 sec. 5 mining algorithms (the idea is to improve decentralization, which led to the opposite effect due to a 51% attack).
- Dogecoin - fork of Litecoin, changed the order of issue and block time (1 minute per block).
- Bitcoin Gold - changed the hash function to combat ASIC chips. The funny thing is that recently the opinion of the public has been drifting towards the fact that specific chips are good.
Privacy
The first thing to say here: Bitcoin does not provide privacy transactions by default, like most other cryptocurrencies. There are various mechanisms for solving the privacy problem (such as mixers). But they are an add-on, not a feature of the project. The user needs to take some action to protect their privacy.
In this section, we have collected cryptocurrencies that provide privacy by design.
- Monero, ByteCoin - a mixer is built into the funds transfer procedure.
- Zcoin - completely disconnect the transactions of spending coins and their generation using zero-knowledge proof. The basis of cryptography is the RSA-2048 competitive task, which has not been cracked for 25 years.
- Zcash - use the concept of zero-knowledge proof, but the less proven cryptographic algorithm zk-SNARKs. Fork Bitcoin.
- Zclassic is the same as Zcash, but without a reward in favor of developers (20% to a specific address). Fork Zcash. The development team discontinued support.
- Bitcoin Private is a fork of both Zclassic and Bitcoin. Developed by a former Zclassic team.
- Verge is a fork of Dogecoin with built-in anonymity (using the TOR network) and support for 5 hash functions at once. Has been subjected to a successful attack 51%.
Dapps
(Stable Coins, Utility Tokens)
Almost all the tokens from the list below are issued on the Ethereum network and cannot be considered as independent cryptocurrencies. In our opinion, it is worth considering them to be an application that implements any functionality based on the capabilities of Ethereum.
- Tether is a stable coin deployed on the Omni Layer network inside Bitcoin and on the Ethereum network in USD and EUR. All value completely depends on whether fiat currency is present in the volume of token issue on the issuer's accounts.
- TrueUSD, USD Coin, Paxos, Gemini Dollar - similar to Tether tokens on the Ethereum network. A complete list of such tokens.
- Maker + Dai is a kind of stable coin on Ethereum, which provides the possibility of margin trading.
- Binance Coin - utility token exchange. The main idea is application inside the trading platform. Like food stamps in the USSR.
- OmiseGO, 0x - Ethereum tokens of open source software of decentralized exchanges, which is used to charge a fee in favor of developers for using software.
- Basic Attention Token - utility token for members of a decentralized advertising platform.
- Aeternity is an oracle network that transfers real-world data to the blockchain.
- Chainlink is the best oracle.
- Pundi X is a blockchain-based point-of-sale system. Uses tokens in NEM and Ethereum networks to charge fees for operations on his network.
- Populous is the token of the global factoring market.
- Augur is the token of the prediction market.
- Golem is a global computing marketplace, a token on Ethereum.
- Status - used in a set of 6 projects (messenger, hardware wallet, development framework), in order to popularize the Ethereum platform. Of course built on Ethereum.
- Petro is a Venezuelan-Russian cryptocurrency secured by oil and the government of Venezuela.
No cryptocurrencies
The fact that the project uses blockchain technology and its own coin does not mean at all that it is a cryptocurrency. Just as having money in your Steam account does not mean that Valve is a bank or payment system. Some projects declare their purpose, not related to financial instruments.
- XRP, Stellar - a technical platform for making payments with recording transactions on the blockchain, managed by a single emission center.
- IOTA is a data collection system for the Internet of things.
- VeChain is a blockchain for storing IoT identifiers for logistics needs.
- Steem is a content publishing platform with integrated monetization.
- Ontology - Chinese blockchain messy software suite. It is very similar to Metaverse ETP (blockchain as a service) only over other blockchains (NEO, Ethereum), including its own (Ontology Ledger) and others.
- ICON is a network that unites networks of other blockchains. For each third-party blockchain, a portal to the ICON blockchain is used. Inside the ICON blockchain network, a consensus protocol based on BFT (fully centralized) is used. Inside this there is an ICX token (ICON Exchange Token), as well as some kind of smart contracts.
- BitShares is a regular DEX + a lot of marketing features.
- Siacoin is a blockchain-based decentralized data storage system with payment.
- Holo - No Consensus Protocol! They simply write transactions to a distributed table (DHT). Distribution of unreliable information contradicts the concept of currency :-D
- Git - source code control technology using blockchain with PoA :-)
findings
- Cryptocurrencies are not hype. This hype is multiplied by greed under a thick layer of immoral marketing.
- Ethereum is almost the only project that brought something new to the industry.
- Not all is the cryptocurrency that it writes on the blockchain!
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