The huge pool of cryptocurrencies available today can be categorised in many ways, including by function, date of launch or worth.
Though as much as cryptocurrency mostly shares commonality in a reliance of blockchain technology, there are many others falling somewhere outside of this parameter, and outside of defined cryptocurrency categories.
This is due to the fast-changing cryptocurrency landscape and rapid development in blockchain technology.
Blockchain technology, while not invented with the advent of cryptocurrency, was a concept first implemented successfully with Bitcoin in 2008.
Bitcoin was not only where cryptocurrency started, but it utilised blockchain technology in its original and basic form, making it a first-generation cryptocurrency.
Bitcoin remains essentially the same and has somewhat the same utility as when it was first launched. This means despite its complexity on the surface, Bitcoin is quite simple in its function as a method of performing P2P transactions. This is especially the case when compared to some of the more recently introduced cryptocurrency and their expanded blockchain concepts.
Some of the earliest second-generation cryptocurrencies to make an impact on the market accepted and embraced Bitcoin’s blockchain technology for its own blockchains while also expanding on the revolutionary concept.
Ethereum was the first cryptocurrency to use blockchain networks to transfer specifically programmed information, rather than just cryptocurrency tender. This information is programmed using a special type of code specific to the blockchain allowing users to design and implement special contracts as a way of better guaranteeing fair trade.
Ethereum and other second-generation blockchains like it were the first to understand and expand blockchain's almost limitless potential.
While many cryptocurrencies utilising first generation and second-generation concepts have appeared and disappeared since Bitcoin’s release, there have been others falling somewhere within the two categories.
However, until third-generation cryptocurrency entered the market, all had varying degrees of difficulty with scalability, particularly as they became more widely used and networks became busier and slower.
As blockchains extend, adding more and more blocks of information, more and more nodes are required to process verification requests in a timely manner. Changes to these cryptocurrencies have been made to help speed up transactions, but the original concepts of whole-network mining verification faces a never-ending battle to reduce lag in the network.
These adjustments in the aim of speeding up blockchain performance have led to varying degrees of success but have had many questioning whether changes to these cryptocurrencies’ original blockchain function draw criticism surrounding their decentralisation credentials.
This triggered a push for a third-generation cryptocurrency prioritising decentralisation and network governance allowing the entire network to determine the coin’s future.
While the step from first to second-generation cryptocurrencies had standout cryptocurrency blockchains pioneering change, the third-generation cryptocurrency is yet to produce a standout example of a new cryptocurrency trailblazing a way of achieving all these new requirements.
Cryptocurrency is a fast changing and forever evolving landscape, which has produced an expanded range of multifaceted currencies. These different cryptocurrencies are designed to operate and function for a particular use as tender, however there are also cryptocurrencies using blockchain technology to perform different functions.
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