A Cryptocurrency, as defined by Wikipedia, is “a form of currency which uses cryptography as an integral part of its design”. A Cryptocurrency can be created from any one of several different types of currencies. These include “fiat currencies” such as the US dollar and the Euro, as well as “crypto currencies” which are derived from one or more cryptographic protocols. A couple examples of these protocols include the bitcoin and zcash protocols.
The underlying asset in any instance of a Cryptocurrency is a collection of proofs of ownership. These proofs typically are in the form of “keys”, which are only accessible by the owner of the asset and are used to secure communications within the network. A few of the most common Cryptocurrencies are Namecoin and Stellar Lumbo.
Namecoin is a very simple Cryptocurrency, but what makes it unique is the fact that it is actually a type of open source program. Namecoin is essentially a system which generates its own money by accepting payment for the use of its public key infrastructure (PKI). The money generated by Namecoin is referred to as “Fiat Money” and is used as a payment in the normal world as well as in the more specialized world of the cryptocoin. A few things that differentiate Namecoin from other types of Cryptocurrecties is the fact that it is not controlled by any central body, but instead is governed by a grassroots organization called “The Association of Namewriters”. The main advantages of this system are that it is entirely decentralized, free of third party involvement, and is mathematically programmed in a manner that makes it immune to hacking.
On the other hand, Stellar Lumbo is a private, closed-source cryptography system that provides citizens and businesses with a secure and efficient method of completing currency transactions. Transactions are executed through a system of digital certificates, which serve as evidence that the transactions are valid. This system is actually based on Proof of Stake, a system that ensures the currency stake is exclusive to the owner. This ensures that in the unlikely event that an employee steals the stake or shares, their transactions are immediately and permanently disabled.
Unlike the two previous cryptocoinages mentioned above, Peerless Network is an open source protocol and relies on a proof of work system for security. It was designed by J.R. Maxwell and is used to facilitate the exchange of the Peerless Network’s labor and resources, while concurrently ensuring that the network’s holders are constantly protected from malicious actors. Unlike other cryptocoins like Namecoin and Stellar Lumbo, Peerless Network is not governed by a governing body. Its security proof lies in its work of creating an algorithm for generating the proof-of-stake and distributing the work over a decentralized mesh.
So there you have it. An overview of three different decentralized systems which are used as the backbone of different cryptosystems. All of these coins utilize proof-of-work or a resource that is only generated by the users, hence their value is derived from the fact that they are scarce. As you can see, you don’t need to worry so much about how your investments are managed when investing in cryptosystems – it’s your money that matters!