A cryptocurrency is defined as a virtual or digital currency that is decentralized and is secured by blockchain technology.

Decentralised allows transactions to take place on a peer-to-peer basis without the need of a third party. An example is when using a debit or credit card where the bank is the third party.   

However, the problem with decentralisation or DeFi, is that it is beyond the control of governments. Utilising smart contracts as opposed to intermediaries means that there is a shadow currency beyond the reach of regulators therefore making it difficult to enforce the law.


In 1983 David Chaum developed eCash where the first digital coin was invented. Only one bank in the United States took up this opportunity, the Mark Twain Bank based in St Louis. The system was similar to that of credit cards. Merchants paid nothing for the system but had to pay a merchant fee. The system was adopted in June 1998 by Credit Suisse in Switzerland, Deutsche Bank in Germany and Bank Austria to name but a few of Europe’s leading banks. 

It is generally assumed that the original cryptocurrency started in 2009 and was founded by Satoshi Nakamoto. Satoshi Nakamoto is a pseudonym and no one is exactly sure of the identity of this person or persons. The new cryptocurrency “Bitcoin” was responsible for introducing decentralised digital currencies and an updated version of blockchain technology. 

What is Blockchain Technology? 

Blockchain technology represents a digital ledger of transactions and contains an entire network of computer systems where these transactions are distributed. The blocks that make up blockchain contain various transactions. Each time a transaction takes place every participant’s ledger receives a record of that transaction. This database is referred to as DLT or Distributed Ledger Technology. 

Blockchain is a secure system that records information and has safeguards that supposedly make it extremely difficult to abuse such as hacking or trying to cheat the system. However, this appears to be a misnomer as various systems have been hacked over time culminating in the August 12 2021 hack, where a hacker stole USD 600 million from the Poly Network. Happily, most of the funds have been returned as the hacker “did it for fun”. 

The key apparently for ensuring that blockchain date is manageable is by utilising an algorithm known as hashing which is used in tandem with a data structure called a Merkle Tree. A hash is a “proof of work” that assigns a block an identification code. The Merkle Tree is fundamental to blockchain technology. Basically, it is a mathematical structure composed of the hashes of different blocks of data and allows for a full summary of every transaction within a particular block. 

Top Five Cryptocurrencies 

There are nearly 200 cryptocurrencies in the world, below the 2021 top five cryptocurrencies in terms of market capitalisation are, 

Bitcoin (BTC), Market Cap USD 887 Billion 

  • Bitcoin of course is the original cryptocurrency. Launched in 2009, it was the first decentralised peer-to-peer digital currency and remains the most popular cryptocurrency to date. It was designed as a digital currency for consumer payments. Bitcoin is the only cryptocurrency that has the Omni Protocol, which has been built as a separate layer over Bitcoin. This allows for the creating and trading of digital currencies and assets. 

Ethereum (ETH), Market Cap 383 Billion 

  • Ethereum was introduced to the market in 2013 and utilises the same blockchain model as Bitcoin. Ethereum was originally not aimed at the consumer market but designed for niche business market such as smart contracts. Big banks such as Barclays use smart contracts for derivative trading. This is where deals are automatically executed once specific terms have been met. 

Binance Coin (BNB), Market Cap USD 71 Billion  

  • Binance was originally founded in 2017 as a cryptocurrency exchange and is a platform for trading a number of cryptocurrencies. Domiciled in the Cayman Islands it is today the largest exchange by volume traded. Binance has launched two cryptocurrencies, Binance Con in 2017 and Binance Smart Chain in 2020. Binance was investigated for money laundering in May 2021 by the US Department of Justice and in June 2021 was ordered to stop all regulated trading in the United Kingdom by the Financial Conduct Authority. 

Cardano (ADA) Market Cap USD 69 Billion 

  • Interestingly, Cardano was brought to the market towards the end of 2017 through an Initial Coin Offering, (ICO). Cardano suggests that unlike Bitcoin and Ethereum it has overcome existing problems in the cryptocurrency market. These problems are slowness and inflexibility in Bitcoin and lack of safety in Ethereum. 

Tether (USDT) Market Cap USD 63 Billion 

  • Tether was originally Realcoin created in July 2014 and renamed Tether in November of that year. Tether is a cryptocurrency that offers tokens the first of which were introduced on 6th October 2014 on the Bitcoin blockchain, utilising the Omni Layer protocol. Tether is referred to as a stablecoin as the owners, Bitfinex, confirmed that each token is worth USD 1 as they have the same reserves in cash. 
  • Stablecoins have essentially been utilised to buy and sell other cryptocurrencies on various crypto exchanges. This is how Tether gained fame and became the most traded stablecoin.
  • Sadly, Tether states that token owners own no contractual rights to redeeming the tokens for cash. In March 2019 the New York attorney general stated that claims made by Tether that each token was fully backed by cash was a lie. Despite this statement, as of August 2021 there are USD 63.2 billion tokens in the market. 

To learn more about cryptocurrency, utilise our blog and discover our useful definitions list.

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